G.R. No. 174161               February 18, 2015
00 subject to interest at the legal rate from the filing of
R TRANSPORT CORPORATION, Petitioner,
vs.
LUISITO G. YU, Respondent.
DECISION
PERALTA, J.:
Before the Court is a petition for review on certiorari under Rule 45
of the Rules of Court seeking to reverse and set aside the
Decision1 and Resolution,2 dated September 9, 2005 and August 8,
2006, respectively, of the Court of Appeals (CA) in CA-G.R. CV No.
84175.
The antecedent facts are as follows:
At around 8:45 in the morning of December 12, 1993, Loreta J. Yu,
after having alighted from a passenger bus in front of Robinson's
Galleria along the north-bound lane of Epifanio de los Santos
Avenue (EDSA), was hit and run over by a bus driven by Antonio P.
Gimena, who was then employed by petitioner R Transport
Corporation. Loreta was immediately rushed to Medical City
Hospital where she was pronounced dead on arrival.3
On February 3, 1994, the husband of the deceased, respondent
Luisito G. Yu, filed a Complaint for damages before the Regional
Trial Court (RTC) of Makati City against petitioner R Transport,
Antonio Gimena, and Metro Manila Transport Corporation (MMTC)
for the death of his wife. MMTC denied its liability reasoning that it
is merely the registered owner of the bus involved in the incident,
the actual owner, being petitioner R Transport. 4 It explained that
under the Bus Installment Purchase Program of the government,
MMTC merely purchased the subject bus, among several others, for
resale to petitioner R Transport, which will in turn operate the
same within Metro Manila. Since it was not actually operating the
bus which killed respondent’s wife, nor was it the employer of the
driver thereof, MMTC alleged that the complaint against it should
be dismissed.5 For its part, petitioner R Transport alleged that
respondent had no cause of action against it for it had exercised
due diligence in the selection and supervision of its employees and
drivers and that its buses are in good condition. Meanwhile, the
driver Antonio Gimena was declared in default for his failure to file
an answer to the complaint.
After trial on the merits, wherein the parties presented their
respective witnesses and documentary evidence, the trial court
rendered judgment in favor of respondent Yu ruling that petitioner
R Transport failed to prove that it exercised the diligence required
of a good father of a family in the selection and supervision of its
driver, who, by its negligence, ran over the deceased resulting in
her death. It also held that MMTC should be held solidarily liable
with petitioner R Transport because it would unduly prejudice a
third person who is a victim of a tort to look beyond the certificate
of registration and prove who the actual owner is in order to
enforce a right of action. Thus, the trial court ordered the payment
of damages in its Decision6 dated June 3, 2004, the dispositive
portion of which reads:
WHEREFORE, foregoing premises considered, judgment is hereby
rendered ordering defendants Rizal Transport and Metro Manila
Transport Corporation to be primarily and solidarily liable and
defendant Antonio Parraba Gimena subsidiarily liable to plaintiff
Luisito Yu as follows: 1. Actual damages in the amount of
Php78,357.
the complaint until fully paid;
2. Loss of income in the amount of Php500,000.00;
3. Moral damages in the amount of ₱150,000.00;
4. Exemplary damages in the amount of ₱20,000.00;
5. Attorney’s fees in the amount of ₱10,000.00; and
6. Costs of suit.7
On September 9, 2005, the CA affirmed the Decision of the RTC
with modification that defendant Antonio Gimena is made
solidarily liable for the damages caused to respondent. According
to the appellate court, considering that the negligence of Antonio
Gimena was sufficiently proven by the records of the case, and that
no evidence of whatever nature was presented by petitioner to
support its defense of due diligence in the selection and
supervision of its employees, petitioner, as the employer of Gimena,
may be held liable for the damage caused. The CA noted that the
fact that petitioner is not the registered owner of the bus which
caused the death of the victim does not exculpate it from
liability.8 Thereafter, petitioner’s Motion for Reconsideration was
further denied by the CA in its Resolution9 dated August 8, 2006.
Hence, the present petition.
Petitioner essentially invokes the following ground to support its
petition:
I.
THE COURT OF APPEALS ERRED IN AFFIRMING THE RULING OF
THE REGIONAL TRIAL COURT FINDING PETITIONER LIABLE FOR
THE DAMAGES CAUSED BY THE NEGLIGENCE OF ITS EMPLOYEE,
WHICH WAS NOT SUPPORTED BY THE EVIDENCE ON RECORD.
Petitioner insists that the CA and the RTC were incorrect in ruling
that its driver was negligent for aside from the mere speculations
and uncorroborated testimonies of the police officers on duty at the
time of the accident, no other evidence had been adduced to prove
that its driver was driving in a reckless and imprudent manner. It
asserts that contrary to the findings of the courts below, the bus
from which the victim alighted is actually the proximate cause of
the victim’s death for having unloaded its passengers on the lane
where the subject bus was traversing. Moreover, petitioner
reiterates its argument that since it is not the registered owner of
the bus which bumped the victim, it cannot be held liable for the
damage caused by the same.
We disagree.
Time and again, it has been ruled that whether a person is
negligent or not is a question of fact which this Court cannot pass
upon in a petition for review on certiorari, as its jurisdiction is
limited to reviewing errors of law.10 This Court is not bound to
weigh all over again the evidence adduced by the parties,
particularly where the findings of both the trial and the appellate
courts on the matter of petitioners’ negligence coincide. As a
general rule, therefore, the resolution off actual issues is a function
of the trial court, whose findings on these matters are binding on
this Court, more so where these have been affirmed by the Court of
Appeals,11 save for the following exceptional and meritorious
circumstances: (1) when the factual findings of the appellate court
and the trial court are contradictory; (2) when the findings of the
trial court are grounded entirely on speculation, surmises or
conjectures; (3) when the lower court’s inference from its factual
findings is manifestly mistaken, absurd or impossible; (4) when
there is grave abuse of discretion in the appreciation of facts; (5)
when the findings of the appellate court go beyond the issues of the
case, or fail to notice certain relevant facts which, if properly
considered, will justify a different conclusion; (6) when there is a
misappreciation of facts; (7) when the findings of fact are
themselves conflicting; and (8) when the findings of fact are
conclusions without mention of the specific evidence on which they
are based, are premised on the absence of evidence, or are
contradicted by evidence on record.12
After a review of the records of the case, we find no cogent reason
to reverse the rulings of the courts below for none of the
aforementioned exceptions are present herein. Both the trial and
appellate courts found driver Gimena negligent in hitting and
running over the victim and ruled that his negligence was the
proximate cause of her death. Negligence has been defined as "the
failure to observe for the protection of the interests of another
person that degree of care, precaution, and vigilance which the
circumstances justly demand, whereby such other person suffers
injury."13 Verily, foreseeability is the fundamental test of
negligence.14 It is the omission to do something which a reasonable
man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something
which a prudent and reasonable man would not do.15
In this case, the records show that driver Gimena was clearly
running at a reckless speed. As testified by the police officer on
duty at the time of the incident16 and indicated in the Autopsy
Report,17 not only were the deceased’s clothes ripped off from her
body, her brain even spewed out from her skull and spilled over
the road. Indeed, this Court is not prepared to believe petitioner’s
contention that its bus was travelling at a "normal speed" in
preparation for a full stop in view of the fatal injuries sustained by
the deceased. Moreover, the location wherein the deceased was hit
and run over further indicates Gimena’s negligence. As borne by
the records, the bus driven by Gimena bumped the deceased in a
loading and unloading area of a commercial center. The fact that he
was approaching such a busy part of EDSA should have already
cautioned the driver of the bus. In fact, upon seeing that a bus has
stopped beside his lane should have signalled him to step on his
brakes to slow down for the possibility that said bus was unloading
its passengers in the area. Unfortunately, he did not take the
necessary precaution and instead, drove on and bumped the
deceased despite being aware that he was traversing a commercial
center where pedestrians were crossing the street. Ultimately,
Gimena should have observed due diligence of a reasonably
prudent man by slackening his speed and proceeding cautiously
while passing the area.
Under Article 218018 of the New Civil Code, employers are liable for
the damages caused by their employees acting within the scope of
their assigned tasks. Once negligence on the part of the employee is
established, a presumption instantly arises that the employer was
remiss in the selection and/or supervision of the negligent
employee. To avoid liability for the quasi-delict committed by its
employee, it is incumbent upon the employer to rebut this
presumption by presenting adequate and convincing proof that it
exercised the care and diligence of a good father of a family in the
selection and supervision of its employees.19
Unfortunately, however, the records of this case are bereft of any
proof showing the exercise by petitioner of the required diligence.
As aptly observed by the CA, no evidence of whatever nature was
ever presented depicting petitioner’s due diligence in the selection
and supervision of its driver, Gimena, despite several opportunities
to do so. In fact, in its petition, apart from denying the negligence of
its employee and imputing the same to the bus from which the
victim alighted, petitioner merely reiterates its argument that since
it is not the registered owner of the bus which bumped the victim,
it cannot be held liable for the damage caused by the same.
Nowhere was it even remotely alleged that petitioner had exercised
the required diligence in the selection and supervision of its
employee. Because of this failure, petitioner cannot now avoid
liability for the quasi-delict committed by its negligent employee.
At this point, it must be noted that petitioner, in its relentless
attempt to evade liability, cites our rulings in Vargas v.
Langcay20 and Tamayo v. Aquino21 insisting that it should not be
held solidarily liable with MMTC for it is not the registered owner
of the bus which killed the deceased. However, this Court, in Jereos
v. Court of Appeals, et al.,22 rejected such contention in the
following wise:
Finally, the petitioner, citing the case of Vargas vs. Langcay,
contends that it is the registered owner of the vehicle, rather than
the actual owner, who must be jointly and severally liable with the
driver of the passenger vehicle for damages incurred by third
persons as a consequence of injuries or death sustained in the
operation of said vehicle.
The contention is devoid of merit. While the Court therein ruled
that the registered owner or operator of a passenger vehicle is
jointly and severally liable with the driver of the said vehicle for
damages incurred by passengers or third persons as a consequence
of injuries or death sustained in the operation of the said vehicle,
the Court did so to correct the erroneous findings of the Court of
Appeals that the liability of the registered owner or operator of a
passenger vehicle is merely subsidiary, as contemplated in Art. 103
of the Revised Penal Code. In no case did the Court exempt the
actual owner of the passenger vehicle from liability. On the
contrary, it adhered to the rule followed in the cases of Erezo vs.
Jepte, Tamayo vs. Aquino, and De Peralta vs. Mangusang, among
others, that the registered owner or operator has the right to be
indemnified by the real or actual owner of the amount that he may
be required to pay as damage for the injury caused.
The right to be indemnified being recognized, recovery by the
registered owner or operator may be made in any form-either by a
cross-claim, third-party complaint, or an independent action. The
result is the same.23
Moreover, while We held in Tamayo that the responsibility of the
registered owner and actual operator of a truck which caused the
death of its passenger is not solidary, We noted therein that the
same is due to the fact that the action instituted was one for breach
of contract, to wit:
The decision of the Court of Appeals is also attacked insofar as it
holds that inasmuch as the third-party defendant had used the
truck on a route not covered by the registered owner's franchise,
both the registered owner and the actual owner and operator
should be considered as joint tortfeasors and should be made liable
in accordance with Article 2194 of the Civil Code. This Article is as
follows:
Art. 2194. The responsibility of two or more persons who are liable
for a quasi-delict is solidary. But the action instituted in the case at
bar is one for breach of contract, for failure of the defendant to
carry safely the deceased for her destination. The liability for which
he is made responsible, i.e., for the death of the passenger, may not
be considered as arising from a quasi-delict. As the registered
owner Tamayo and his transferee Rayos may not be held guilty of
tort or a quasi-delict; their responsibility is not solidary as held by
the Court of Appeals.
The question that poses, therefore, is how should the holder of the
certificate of public convenience, Tamayo, participate with his
transferee, operator Rayos, in the damages recoverable by the heirs
of the deceased passenger, if their liability is not that of Joint
tortfeasors in accordance with Article 2194 of the Civil Code. The
following considerations must be borne in mind in determining this
question. As Tamayo is the registered owner of the truck, his
responsibility to the public orto any passenger riding in the vehicle
or truck must be direct, for the reasons given in our decision in the
case of Erezo vs. Jepte, supra, as quoted above. But as the
transferee, who operated the vehicle when the passenger died, is
the one directly responsible for the accident and death he should in
turn be made responsible to the registered owner for what the
latter may have been adjudged to pay. In operating the truck
without transfer thereof having been approved by the Public
Service Commission, the transferee acted merely as agent of the
registered owner and should be responsible to him (the registered
owner), for any damages that he may cause the latter by his
negligence.24
However, it must be noted that the case at hand does not involve a
breach of contract of carriage, as in Tamayo, but a tort or quasi-
delict under Article 2176,25 in relation to Article 218026 of the New
Civil Code. As such, the liability for which petitioner is being made
responsible actually arises not from a pre-existing contractual
relation between petitioner and the deceased, but from a damage
caused by the negligence of its employee. Petitioner cannot,
therefore, rely on our ruling in Tamayo and escape its solidary
liability for the liability of the employer for the negligent conduct of
its subordinate is direct and primary, subject only to the defense of
due diligence in the selection and supervision of the employee.27
Indeed, this Court has consistently been of the view that it is for the
better protection of the public for both the owner of record and the
actual operator to be adjudged jointly and severally liable with the
driver.28 As aptly stated by the appellate court, "the principle of
holding the registered owner liable for damages notwithstanding
that ownership of the offending vehicle has already been
transferred to another is designed to protect the public and not as a
shield on the part of unscrupulous transferees of the vehicle to take
refuge in, in order to free itself from liability arising from its own
negligent act. "29
Hence, considering that the negligence of driver Gimena was
sufficiently proven by the records of the case, and that no evidence
of whatever nature was presented by petitioner to support its
defense of due diligence in the selection and supervision of its
employees, petitioner, as the employer of Gimena, may be held
liable for damages arising from the death of respondent Yu's wife.
WHEREFORE, premises considered, the instant petition is DENIED.
The Decision and Resolution, dated September 9, 2005 and August
8, 2006, respectively, of the Court of Appeals in CA-G.R. CV No.
84175 are hereby AFFIRMED.
SO ORDERED.
G.R. No. 181398               June 29, 2011
FEB LEASING AND FINANCE CORPORATION (now BPI LEASING
CORPORATION), Petitioner,
vs.
SPOUSES SERGIO P. BAYLON and MARITESS VILLENA-BAYLON,
BG HAULER, INC., and MANUEL Y. ESTILLOSO, Respondents.
DECISION
CARPIO, J.:
The Case
This is a petition for review on certiorari 1 of the 9 October 2007
Decision2 and the 18 January 2008 Resolution3 of the Court of
Appeals in CA-G.R. CV No. 81446. The 9 October 2007 Decision
affirmed the 30 October 2003 Decision4 of the Regional Trial Court
(Branch 35) of Gapan City in Civil Case No. 2334 ordering
petitioner to pay respondents damages. The 18 January 2008
Resolution denied petitioner’s motion for reconsideration.
The Facts
On 2 September 2000, an Isuzu oil tanker running along Del Monte
Avenue in Quezon City and bearing plate number TDY 712 hit
Loretta V. Baylon (Loretta), daughter of respondent spouses Sergio
P. Baylon and Maritess Villena-Baylon (spouses Baylon). At the
time of the accident, the oil tanker was registered5 in the name of
petitioner FEB Leasing and Finance Corporation6 (petitioner). The
oil tanker was leased7 to BG Hauler, Inc. (BG Hauler) and was being
driven by the latter’s driver, Manuel Y. Estilloso. The oil tanker was
insured8 by FGU Insurance Corp. (FGU Insurance).
The accident took place at around 2:00 p.m. as the oil tanker was
coming from Balintawak and heading towards Manila. Upon
reaching the intersection of Bonifacio Street and Del Monte Avenue,
the oil tanker turned left. While the driver of the oil tanker was
executing a left turn side by side with another vehicle towards Del
Monte Avenue, the oil tanker hit Loretta who was then crossing Del
Monte Avenue coming from Mayon Street. Due to the strong
impact, Loretta was violently thrown away about three to five
meters from the point of impact. She fell to the ground
unconscious. She was brought for treatment to the Chinese General
Hospital where she remained in a coma until her death two days
after.9
The spouses Baylon filed with the RTC (Branch 35) of Gapan City a
Complaint10 for damages against petitioner, BG Hauler, the driver,
and FGU Insurance. Petitioner filed its answer with compulsory
counterclaim while FGU Insurance filed its answer with
counterclaim. On the other hand, BG Hauler filed its answer with
compulsory counterclaim and cross-claim against FGU Insurance.
Petitioner claimed that the spouses Baylon had no cause of action
against it because under its lease contract with BG Hauler,
petitioner was not liable for any loss, damage, or injury that the
leased oil tanker might cause. Petitioner claimed that no employer-
employee relationship existed between petitioner and the driver.
BG Hauler alleged that neither do the spouses Baylon have a cause
of action against it since the oil tanker was not registered in its
name. BG Hauler contended that the victim was guilty of
contributory negligence in crossing the street. BG Hauler claimed
that even if its driver was at fault, BG Hauler exercised the diligence
of a good father of a family in the selection and supervision of its
driver. BG Hauler also contended that FGU Insurance is obliged to
assume all liabilities arising from the use of the insured oil tanker.
For its part, FGU Insurance averred that the victim was guilty of
contributory negligence. FGU Insurance concluded that the spouses
Baylon could not expect to be paid the full amount of their claims.
FGU Insurance pointed out that the insurance policy covering the
oil tanker limited any claim to a maximum of ₱400,000.00.
During trial, FGU Insurance moved that (1) it be allowed to deposit
in court the amount of ₱450,000.00 in the joint names of the
spouses Baylon, petitioner, and BG Hauler and (2) it be released
from further participating in the proceedings. After the RTC
granted the motion, FGU Insurance deposited in the Branch Clerk
of Court a check in the names of the spouses Baylon, petitioner, and
BG Hauler. The RTC then released FGU Insurance from its
contractual obligations under the insurance policy.
The Ruling of the RTC
After weighing the evidence submitted by the parties, the RTC
found that the death of Loretta was due to the negligent act of the
driver. The RTC held that BG Hauler, as the employer, was
solidarily liable with the driver. The RTC further held that
petitioner, as the registered owner of the oil tanker, was also
solidarily liable.
The RTC found that since FGU Insurance already paid the amount
of ₱450,000.00 to the spouses Baylon, BG Hauler, and petitioner,
the insurer’s obligation has been satisfactorily fulfilled. The RTC
thus dismissed the cross-claim of BG Hauler against FGU Insurance.
The decretal part of the RTC’s decision reads:
Wherefore, premises considered, judgment is hereby rendered in
favor of the plaintiffs and against defendants FEB Leasing (now BPI
Leasing), BG Hauler, and Manuel Estilloso, to wit:
1. Ordering the defendants, jointly and severally, to pay
plaintiffs the following:
a. the amount of ₱62,000.00 representing actual
expenses incurred by the plaintiffs;
b. the amount of ₱50,000.00 as moral damages;
c. the amount of ₱2,400,000.00 for loss of
earning capacity of the deceased victim, Loretta
V. Baylon;
d. the sum of ₱50,000.00 for death indemnity;
e. the sum of ₱50,000.00 for and as attorney’s
fees; and
f. with costs against the defendants.
2. Ordering the dismissal of defendants’ counter-claim for
lack of merit and the cross claim of defendant BG Hauler
against defendant FGU Insurance.
SO ORDERED.11
Petitioner, BG Hauler, and the driver appealed the RTC Decision to
the Court of Appeals. Petitioner claimed that as financial lessor, it is
exempt from liability resulting from any loss, damage, or injury the
oil tanker may cause while being operated by BG Hauler as
financial lessee.
On the other hand, BG Hauler and the driver alleged that no
sufficient evidence existed proving the driver to be at fault. They
claimed that the RTC erred in finding BG Hauler negligent despite
the fact that it had exercised the diligence of a good father of a
family in the selection and supervision of its driver and in the
maintenance of its vehicles. They contended that petitioner, as the
registered owner of the oil tanker, should be solely liable for
Loretta’s death.
The Ruling of the Court of Appeals
The Court of Appeals held that petitioner, BG Hauler, and the driver
are solidarily liable for damages arising from Loretta’s death.
Petitioner’s liability arose from the fact that it was the registered
owner of the oil tanker while BG Hauler’s liability emanated from a
provision in the lease contract providing that the lessee shall be
liable in case of any loss, damage, or injury the leased oil tanker
may cause.
Thus, the Court of Appeals affirmed the RTC Decision but with the
modification that the award of attorney’s fees be deleted for being
speculative. The dispositive part of the appellate court’s Decision
reads:
WHEREFORE, in the light of the foregoing, the instant appeal is
DENIED. Consequently, the assailed Decision of the lower court is
AFFIRMED with the MODIFICATION that the award of attorney’s
fees is DELETED.
IT IS SO ORDERED.12
Dissatisfied, petitioner and BG Hauler, joined by the driver, filed
two separate motions for reconsideration. In its 18 January 2008
Resolution, the Court of Appeals denied both motions for lack of
merit.
Unconvinced, petitioner alone filed with this Court the present
petition for review on certiorari impleading the spouses Baylon, BG
Hauler, and the driver as respondents.13
The Issue
The sole issue submitted for resolution is whether the registered
owner of a financially leased vehicle remains liable for loss,
damage, or injury caused by the vehicle notwithstanding an
exemption provision in the financial lease contract.
The Court’s Ruling
Petitioner contends that the lease contract between BG Hauler and
petitioner specifically provides that BG Hauler shall be liable for
any loss, damage, or injury the leased oil tanker may cause even if
petitioner is the registered owner of the said oil tanker. Petitioner
claims that the Court of Appeals erred in holding petitioner
solidarily liable with BG Hauler despite having found the latter
liable under the lease contract.
For their part, the spouses Baylon counter that the lease contract
between petitioner and BG Hauler cannot bind third parties like
them. The spouses Baylon maintain that the existence of the lease
contract does not relieve petitioner of direct responsibility as the
registered owner of the oil tanker that caused the death of their
daughter.
On the other hand, BG Hauler and the driver argue that at the time
petitioner and BG Hauler entered into the lease contract, Republic
Act No. 598014 was still in effect. They point out that the
amendatory law, Republic Act No. 8556,15 which exempts from
liability in case of any loss, damage, or injury to third persons the
registered owners of vehicles financially leased to another, was not
yet enacted at that time.
In point is the 2008 case of PCI Leasing and Finance, Inc. v. UCPB
General Insurance Co., Inc.16 There, we held liable PCI Leasing and
Finance, Inc., the registered owner of an 18-wheeler Fuso Tanker
Truck leased to Superior Gas & Equitable Co., Inc. (SUGECO) and
being driven by the latter’s driver, for damages arising from a
collision. This despite an express provision in the lease contract to
the effect that the lessee, SUGECO, shall indemnify and hold the
registered owner free from any liabilities, damages, suits, claims, or
judgments arising from SUGECO’s use of the leased motor vehicle.
In the instant case, Section 5.1 of the lease contract between
petitioner and BG Hauler provides:
Sec. 5.1. It is the principle of this Lease that while the title or
ownership of the EQUIPMENT, with all the rights consequent
thereof, are retained by the LESSOR, the risk of loss or damage of
the EQUIPMENT from whatever source arising, as well as any
liability resulting from the ownership, operation and/or
possession thereof, over and above those actually
compensated by insurance, are hereby transferred to and
assumed by the LESSEE hereunder which shall continue in full
force and effect.17 (Emphasis supplied)
If it so wishes, petitioner may proceed against BG Hauler to seek
enforcement of the latter’s contractual obligation under Section 5.1
of the lease contract. In the present case, petitioner did not file a
cross-claim against BG Hauler. Hence, this Court cannot require BG
Hauler to reimburse petitioner for the latter’s liability to the
spouses Baylon. However, as the registered owner of the oil tanker,
petitioner may not escape its liability to third persons.
Under Section 5 of Republic Act No. 4136, 18 as amended, all motor
vehicles used or operated on or upon any highway of the
Philippines must be registered with the Bureau of Land
Transportation (now Land Transportation Office) for the current
year.19 Furthermore, any encumbrances of motor vehicles must be
recorded with the Land Transportation Office in order to be valid
against third parties.20
In accordance with the law on compulsory motor vehicle
registration, this Court has consistently ruled that, with respect to
the public and third persons, the registered owner of a motor
vehicle is directly and primarily responsible for the consequences
of its operation regardless of who the actual vehicle owner might
be.21 Well-settled is the rule that the registered owner of the vehicle
is liable for quasi-delicts resulting from its use. Thus, even if the
vehicle has already been sold, leased, or transferred to another
person at the time the vehicle figured in an accident, the registered
vehicle owner would still be liable for damages caused by the
accident. The sale, transfer or lease of the vehicle, which is not
registered with the Land Transportation Office, will not bind third
persons aggrieved in an accident involving the vehicle. The
compulsory motor vehicle registration underscores the importance
of registering the vehicle in the name of the actual owner.1avvphi1
The policy behind the rule is to enable the victim to find redress by
the expedient recourse of identifying the registered vehicle owner
in the records of the Land Transportation Office. The registered
owner can be reimbursed by the actual owner, lessee or transferee
who is known to him. Unlike the registered owner, the innocent
victim is not privy to the lease, sale, transfer or encumbrance of the
vehicle. Hence, the victim should not be prejudiced by the failure to
register such transaction or encumbrance. As the Court held in PCI
Leasing:
The burden of registration of the lease contract is minuscule
compared to the chaos that may result if registered owners or
operators of vehicles are freed from such responsibility. Petitioner
pays the price for its failure to obey the law on compulsory
registration of motor vehicles for registration is a pre-requisite for
any person to even enjoy the privilege of putting a vehicle on public
roads.22
In the landmark case of Erezo v. Jepte,23 the Court succinctly laid
down the public policy behind the rule, thus:
The main aim of motor vehicle registration is to identify the owner
so that if any accident happens, or that any damage or injury is
caused by the vehicle on the public highways, responsibility
therefor can be fixed on a definite individual, the registered owner.
Instances are numerous where vehicles running on public
highways caused accidents or injuries to pedestrians or other
vehicles without positive identification of the owner or drivers, or
with very scant means of identification. It is to forestall these
circumstances, so inconvenient or prejudicial to the public, that the
motor vehicle registration is primarily ordained, in the interest of
the determination of persons responsible for damages or injuries
caused on public highways.
xxx
Were a registered owner allowed to evade responsibility by
proving who the supposed transferee or owner is, it would be easy
for him, by collusion with others or, or otherwise, to escape said
responsibility and transfer the same to an indefinite person, or to
one who possesses no property with which to respond financially
for the damage or injury done. A victim of recklessness on the
public highways is usually without means to discover or identify
the person actually causing the injury or damage. He has no means
other than by a recourse to the registration in the Motor Vehicles
Office to determine who is the owner. The protection that the law
aims to extend to him would become illusory were the registered
owner given the opportunity to escape liability by disproving his
ownership. If the policy of the law is to be enforced and carried out,
the registered owner should not be allowed to prove the contrary
to the prejudice of the person injured, that is to prove that a third
person or another has become the owner, so that he may be
thereby be relieved of the responsibility to the injured person.24
In this case, petitioner admits that it is the registered owner of the
oil tanker that figured in an accident causing the death of Loretta.
As the registered owner, it cannot escape liability for the loss
arising out of negligence in the operation of the oil tanker. Its
liability remains even if at the time of the accident, the oil tanker
was leased to BG Hauler and was being driven by the latter’s driver,
and despite a provision in the lease contract exonerating the
registered owner from liability.
As a final point, we agree with the Court of Appeals that the award
of attorney’s fees by the RTC must be deleted for lack of basis. The
RTC failed to justify the award of ₱50,000 attorney’s fees to
respondent spouses Baylon. The award of attorney’s fees must
have some factual, legal and equitable bases and cannot be left to
speculations and conjectures.25 Consistent with prevailing
jurisprudence,26 attorney’s fees as part of damages are awarded
only in the instances enumerated in Article 2208 of the Civil
Code.27 Thus, the award of attorney’s fees is the exception rather
than the rule. Attorney’s fees are not awarded every time a party
prevails in a suit because of the policy that no premium should be
placed on the right to litigate.28
WHEREFORE, we DENY the petition. We AFFIRM the 9 October
2007 Decision and the 18 January 2008 Resolution of the Court of
Appeals in CA-G.R. CV No. 81446 affirming with modification the 30
October 2003 Decision of the Regional Trial Court (Branch 35) of
Gapan City in Civil Case No. 2334 ordering petitioner FEB Leasing
and Finance Corporation, BG Hauler, Inc., and driver Manuel Y.
Estilloso to solidarily pay respondent spouses Sergio P. Baylon and
Maritess Villena-Baylon the following amounts:
a. ₱62,000.00 representing actual expenses incurred by
the plaintiffs;
b. ₱50,000.00 as moral damages;
c. ₱2,400,000.00 for loss of earning capacity of the
deceased victim, Loretta V. Baylon; and
d. ₱50,000.00 for death indemnity.
Costs against petitioner.
SO ORDERED.
G.R. No. 150403             January 25, 2007
CEBU SALVAGE CORPORATION, Petitioner,
vs.
PHILIPPINE HOME ASSURANCE CORPORATION, Respondent.
DECISION
CORONA,  J.:
May a carrier be held liable for the loss of cargo resulting from the
sinking of a ship it does not own?
This is the issue presented for the Court’s resolution in this petition
for review on certiorari1 assailing the March 16, 2001 decision2 and
September 17, 2001 resolution3 of the Court of Appeals (CA) in CA-
G.R. CV No. 40473 which in turn affirmed the December 27, 1989
decision4 of the Regional Trial Court (RTC), Branch 145, Makati,
Metro Manila.5
The pertinent facts follow.
On November 12, 1984, petitioner Cebu Salvage Corporation (as
carrier) and Maria Cristina Chemicals Industries, Inc. [MCCII] (as
charterer) entered into a voyage charter6 wherein petitioner was to
load 800 to 1,100 metric tons of silica quartz on board the M/T
Espiritu Santo7 at Ayungon, Negros Occidental for transport to and
discharge at Tagoloan, Misamis Oriental to consignee Ferrochrome
Phils., Inc.8
Pursuant to the contract, on December 23, 1984, petitioner
received and loaded 1,100 metric tons of silica quartz on board the
M/T Espiritu Santo which left Ayungon for Tagoloan the next
day.9 The shipment never reached its destination, however,
because the M/T Espiritu Santo sank in the afternoon of December
24, 1984 off the beach of Opol, Misamis Oriental, resulting in the
total loss of the cargo.10
MCCII filed a claim for the loss of the shipment with its insurer,
respondent Philippine Home Assurance Corporation.11 Respondent
paid the claim in the amount of P211,500 and was subrogated to
the rights of MCCII.12 Thereafter, it filed a case in the RTC13 against
petitioner for reimbursement of the amount it paid MCCII.
After trial, the RTC rendered judgment in favor of respondent. It
ordered petitioner to pay respondent P211,500 plus legal interest,
attorney’s fees equivalent to 25% of the award and costs of suit.
On appeal, the CA affirmed the decision of the RTC. Hence, this
petition.
Petitioner and MCCII entered into a "voyage charter," also known
as a contract of affreightment wherein the ship was leased for a
single voyage for the conveyance of goods, in consideration of the
payment of freight.14 Under a voyage charter, the shipowner retains
the possession, command and navigation of the ship, the charterer
or freighter merely having use of the space in the vessel in return
for his payment of freight.15 An owner who retains possession of
the ship remains liable as carrier and must answer for loss or non-
delivery of the goods received for transportation.16
Petitioner argues that the CA erred when it affirmed the RTC
finding that the voyage charter it entered into with MCCII was a
contract of carriage.17 It insists that the agreement was merely a
contract of hire wherein MCCII hired the vessel from its owner, ALS
Timber Enterprises (ALS).18 Not being the owner of the M/T
Espiritu Santo, petitioner did not have control and supervision over
the vessel, its master and crew.19 Thus, it could not be held liable
for the loss of the shipment caused by the sinking of a ship it did
not own.
We disagree.
Based on the agreement signed by the parties and the testimony of
petitioner’s operations manager, it is clear that it was a contract of
carriage petitioner signed with MCCII. It actively negotiated and
solicited MCCII’s account, offered its services to ship the silica
quartz and proposed to utilize the M/T Espiritu Santo in lieu of the
M/T Seebees or the M/T Shirley (as previously agreed upon in the
voyage charter) since these vessels had broken down.20
There is no dispute that petitioner was a common carrier. At the
time of the loss of the cargo, it was engaged in the business of
carrying and transporting goods by water, for compensation, and
offered its services to the public.21
From the nature of their business and for reasons of public policy,
common carriers are bound to observe extraordinary diligence
over the goods they transport according to the circumstances of
each case.22 In the event of loss of the goods, common carriers are
responsible, unless they can prove that this was brought about by
the causes specified in Article 1734 of the Civil Code.23 In all other
cases, common carriers are presumed to be at fault or to have acted
negligently, unless they prove that they observed extraordinary
diligence.24
Petitioner was the one which contracted with MCCII for the
transport of the cargo. It had control over what vessel it would use.
All throughout its dealings with MCCII, it represented itself as a
common carrier. The fact that it did not own the vessel it decided to
use to consummate the contract of carriage did not negate its
character and duties as a common carrier. The MCCII (respondent’s
subrogor) could not be reasonably expected to inquire about the
ownership of the vessels which petitioner carrier offered to utilize.
As a practical matter, it is very difficult and often impossible for the
general public to enforce its rights of action under a contract of
carriage if it should be required to know who the actual owner of
the vessel is.25 In fact, in this case, the voyage charter itself
denominated petitioner as the "owner/operator" of the vessel.26
Petitioner next contends that if there was a contract of carriage,
then it was between MCCII and ALS as evidenced by the bill of
lading ALS issued.27
Again, we disagree.
The bill of lading was merely a receipt issued by ALS to evidence
the fact that the goods had been received for transportation. It was
not signed by MCCII, as in fact it was simply signed by the
supercargo of ALS.28 This is consistent with the fact that MCCII did
not contract directly with ALS. While it is true that a bill of lading
may serve as the contract of carriage between the parties,29 it
cannot prevail over the express provision of the voyage charter
that MCCII and petitioner executed:
[I]n cases where a Bill of Lading has been issued by a carrier
covering goods shipped aboard a vessel under a charter party, and
the charterer is also the holder of the bill of lading, "the bill of
lading operates as the receipt for the goods, and as document of
title passing the property of the goods, but not as varying the
contract between the charterer and the shipowner." The Bill of
Lading becomes, therefore, only a receipt and not the contract of
carriage in a charter of the entire vessel, for the contract is the
Charter Party, and is the law between the parties who are bound by
its terms and condition provided that these are not contrary to law,
morals, good customs, public order and public policy. 30
Finally, petitioner asserts that MCCII should be held liable for its
own loss since the voyage charter stipulated that cargo insurance
was for the charterer’s account.31 This deserves scant
consideration. This simply meant that the charterer would take
care of having the goods insured. It could not exculpate the carrier
from liability for the breach of its contract of carriage. The law, in
fact, prohibits it and condemns it as unjust and contrary to public
policy.32
To summarize, a contract of carriage of goods was shown to exist;
the cargo was loaded on board the vessel; loss or non-delivery of
the cargo was proven; and petitioner failed to prove that it
exercised extraordinary diligence to prevent such loss or that it
was due to some casualty or force majeure. The voyage charter here
being a contract of affreightment, the carrier was answerable for
the loss of the goods received for transportation.33
The idea proposed by petitioner is not only preposterous, it is also
dangerous. It says that a carrier that enters into a contract of
carriage is not liable to the charterer or shipper if it does not own
the vessel it chooses to use. MCCII never dealt with ALS and yet
petitioner insists that MCCII should sue ALS for reimbursement for
its loss. Certainly, to permit a common carrier to escape its
responsibility for the goods it agreed to transport (by the expedient
of alleging non-ownership of the vessel it employed) would
radically derogate from the carrier's duty of extraordinary
diligence. It would also open the door to collusion between the
carrier and the supposed owner and to the possible shifting of
liability from the carrier to one without any financial capability to
answer for the resulting damages.34
WHEREFORE, the petition is hereby DENIED.
Costs against petitioner.
SO ORDERED.
G.R. No. 74811 September 30, 1988
CHUA YEK HONG, petitioner,
vs.
INTERMEDIATE APPELLATE COURT, MARIANO GUNO, and
DOMINADOR OLIT, respondents.
Francisco D. Estrada for petitioner.
Purita Hontanosas-Cortes for private respondents.
MELENCIO-HERRERA, J.:
In this Petition for Review on certiorari petitioner seeks to set
aside the Decision of respondent Appellate Court in AC G.R. No.
01375 entitled "Chua Yek Hong vs. Mariano Guno, et al.,"
promulgated on 3 April 1986, reversing the Trial Court and
relieving private respondents (defendants below) of any liability
for damages for loss of cargo.
The basic facts are not disputed:
Petitioner is a duly licensed copra dealer based at Puerta Galera,
Oriental Mindoro, while private respondents are the owners of the
vessel, "M/V Luzviminda I," a common carrier engaged in coastwise
trade from the different ports of Oriental Mindoro to the Port of
Manila.
In October 1977, petitioner loaded 1,000 sacks of copra, valued at
P101,227.40, on board the vessel "M/V Luzviminda I" for shipment
from Puerta Galera, Oriental Mindoro, to Manila. Said cargo,
however, did not reach Manila because somewhere between Cape
Santiago and Calatagan, Batangas, the vessel capsized and sank
with all its cargo.
On 30 March 1979, petitioner instituted before the then Court of
First Instance of Oriental Mindoro, a Complaint for damages based
on breach of contract of carriage against private respondents (Civil
Case No. R-3205).
In their Answer, private respondents averred that even assuming
that the alleged cargo was truly loaded aboard their vessel, their
liability had been extinguished by reason of the total loss of said
vessel.
On 17 May 1983, the Trial Court rendered its Decision, the
dispositive portion of which follows:
WHEREFORE, in view of the foregoing
considerations, the court believes and so holds
that the preponderance of evidence militates in
favor of the plaintiff and against the defendants
by ordering the latter, jointly and severally, to
pay the plaintiff the sum of P101,227.40
representing the value of the cargo belonging to
the plaintiff which was lost while in the custody
of the defendants; P65,550.00 representing
miscellaneous expenses of plaintiff on said lost
cargo; attorney's fees in the amount of
P5,000.00, and to pay the costs of suit. (p. 30,
Rollo).
On appeal, respondent Appellate Court ruled to the contrary when
it applied Article 587 of the Code of Commerce and the doctrine in
Yangco vs. Lasema (73 Phil. 330 [1941]) and held that private
respondents' liability, as ship owners, for the loss of the cargo is
merely co-extensive with their interest in the vessel such that a
total loss thereof results in its extinction. The decretal portion of
that Decision 1 reads:
IN VIEW OF THE FOREGOING
CONSIDERATIONS, the decision appealed from
is hereby REVERSED, and another one entered
dismissing the complaint against defendants-
appellants and absolving them from any and all
liabilities arising from the loss of 1,000 sacks of
copra belonging to plaintiff-appellee. Costs
against appellee.
(p. 19, Rollo).
Unsuccessful in his Motion for Reconsideration of the aforesaid
Decision, petitioner has availed of the present recourse.
The basic issue for resolution is whether or not respondent
Appellate Court erred in applying the doctrine of limited liability
under Article 587 of the Code of Commerce as expounded
in Yangco vs. Laserna, supra.
Article 587 of the Code of Commerce provides:
Art. 587. The ship agent shall also be civilly
liable for the indemnities in favor of third
persons which may arise from the conduct of the
captain in the care of the goods which he loaded
on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all the
equipments and the freight it may have earned
during the voyage.
The term "ship agent" as used in the foregoing provision is broad
enough to include the ship owner (Standard Oil Co. vs. Lopez
Castelo, 42 Phil. 256 [1921]). Pursuant to said provision, therefore,
both the ship owner and ship agent are civilly and directly liable for
the indemnities in favor of third persons, which may arise from the
conduct of the captain in the care of goods transported, as well as
for the safety of passengers transported Yangco vs. Laserna,
supra; Manila Steamship Co., Inc. vs. Abdulhaman et al., 100 Phil. 32
[1956]).
However, under the same Article, this direct liability is moderated
and limited by the ship agent's or ship owner's right of
abandonment of the vessel and earned freight. This expresses the
universal principle of limited liability under maritime law. The
most fundamental effect of abandonment is the cessation of the
responsibility of the ship agent/owner (Switzerland General
Insurance Co., Ltd. vs. Ramirez, L-48264, February 21, 1980, 96
SCRA 297). It has thus been held that by necessary implication, the
ship agent's or ship owner's liability is confined to that which he is
entitled as of right to abandon the vessel with all her equipment
and the freight it may have earned during the voyage," and "to the
insurance thereof if any" (Yangco vs. Lasema, supra). In other
words, the ship owner's or agent's liability is merely co-extensive
with his interest in the vessel such that a total loss thereof results
in its extinction. "No vessel, no liability" expresses in a nutshell the
limited liability rule. The total destruction of the vessel
extinguishes maritime liens as there is no longer any res to which it
can attach (Govt. Insular Maritime Co. vs. The Insular Maritime, 45
Phil. 805, 807 [1924]).
As this Court held:
If the ship owner or agent may in any way be
held civilly liable at all for injury to or death of
passengers arising from the negligence of the
captain in cases of collisions or shipwrecks, his
liability is merely co-extensive with his interest
in the vessel such that a total loss thereof results
in its extinction. (Yangco vs. Laserna, et
al., supra).
The rationale therefor has been explained as follows:
The real and hypothecary nature of the liability
of the ship owner or agent embodied in the
provisions of the Maritime Law, Book III, Code of
Commerce, had its origin in the prevailing
conditions of the maritime trade and sea
voyages during the medieval ages, attended by
innumerable hazards and perils. To offset
against these adverse conditions and to
encourage ship building and maritime
commerce, it was deemed necessary to confine
the liability of the owner or agent arising from
the operation of a ship to the vessel, equipment,
and freight, or insurance, if any, so that if the
ship owner or agent abandoned the ship,
equipment, and freight, his liability was
extinguished. (Abueg vs. San Diego, 77 Phil. 730
[1946])
—0—
Without the principle of limited liability, a ship
owner and investor in maritime commerce
would run the risk of being ruined by the bad
faith or negligence of his captain, and the
apprehension of this would be fatal to the
interest of navigation." Yangco vs.
Lasema, supra).
—0—
As evidence of this real nature of the maritime
law we have (1) the limitation of the liability of
 the agents to the actual value of the vessel and
the freight money, and (2) the right to retain the
cargo and the embargo and detention of the
vessel even in cases where the ordinary civil law
would not allow more than a personal action
against the debtor or person liable. It will be
observed that these rights are correlative, and
naturally so, because if the agent can exempt
himself from liability by abandoning the vessel
and freight money, thus avoiding the possibility
of risking his whole fortune in the business, it is
also just that his maritime creditor may for any
reason attach the vessel itself to secure his claim
without waiting for a settlement of his rights by
a final judgment, even to the prejudice of a third
person. (Phil. Shipping Co. vs. Vergara, 6 Phil.
284 [1906]).
The limited liability rule, however, is not without exceptions,
namely: (1) where the injury or death to a passenger is due either
to the fault of the ship owner, or to the concurring negligence of the
ship owner and the captain (Manila Steamship Co., Inc. vs.
Abdulhaman supra); (2) where the vessel is insured; and (3) in
workmen's compensation claims Abueg vs. San Diego, supra). In
this case, there is nothing in the records to show that the loss of the
cargo was due to the fault of the private respondent as shipowners,
or to their concurrent negligence with the captain of the vessel.
What about the provisions of the Civil Code on common carriers?
Considering the "real and hypothecary nature" of liability under
maritime law, these provisions would not have any effect on the
principle of limited liability for ship owners or ship agents. As was
expounded by this Court:
In arriving at this conclusion, the fact is not
ignored that the illfated, S.S. Negros, as a vessel
engaged in interisland trade, is a common
carrier, and that the relationship between the
petitioner and the passengers who died in the
mishap rests on a contract of carriage. But
assuming that petitioner is liable for a breach of
contract of carriage, the exclusively 'real and
hypothecary nature of maritime law operates to
limit such liability to the value of the vessel, or
to the insurance thereon, if any. In the instant
case it does not appear that the vessel was
insured. (Yangco vs. Laserila, et al., supra).
Moreover, Article 1766 of the Civil Code provides:
Art. 1766. In all matters not regulated by this
Code, the rights and obligations of common
carriers shall be governed by the Code of
Commerce and by special laws.
In other words, the primary law is the Civil Code (Arts. 17321766)
and in default thereof, the Code of Commerce and other special
laws are applied. Since the Civil Code contains no provisions
regulating liability of ship owners or agents in the event of total
loss or destruction of the vessel, it is the provisions of the Code of
Commerce, more particularly Article 587, that govern in this case.
In sum, it will have to be held that since the ship agent's or ship
owner's liability is merely co-extensive with his interest in the
vessel such that a total loss thereof results in its extinction (Yangco
vs. Laserna, supra), and none of the exceptions to the rule on
limited liability being present, the liability of private respondents
for the loss of the cargo of copra must be deemed to have been
extinguished. There is no showing that the vessel was insured in
this case.
WHEREFORE, the judgment sought to be reviewed is hereby
AFFIRMED. No costs.
SO ORDERED.
G.R. No. 100446 January 21, 1993
ABOITIZ SHIPPING CORPORATION, petitioner,
vs.
GENERAL ACCIDENT FIRE AND LIFE ASSURANCE
CORPORATION, LTD., respondent.
Sycip, Salazar, Hernandez & Gamaitan Law Office for petitioner.
Napoleon Rama collaborating counsel for petitioner.
Dollete, Blanco, Ejercito & Associates for private respondent.
MELO, J.:
This refers to a petition for review which seeks to annul and set
aside the decision of the Court of Appeals dated June 21, 1991, in
CA G.R. SP No. 24918. The appellate court dismissed the petition
for certiorari filed by herein petitioner, Aboitiz Shipping
Corporation, questioning the Order of April 30, 1991 issued by the
Regional Trial Court of the National Capital Judicial Region (Manila,
Branch IV) in its Civil Case No. 144425 granting private
respondent's prayer for execution for the full amount of the
judgment award. The trial court in so doing swept aside
petitioner's opposition which was grounded on the real and
hypothecary nature of petitioner's liability as ship owner. The
application of this established principle of maritime law would
necessarily result in a probable reduction of the amount to be
recovered by private respondent, since it would have to share with
a number of other parties similarly situated in the insurance
proceeds on the vessel that sank.
The basic facts are not disputed.
Petitioner is a corporation organized and operating under
Philippine laws and engaged in the business of maritime trade as a
carrier. As such, it owned and operated the ill-fated "M/V P.
ABOITIZ," a common carrier which sank on a voyage from
Hongkong to the Philippines on October 31, 1980. Private
respondent General Accident Fire and Life Assurance Corporation,
Ltd. (GAFLAC), on the other hand, is a foreign insurance company
pursuing its remedies as a subrogee of several cargo consignees
whose respective cargo sank with the said vessel and for which it
has priorly paid.
The incident of said vessel's sinking gave rise to the filing of suits
for recovery of lost cargo either by the shippers, their successor-in-
interest, or the cargo insurers like GAFLAC as subrogees. The
sinking was initially investigated by the Board of Marine Inquiry
(BMI Case No. 466, December 26, 1984), which found that such
sinking was due to force majeure and that subject vessel, at the
time of the sinking was seaworthy. This administrative finding
notwithstanding, the trial court in said Civil Case No. 144425 found
against the carrier on the basis that the loss subject matter therein
did not occur as a result of force majeure. Thus, in said case,
plaintiff GAFLAC was allowed to prove, and. was later awarded, its
claim. This decision in favor of GAFLAC was elevated all the way up
to this Court in G.R. No. 89757 (Aboitiz v. Court of Appeals, 188
SCRA 387 [1990]), with Aboitiz, like its ill-fated vessel,
encountering rough sailing. The attempted execution of the
judgment award in said case in the amount of P1,072,611.20 plus
legal interest has given rise to the instant petition.
On the other hand, other cases have resulted in findings upholding
the conclusion of the BMI that the vessel was seaworthy at the time
of the sinking, and that such sinking was due to force majeure. One
such ruling was likewise elevated to this Court in G.R. No.
100373, Country Bankers Insurance Corporation v. Court of Appeals,
et al., August 28, 1991 and was sustained. Part of the task resting
upon this Court, therefore, is to reconcile the resulting apparent
contrary findings in cases originating out of a single set of facts.
It is in this factual milieu that the instant petition seeks a
pronouncement as to the applicability of the doctrine of limited
liability on the totality of the claims vis a vis the losses brought
about by the sinking of the vessel M/V P. ABOITIZ, as based on the
real and hypothecary nature of maritime law. This is an issue which
begs to be resolved considering that a number of suits alleged in
the petition number about 110 (p. 10 and pp. 175 to 183, Rollo) still
pend and whose resolution shall well-nigh result in more confusion
than presently attends the instant case.
In support of the instant petition, the following arguments are
submitted by the petitioner:
1. The Limited Liability Rule warrants
immediate stay of execution of judgment to
prevent impairment of other creditors' shares;
2. The finding of unseaworthiness of a vessel is
not necessarily attributable to the shipowner;
and
3 The principle of "Law of the Case" is not
applicable to the present petition. (pp. 2-
26, Rollo.)
On the other hand, private respondent opposes the foregoing
contentions, arguing that:
1. There is no limited liability to speak of or
applicable real and hypothecary rule under
Article 587, 590, and 837 of the Code of
Commerce in the face of the facts found by the
lower court (Civil Case No. 144425), upheld by
the Appellate Court (CA G.R. No. 10609), and
affirmed in toto by the Supreme Court in G.R. No.
89757 which cited G.R. No. 88159 as the Law of
the Case; and
2. Under the doctrine of the Law of the Case,
cases involving the same incident, parties
similarly situated and the same issues litigated
should be decided in conformity therewith
following the maxim stare decisis et non quieta
movere. (pp. 225 to 279, Rollo.)
Before proceeding to the main bone of contention, it is important to
determine first whether or not the Resolution of this Court in G.R.
No. 88159, Aboitiz Shipping, Corporation vs. The Honorable Court of
Appeals and Allied Guaranty Insurance Company, Inc., dated
November 13, 1989 effectively bars and precludes the instant
petition as argued by respondent GAFLAC.
An examination of the November 13, 1989 Resolution in G.R. No.
88159 (pp. 280 to 282, Rollo) shows that the same settles two
principal matters, first of which is that the doctrine of primary
administrative jurisdiction is not applicable therein; and second is
that a limitation of liability in said case would render inefficacious
the extraordinary diligence required by law of common carriers.
It should be pointed out, however, that the limited liability
discussed in said case is not the same one now in issue at bar, but
an altogether different aspect. The limited liability settled in G.R.
No. 88159 is that which attaches to cargo by virtue of stipulations
in the Bill of Lading, popularly known as package limitation clauses,
which in that case was contained in Section 8 of the Bill of Lading
and which limited the carrier's liability to US$500.00 for the cargo
whose value was therein sought to be recovered. Said resolution
did not tackle the matter of the Limited Liability Rule arising out of
the real and hypothecary nature of maritime law, which was not
raised therein, and which is the principal bone of contention in this
case. While the matters threshed out in G.R. No. 88159, particularly
those dealing with the issues on primary administrative
jurisdiction and the package liability limitation provided in the Bill
of Lading are now settled and should no longer be touched, the
instant case raises a completely different issue. It appears,
therefore, that the resolution in G.R. 88159 adverted to has no
bearing other than factual to the instant case.
This brings us to the primary question herein which is whether or
not respondent court erred in granting execution of the full
judgment award in Civil Case No. 14425 (G.R. No. 89757), thus
effectively denying the application of the limited liability
enunciated under the appropriate articles of the Code of
Commerce. The articles may be ancient, but they are timeless and
have remained to be good law. Collaterally, determination of the
question of whether execution of judgments which have become
final and executory may be stayed is also an issue.
We shall tackle the latter issue first. This Court has always been
consistent in its stand that the very purpose for its existence is to
see to the accomplishment of the ends of justice. Consistent with
this view, a number of decisions have originated herefrom, the
tenor of which is that no procedural consideration is sacrosanct if
such shall result in the subverting of substantial justice. The right
to an execution after finality of a decision is certainly no exception
to this. Thus, in Cabrias v. Adil (135 SCRA 355 [1985]), this Court
ruled that:
. . . It is a truism that every court has the power
"to control, in the furtherance of justice, the
conduct of its ministerial officers, and of all
other persons in any manner connected with a
case before it, in every manner appertaining
thereto. It has also been said that:
. . . every court having
jurisdiction to render a
particular judgment has
inherent power to enforce it,
and to exercise equitable
control over such
 enforcement. The court has
authority to inquire whether
its judgment has been
executed, and will remove
obstructions to the
enforcement thereof. Such
authority extends not only to
such orders and such writs as
may be necessary to carry out
the judgment into effect and
render it binding and
operative, but also to such
orders and such writs as may
be necessary to prevent an
improper enforcement of the
judgment. If a judgment is
sought to be perverted and
made a medium of
consummating a wrong the
court on proper application
can prevent it. (at p. 359)
and again in the case of Lipana v. Development Bank of Rizal (154
SCRA 257 [1987]), this Court found that:
The rule that once a decision becomes final and
executory, it is the ministerial duty of the court
to order its execution, admits of certain
exceptions as in cases of special and exceptional
nature where it becomes the imperative in the
higher interest of justice to direct the
suspension of its execution (Vecine v. Geronimo,
59 OG 579); whenever it is necessary to
accomplish the aims of justice (Pascual v Tan, 85
Phil. 164); or when certain facts and
circumstances transpired after the judgment
became final which would render the execution
of the judgment unjust (Cabrias v. Adil, 135
SCRA 354). (at p. 201)
We now come to the determination of the principal issue as to
whether the Limited Liability Rule arising out of the real and
hypothecary nature of maritime law should apply in this and
related cases. We rule in the affirmative.
In deciding the instant case below, the Court of Appeals took refuge
in this Court's decision in G.R. No. 89757 upholding private
respondent's claims in that particular case, which the Court of
Appeals took to mean that this Court has "considered, passed upon
and resolved Aboitiz's contention that all claims for the losses
should first be determined before GAFLAC's judgment may be
satisfied," and that such ruling "in effect necessarily negated the
application of the limited liability principle" (p. 175, Rollo). Such
conclusion is not accurate. The decision in G.R. No. 89757
considered only the circumstances peculiar to that particular case,
and was not meant to traverse the larger picture herein brought to
fore, the circumstances of which heretofore were not relevant. We
must stress that the matter of the Limited Liability Rule as
discussed was never in issue in all prior cases, including those
before the RTCs and the Court of Appeals. As discussed earlier, the
"limited liability" in issue before the trial courts referred to the
package limitation clauses in the bills of lading and not the limited
liability doctrine arising from the real and hypothecary nature of
maritime trade. The latter rule was never made a matter of defense
in any of the cases a quo, as properly it could not have been made
so since it was not relevant in said cases. The only time it could
come into play is when any of the cases involving the mishap were
to be executed, as in this case. Then, and only then, could the
matter have been raised, as it has now been brought before the
Court.
The real and hypothecary nature of maritime law simply means
that the liability of the carrier in connection with losses related to
maritime contracts is confined to the vessel, which is hypothecated
for such obligations or which stands as the guaranty for their
settlement. It has its origin by reason of the conditions and risks
attending maritime trade in its earliest years when such trade was
replete with innumerable and unknown hazards since vessels had
to go through largely uncharted waters to ply their trade. It was
designed to offset such adverse conditions and to encourage people
and entities to venture into maritime commerce despite the risks
and the prohibitive cost of shipbuilding. Thus, the liability of the
vessel owner and agent arising from the operation of such vessel
were confined to the vessel itself, its equipment, freight, and
insurance, if any, which limitation served to induce capitalists into
effectively wagering their resources against the consideration of
the large profits attainable in the trade.
It might be noteworthy to add in passing that despite the
modernization of the shipping industry and the development of
high-technology safety devices designed to reduce the risks
therein, the limitation has not only persisted, but is even practically
absolute in well-developed maritime countries such as the United
States and England where it covers almost all maritime casualties.
Philippine maritime law is of Anglo-American extraction, and is
governed by adherence to both international maritime conventions
and generally accepted practices relative to maritime trade and
travel. This is highlighted by the following excerpts on the limited
liability of vessel owners and/or agents;
Sec. 183. The liability of the owner of any vessel,
whether American or foreign, for any
embezzlement, loss, or destruction by any
person of any person or any property, goods, or
merchandise shipped or put on board such
vessel, or for any loss, damage, or forfeiture,
done, occasioned, or incurred, without the
privity or knowledge of such owner or owners
shall not exceed the amount or value of the
interest of such owner in such vessel, and her
freight then pending. (Section 183 of the US
Federal Limitation of Liability Act).
—and—
1. The owner of a sea-going ship may limit his
liability in accordance with Article 3 of this
Convention in respect of claims arising, from any
of the following occurrences, unless the
occurrence giving rise to the claim resulted from
the actual fault or privity of the owner;
(a) loss of life of, or personal injury to, any
person being carried in the ship, and loss of, or
damage to, any property on board the ship.
(b) loss of life of, or personal injury to, any other
person, whether on land or on water, loss of or
damage to any other property or infringement of
any rights caused by the act, neglect or default
the owner is responsible for, or any person not
 on board the ship for whose act, neglect or
default the owner is responsible: Provided,
however, that in regard to the act, neglect or
default of this last class of person, the owner
shall only be entitled to limit his liability when
the act, neglect or default is one which occurs in
the navigation or the management of the ship or
in the loading, carriage or discharge of its cargo
or in the embarkation, carriage or
disembarkation of its passengers.
(c) any obligation or liability imposed by any
law relating to the removal of wreck and arising
from or in connection with the raising, removal
or destruction of any ship which is sunk,
stranded or abandoned (including anything
which may be on board such ship) and any
obligation or liability arising out of damage
caused to harbor works, basins and navigable
waterways. (Section 1, Article I of the Brussels
International Convention of 1957)
In this jurisdiction, on the other hand, its application has been well-
nigh constricted by the very statute from which it originates. The
Limited Liability Rule in the Philippines is taken up in Book III of
the Code of Commerce, particularly in Articles 587, 590, and 837,
hereunder quoted in toto:
Art. 587. The ship agent shall also be civilly
liable for the indemnities in favor of third
persons which may arise from the conduct of the
captain in the care of the goods which he loaded
on the vessel; but he may exempt himself
therefrom by abandoning the vessel with all her
equipment and the freight it may have earned
during the voyage.
Art. 590. The co-owners of a vessel shall be
civilly liable in the proportion of their interests
in the common fund for the results of the acts of
the captain referred to in Art. 587.
Each co-owner may exempt himself from this
liability by the abandonment, before a notary, of
the part of the vessel belonging to him.
Art. 837. The civil liability incurred by
shipowners in the case prescribed in this section
(on collisions), shall be understood as limited to
the value of the vessel with all its appurtenances
and freightage served during the voyage.
(Emphasis supplied)
Taken together with related articles, the foregoing cover only
liability for injuries to third parties (Art. 587), acts of the captain
(Art. 590) and collisions (Art. 837).
In view of the foregoing, this Court shall not take the application of
such limited liability rule, which is a matter of near absolute
application in other jurisdictions, so lightly as to merely "imply" its
inapplicability, because as could be seen, the reasons for its being
are still apparently much in existence and highly regarded.
We now come to its applicability in the instant case. In the few
instances when the matter was considered by this Court, we have
been consistent in this jurisdiction in holding that the only time the
Limited Liability Rule does not apply is when there is an actual
finding of negligence on the part of the vessel owner or agent
(Yango v. Laserna, 73 Phil. 330 [1941]; Manila Steamship Co., Inc. v.
Abdulhanan, 101 Phil. 32 [1957]; Heirs of Amparo delos Santos v.
Court of Appeals, 186 SCRA 649 [1967]). The pivotal question, thus,
is whether there is a finding of such negligence on the part of the
owner in the instant case.
A careful reading of the decision rendered by the trial court in Civil
Case No. 144425 (pp. 27-33, Rollo) as well as the entirety of the
records in the instant case will show that there has been no actual
finding of negligence on the part of petitioner. In its Decision, the
trial court merely held that:
. . . Considering the foregoing reasons, the Court
holds that the vessel M/V "Aboitiz" and its cargo
were not lost due to fortuitous event or force
majeure." (p. 32, Rollo)
The same is true of the decision of this Court in G.R. No. 89757 (pp.
71-86, Rollo) affirming the decision of the Court of Appeals in CA-
G.R. CV No. 10609 (pp. 34-50, Rollo) since both decisions did not
make any new and additional finding of fact. Both merely affirmed
the factual findings of the trial court, adding that the cause of the
sinking of the vessel was because of unseaworthiness due to the
failure of the crew and the master to exercise extraordinary
diligence. Indeed, there appears to have been no evidence
presented sufficient to form a conclusion that petitioner shipowner
itself was negligent, and no tribunal, including this Court will add
or subtract to such evidence to justify a conclusion to the contrary.
The qualified nature of the meaning of "unseaworthiness," under
the peculiar circumstances of this case is underscored by the fact
that in the Country Banker's case, supra, arising from the same
sinking, the Court sustained the decision of the Court of Appeals
that the sinking of the M/V P. Aboitiz was due to force majeure.
On this point, it should be stressed that unseaworthiness is not a
fault that can be laid squarely on petitioner's lap, absent a factual
basis for such a conclusion. The unseaworthiness found in some
cases where the same has been ruled to exist is directly
attributable to the vessel's crew and captain, more so on the part of
the latter since Article 612 of the Code of Commerce provides that
among the inherent duties of a captain is to examine a vessel before
sailing and to comply with the laws of navigation. Such a
construction would also put matters to rest relative to the decision
of the Board of Marine Inquiry. While the conclusion therein
exonerating the captain and crew of the vessel was not sustained
for lack of basis, the finding therein contained to the effect that the
vessel was seaworthy deserves merit. Despite appearances, it is not
totally incompatible with the findings of the trial court and the
Court of Appeals, whose finding of "unseaworthiness" clearly did
not pertain to the structural condition of the vessel which is the basis
of the BMI's findings, but to the condition it was in at the time of the
sinking, which condition was a result of the acts of the captain and
the crew.
The rights of a vessel owner or agent under the Limited Liability
Rule are akin to those of the rights of shareholders to limited
liability under our corporation law. Both are privileges granted by
statute, and while not absolute, must be swept aside only in the
established existence of the most compelling of reasons. In the
absence of such reasons, this Court chooses to exercise prudence
and shall not sweep such rights aside on mere whim or surmise, for
even in the existence of cause to do so, such incursion is definitely
punitive in nature and must never be taken lightly.
More to the point, the rights of parties to claim against an agent or
owner of a vessel may be compared to those of creditors against an
insolvent corporation whose assets are not enough to satisfy the
totality of claims as against it. While each individual creditor may,
and in fact shall, be allowed to prove the actual amounts of their
respective claims, this does not mean that they shall all be allowed
to recover fully thus favoring those who filed and proved their
claims sooner to the prejudice of those who come later. In such an
instance, such creditors too would not also be able to gain access to
the assets of the individual shareholders, but must limit their
recovery to what is left in the name of the corporation. Thus, in the
case of Lipana v. Development Bank of Rizal  earlier cited, We held
that:
In the instant case, the stay of execution of
judgment is warranted by the fact that the
respondent bank was placed under receivership.
To execute the judgment would unduly deplete
the assets of respondent bank to the obvious
prejudice of other depositors and creditors,
since, as aptly stated in Central Bank v. Morfe
(63 SCRA 114), after the Monetary Board has
declared that a bank is insolvent and has
ordered it to cease operations, the Board
becomes the trustee of its assets for the equal
benefit of all creditors, and after its insolvency,
one cannot obtain an advantage or preference
over another by an attachment, execution or
otherwise. (at p. 261).
In both insolvency of a corporation and the sinking of a vessel, the
claimants or creditors are limited in their recovery to the
remaining value of accessible assets. In the case of an insolvent
corporation, these are the residual assets of the corporation left
over from its operations. In the case of a lost vessel, these are the
insurance proceeds and pending freightage for the particular
voyage.
In the instant case, there is, therefore, a need to collate all claims
preparatory to their satisfaction from the insurance proceeds on
the vessel M/V P. Aboitiz and its pending freightage at the time of
its loss. No claimant can be given precedence over the others by the
simple expedience of having filed or completed its action earlier
than the rest. Thus, execution of judgment in earlier completed
cases, even those already final and executory, must be stayed
pending completion of all cases occasioned by the subject sinking.
Then and only then can all such claims be simultaneously settled,
either completely or pro-rata should the insurance proceeds and
freightage be not enough to satisfy all claims.
Finally, the Court notes that petitioner has provided this Court with
a list of all pending cases (pp. 175 to 183, Rollo), together with the
corresponding claims and the pro-rated share of each. We likewise
note that some of these cases are still with the Court of Appeals,
and some still with the trial courts and which probably are still
undergoing trial. It would not, therefore, be entirely correct to
preclude the trial courts from making their own findings of fact in
those cases and deciding the same by allotting shares for these
claims, some of which, after all, might not prevail, depending on the
evidence presented in each. We, therefore, rule that the pro-rated
share of each claim can only be found after all the cases shall have
been decided.
In fairness to the claimants, and as a matter of equity, the total
proceeds of the insurance and pending freightage should now be
deposited in trust. Moreover, petitioner should institute the
necessary limitation and distribution action before the proper
admiralty court within 15 days from the finality of this decision,
and thereafter deposit with it the proceeds from the insurance
company and pending freightage in order to safeguard the same
pending final resolution of all incidents, for final pro-rating and
settlement thereof.
ACCORDINGLY, the petition is hereby GRANTED, and the Orders of
the Regional Trial Court of Manila, Branch IV dated April 30, 1991
and the Court of Appeals dated June 21, 1991 are hereby set aside.
The trial court is hereby directed to desist from proceeding with
the execution of the judgment rendered in Civil Case No. 144425
pending determination of the totality of claims recoverable from
the petitioner as the owner of the M/V P. Aboitiz. Petitioner is
directed to institute the necessary action and to deposit the
proceeds of the insurance of subject vessel as above-described
within fifteen (15) days from finality of this decision. The
temporary restraining order issued in this case dated August 7,
1991 is hereby made permanent.
SO ORDERED.
G.R. No. 121833              October 17, 2008
ABOITIZ SHIPPING CORPORATION, petitioners,
vs.
COURT OF APPEALS, MALAYAN INSURANCE COMPANY, INC.,
COMPAGNIE MARITIME DES CHARGEURS REUNIS, and F.E.
ZUELLIG (M), INC., respondents.
x-----------------------------------------x
G.R. No. 130752              October 17, 2008
ABOITIZ SHIPPING CORPORATION, petitioners,
vs.
COURT OF APPEALS, THE HON. JUDGE REMEGIO E. ZARI, in his
capacity as Presiding Judge of the RTC, Branch 20; ASIA
TRADERS INSURANCE CORPORATION, and ALLIED
GUARANTEE INSURANCE CORPORATION, respondents.
x-----------------------------------------x
G.R. No. 137801              October 17, 2008
ABOITIZ SHIPPING CORPORATION, petitioners,
vs.
EQUITABLE INSURANCE CORPORATION, respondents.
DECISION
TINGA, J.:
Before this Court are three consolidated Rule 45 petitions all
involving the issue of whether the real and hypothecary doctrine
may be invoked by the shipowner in relation to the loss of cargoes
occasioned by the sinking of M/V P. Aboitiz  on 31 October 1980.
The petitions filed by Aboitiz Shipping Corporation (Aboitiz)
commonly seek the computation of its liability in accordance with
the Court’s pronouncement in Aboitiz Shipping Corporation v.
General Accident Fire and Life Assurance Corporation,
Ltd.1 (hereafter referred to as "the 1993 GAFLAC case").
The three petitions stemmed from some of the several suits filed
against Aboitiz before different regional trial courts by shippers or
their successors-in-interest for the recovery of the monetary value
of the cargoes lost, or by the insurers for the reimbursement of
whatever they paid. The trial courts awarded to various claimants
the amounts of ₱639,862.02, ₱646,926.30, and ₱87,633.81 in G.R.
Nos. 121833, 130752 and 137801, respectively.
ANTECEDENTS
G.R. No. 121833
Respondent Malayan Insurance Company, Inc. (Malayan) filed five
separate actions against several defendants for the collection of the
amounts of the cargoes allegedly paid by Malayan under various
marine cargo policies2 issued to the insurance claimants. The five
civil cases, namely, Civil Cases No. 138761, No. 139083, No.
138762, No. R-81-526 and No. 138879, were consolidated and
heard before the Regional Trial Court (RTC) of Manila, Branch 54.
The defendants in Civil Case No. 138761 and in Civil Case No.
139083 were Malayan International Shipping Corporation, a
foreign corporation based in Malaysia, its local ship agent, Litonjua
Merchant Shipping Agency (Litonjua), and Aboitiz. The defendants
in Civil Case No. 138762 were Compagnie Maritime des Chargeurs
Reunis (CMCR), its local ship agent, F.E. Zuellig (M), Inc. (Zuellig),
and Aboitiz. Malayan also filed Civil Case No. R-81-526 only against
CMCR and Zuellig. Thus, defendants CMCR and Zuellig filed a third-
party complaint against Aboitiz. In the fifth complaint docketed as
Civil Case No. 138879, only Aboitiz was impleaded as defendant.
The shipments were supported by their respective bills of lading
and insured separately by Malayan against the risk of loss or
damage. In the five consolidated cases, Malayan sought the
recovery of amounts totaling ₱639,862.02.
Aboitiz raised the defenses of lack of jurisdiction, lack of cause of
action and prescription. It also claimed that M/V P. Aboitiz  was
seaworthy, that it exercised extraordinary diligence and that the
loss was caused by a fortuitous event.
After trial on the merits, the RTC of Manila rendered a Decision
dated 27 November 1989, adjudging Aboitiz liable on the money
claims. The decretal portion reads:
WHEREFORE, judgment is hereby rendered as follows:
1. In Civil Case No. 138072 (R-81-526-CV), the defendants are
adjudged liable and ordered to pay to the plaintiffs jointly and
severally the amount of ₱128,896.79; the third-party defendant
Aboitiz is adjudged liable to reimburse and ordered to pay the
defendants or whosoever of them paid the plaintiff up to the said
amount;
2. In Civil Case No. 138761, Aboitiz is adjudged liable and ordered
to pay plaintiff the amount of One Hundred Sixty Three-Thousand
Seven Hundred Thirteen Pesos and Thirty-Eight Centavos
(₱163,713.38).
3. In Civil Case No. 138762, defendant Aboitiz is adjudged liable
and ordered to pay plaintiff the sum of Seventy Three Thousand
Five Hundred Sixty-Nine Pesos and Ninety-Four Centavos
(₱73,569.94); and Sixty-Four Thousand Seven Hundred Four Pesos
and Seventy-Seven Centavos (₱64,704.77);
4. In Civil Case No. 139083, defendant Aboitiz is adjudged liable
and ordered to pay plaintiff the amount of One Hundred Fifty-Six
Thousand Two Hundred Eighty-Seven Pesos and Sixty-Four
Centavos (₱156,287.64);
In Civil Case No. 138879, defendant Aboitiz is adjudged liable and
ordered to pay plaintiff the amount of Fifty-Two Thousand Six
Hundred Eighty-Nine Pesos and Fifty Centavos (₱52,689.50).
All the aforesaid award shall bear interest at the legal rate from the
filing of the respective complaints. Considering that there is no
clear showing that the cases fall under Article 2208, Nos. 4 and 5, of
the Civil Code, and in consonance with the basic rule that there be
no penalty (in terms of attorney’s fees) imposed on the right to
litigate, no damages by way of attorney’s fees are awarded;
however, costs of the party/parties to whom judgment awards are
made shall be made by the party ordered to pay the said judgment
awards.
SO ORDERED.3
Aboitiz, CMCR and Zuellig appealed the RTC decision to the Court of
Appeals. The appeal was docketed as CA-G.R. SP No. 35975-CV.
During the pendency of the appeal, the Court promulgated the
decision in the 1993 GAFLAC  case.
On 31 March 1995, the Court of Appeals (Ninth Division) affirmed
the RTC decision. It disregarded Aboitiz’s argument that the sinking
of the vessel was caused by a force majeure, in view of this Court’s
finding in a related case, Aboitiz Shipping Corporation v. Court of
Appeals, et al. (the 1990 GAFLAC case).4 In said case, this Court
affirmed the Court of Appeals’ finding that the sinking of M/V P.
Aboitiz was caused by the negligence of its officers and crew. It is
one of the numerous collection suits against Aboitiz, which
eventually reached this Court in connection with the sinking
of M/V P. Aboitiz.
As to the computation of Aboitiz’s liability, the Court of Appeals
again based its ruling on the 1990 GAFLAC case that Aboitiz’s
liability should be based on the declared value of the shipment in
consonance with the exceptional rule under Section 4(5)5 of the
Carriage of Goods by Sea Act.
Aboitiz moved for reconsideration6 to no avail. Hence, it filed this
petition for review on certiorari docketed as G.R. No. 121833.7 The
instant petition is based on the following grounds:
THE COURT OF APPEALS SHOULD HAVE LIMITED THE
RECOVERABLE AMOUNT FROM ASC TO THAT AMOUNT
STIPULATED IN THE BILL OF LADING.
IN THE ALTERNATIVE, THE COURT OF APPEALS SHOULD HAVE
FOUND THAT THE TOTAL LIABILITY OF ASC IS LIMITED TO THE
VALUE OF THE VESSEL OR THE INSURANCE PROCEEDS
THEREOF.8
On 4 December 1995, the Court issued a Resolution9 denying the
petition. Aboitiz moved for reconsideration, arguing that the
limited liability doctrine enunciated in the 1993 GAFLAC case
should be applied in the computation of its liability. In the
Resolution10 dated 6 March 1996, the Court granted the motion and
ordered the reinstatement of the petition and the filing of a
comment.
G.R. No. 130752
Respondents Asia Traders Insurance Corporation (Asia Traders)
and Allied Guarantee Insurance Corporation (Allied) filed separate
actions for damages against Aboitiz to recover by way of
subrogation the value of the cargoes insured by them and lost in
the sinking of the vessel M/V P. Aboitiz. The two actions were
consolidated and heard before the RTC of Manila, Branch 20.
Aboitiz reiterated the defense of force majeure. The trial court
rendered a decision11 on 25 April 1990 ordering Aboitiz to pay
damages in the amount of ₱646,926.30. Aboitiz sought
reconsideration, arguing that the trial court should have
considered the findings of the Board of Marine Inquiry that the
sinking of the M/V P. Aboitiz was caused by a typhoon and should
have applied the real and hypothecary doctrine in limiting the
monetary award in favor of the claimants. The trial court denied
Aboitiz’s motion for reconsideration.
Aboitiz elevated the case to the Court of Appeals. While the appeal
was pending, this Court promulgated the decision in the
1993 GAFLAC  case. The Court of Appeals subsequently rendered a
decision on 30 May 1994, affirming the RTC decision.12
Aboitiz appealed the Court of Appeals decision to this Court. 13 In a
Resolution dated 20 September 1995,14 the Court denied the
petition for raising factual issues and for failure to show that the
Court of Appeals committed any reversible error. Aboitiz’s motion
for reconsideration was also denied in a Resolution dated 22
November 1995.15
The 22 November 1995 Resolution became final and executory. On
26 February 1996, Asia Traders and Allied filed a motion for
execution before the RTC of Manila, Branch 20. Aboitiz opposed the
motion. On 16 August 1996, the trial court granted the motion and
issued a writ of execution.
Alleging that it had no other speedy, just or adequate remedy to
prevent the execution of the judgment, Aboitiz filed with the Court
of Appeals a petition for certiorari and prohibition with an urgent
prayer for preliminary injunction and/or temporary restraining
order docketed as CA-G.R. SP No. 41696.16 The petition was mainly
anchored on this Court’s ruling in the 1993 GAFLAC case.
On 8 August 1997, the Court of Appeals (Special Seventeenth
Division) rendered the assailed decision dismissing the
petition.17 Based on the trial court’s finding that Aboitiz was
actually negligent in ensuring the seaworthiness of M/V P. Aboitiz,
the appellate court held that the real and hypothecary doctrine
enunciated in the 1993 GAFLAC  case may not be applied in the
case.
In view of the denial of its motion for reconsideration,18 Aboitiz
filed before this Court the instant petition for review on certiorari
docketed as G.R. No. 130752.19 The petition attributes the following
errors to the Court of Appeals:
THE COURT OF APPEALS GRAVELY ERRED WHEN IT RULED THAT
THE LOWER COURT HAD MADE AN EXPRESS FINDING OF
THE ACTUAL NEGLIGENCE OF ABOITIZ IN THE SINKING OF
THE M/V P. ABOITIZ THEREBY DEPRIVING ABOITIZ OF THE
BENEFIT OF THE DOCTRINE OF THE REAL AND HYPOTHECARY
NATURE OF MARITIME LAW.20
THE COURT OF APPEALS ERRED IN NOT GIVING WEIGHT TO
THE GAFLAC CASE DECIDED BY THE HONORABLE COURT WHICH
SUPPORTS THE APPLICABILITY OF THE REAL AND
HYPOTHECARY NATURE OF MARITIME LAW IN THE PRESENT
CASE.21
G.R. No. 137801
On 27 February 1981, Equitable Insurance Corporation (Equitable)
filed an action for damages against Aboitiz to recover by way of
subrogation the value of the cargoes insured by Equitable that
were lost in the sinking of M/V P. Aboitiz.22 The complaint, which
was docketed as Civil Case No. 138395, was later amended to
implead Seatrain Pacific Services S.A. and Citadel Lines, Inc. as
party defendants.23 The complaint against the latter defendants
was subsequently dismissed upon motion in view of the amicable
settlement reached by the parties.
On 7 September 1989, the RTC of Manila, Branch 7, rendered
judgment24 ordering Aboitiz to pay Equitable the amount of
₱87,633.81, plus legal interest and attorney’s fees.25 It found that
Aboitiz was guilty of contributory negligence and, therefore, liable
for the loss.
In its appeal, docketed as CA-G.R. CV No. 43458, Aboitiz invoked the
doctrine of limited liability and claimed that the typhoon was the
proximate cause of the loss. On 27 November 1998, the Court of
Appeals rendered a decision, affirming the RTC decision.26
The Court of Appeals (Fifteenth Division) ruled that the loss of the
cargoes and the sinking of the vessel were due to its
unseaworthiness and the failure of the crew to exercise
extraordinary diligence. Said findings were anchored on the
1990 GAFLAC  case and on this Court’s resolution dated November
13, 1989 in G.R. No. 88159, dismissing Aboitiz’s petition and
affirming the findings of the appellate court on the vessel’s
unseaworthiness and the crew’s negligence.
Its motion for reconsideration27 having been denied,28 Aboitiz filed
before this Court a petition for review on certiorari, docketed as
G.R. No. 137801,29 raising this sole issue, to wit:
WHETHER OR NOT THE DOCTRINE OF REAL AND HYPOTHECARY
NATURE OF MARITIME LAW (ALSO KNOWN AS THE "LIMITED
LIABILITY RULE") APPLIES.30
ISSUES
The principal issue common to all three petitions is whether
Aboitiz can avail limited liability on the basis of the real and
hypothecary doctrine of maritime law. Corollary to this issue is the
determination of actual negligence on the part of Aboitiz.
These consolidated petitions similarly posit that Aboitiz’s liability
to respondents should be limited to the value of the insurance
proceeds of the lost vessel plus pending freightage and not
correspond to the full insurable value of the cargoes paid by
respondents, based on the Court’s ruling in the 1993 GAFLAC case.
Respondents in G.R. No. 121833 counter that the limited liability
rule should not be applied because there was a finding of
negligence in the care of the goods on the part of Aboitiz based on
this Court’s Resolution dated 4 December 1995 in G.R. No. 121833,
which affirmed the trial court’s finding of negligence on the part of
the vessel’s captain. Likewise, respondent in G.R. No. 137801 relies
on the finding of the trial court, as affirmed by the appellate court,
that Aboitiz was guilty of negligence.
Respondents in G.R No. 130752 argue that this Court had already
affirmed in toto the appellate court’s finding that the vessel was not
seaworthy and that Aboitiz failed to exercise extraordinary
diligence in the handling of the cargoes. This being the law of the
case, Aboitiz should not be entitled to the limited liability rule as far
as this petition is concerned, respondents contend.
RULING of the COURT
These consolidated petitions are just among the many others
elevated to this Court involving Aboitiz’s liability to shippers and
insurers as a result of the sinking of its vessel, M/V P. Aboitiz, on 31
October 1980 in the South China Sea. One of those petitions is the
1993 GAFLAC case, docketed as G.R. No. 100446.31
The 1993 GAFLAC case was an offshoot of an earlier final and
executory judgment in the 1990 GAFLAC case, where the General
Accident Fire and Life Assurance Corporation, Ltd. (GAFLAC), as
judgment obligee therein, sought the execution of the monetary
award against Aboitiz. The trial court granted GAFLAC’s prayer for
execution of the full judgment award. The appellate court
dismissed Aboitiz’s petition to nullify the order of execution,
prompting Aboitiz to file a petition with this Court.
In the 1993 GAFLAC case, Aboitiz argued that the real and
hypothecary doctrine warranted the immediate stay of execution of
judgment to prevent the impairment of the other creditors’ shares.
Invoking the rule on the law of the case, private respondent therein
countered that the 1990 GAFLAC case had already settled the
extent of Aboitiz’s liability.
Following the doctrine of limited liability, however, the Court
declared in the 1993 GAFLAC case that claims against Aboitiz
arising from the sinking of M/V P. Aboitiz should be limited only to
the extent of the value of the vessel. Thus, the Court held that the
execution of judgments in cases already resolved with finality must
be stayed pending the resolution of all the other similar claims
arising from the sinking of M/V P. Aboitiz. Considering that the
claims against Aboitiz had reached more than 100, the Court found
it necessary to collate all these claims before their payment from
the insurance proceeds of the vessel and its pending freightage. As
a result, the Court exhorted the trial courts before whom similar
cases remained pending to proceed with trial and adjudicate these
claims so that the pro-rated share of each claim could be
determined after all the cases shall have been decided.32
In the 1993 GAFLAC case, the Court applied the limited liability rule
in favor of Aboitiz based on the trial court’s finding therein that
Aboitiz was not negligent. The Court explained, thus:
x x x In the few instances when the matter was considered by this
Court, we have been consistent in this jurisdiction in holding that
the only time the Limited Liability Rule does not apply is when there
is an actual finding of negligence on the part of the vessel owner or
agent x x x. The pivotal question, thus, is whether there is finding of
such negligence on the part of the owner in the instant case.
A careful reading of the decision rendered by the trial court in Civil
Case No. 144425 as well as the entirety of the records in the instant
case will show that there has been no actual finding of
negligence on the part of petitioner. x x x
The same is true of the decision of this Court in G.R. No. 89757
affirming the decision of the Court of Appeals in CA-G.R. CV No.
10609 since both decisions did not make any new and additional
finding of fact. Both merely affirmed the factual findings of the trial
court, adding that the cause of the sinking of the vessel was because
of unseaworthiness due to the failure of the crew and the master to
exercise extraordinary diligence. Indeed, there appears to have
been no evidence presented sufficient to form a conclusion that
petitioner shipowner itself was negligent, and no tribunal,
including this Court, will add or subtract to such evidence to justify
a conclusion to the contrary. 33 (Citations entitled) (Emphasis
supplied)
The ruling in the 1993 GAFLAC case cited the real and hypothecary
doctrine in maritime law that the shipowner or agent’s liability is
merely co-extensive with his interest in the vessel such that a total
loss thereof results in its extinction. "No vessel, no liability"
expresses in a nutshell the limited liability rule.34
In this jurisdiction, the limited liability rule is embodied in Articles
587, 590 and 837 under Book III of the Code of Commerce, thus:
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded on
the vessel; but he may exempt himself therefrom by abandoning
the vessel with all her equipment and the freight it may have
earned during the voyage.
Art. 590. The co-owners of the vessel shall be civilly liable in the
proportion of their interests in the common fund for the results of
the acts of the captain referred to in Art. 587.
Each co-owner may exempt himself from this liability by the
abandonment, before a notary, of the part of the vessel belonging to
him.
Art. 837. The civil liability incurred by shipowners in the case
prescribed in this section, shall be understood as limited to the
value of the vessel with all its appurtenances and freightage served
during the voyage.
These articles precisely intend to limit the liability of the
shipowner or agent to the value of the vessel, its appurtenances
and freightage earned in the voyage, provided that the owner or
agent abandons the vessel.35 When the vessel is totally lost in which
case there is no vessel to abandon, abandonment is not required.
Because of such total loss the liability of the shipowner or agent for
damages is extinguished.36 However, despite the total loss of the
vessel, its insurance answers for the damages for which a
shipowner or agent may be held liable.37
Nonetheless, there are exceptional circumstances wherein the ship
agent could still be held answerable despite the abandonment of
the vessel, as where the loss or injury was due to the fault of the
shipowner and the captain. The international rule is to the effect
that the right of abandonment of vessels, as a legal limitation of a
shipowner’s liability, does not apply to cases where the injury or
average was occasioned by the shipowner’s own fault.38 Likewise,
the shipowner may be held liable for injuries to passengers
notwithstanding the exclusively real and hypothecary nature of
maritime law if fault can be attributed to the shipowner.39
As can be gleaned from the foregoing disquisition in the
1993 GAFLAC case, the Court applied the doctrine of limited
liability in view of the absence of an express finding that Aboitiz’s
negligence was the direct cause of the sinking of the vessel. The
circumstances in the 1993 GAFLAC case, however, are not obtaining
in the instant petitions.
A perusal of the decisions of the courts below in all three petitions
reveals that there is a categorical finding of negligence on the part
of Aboitiz. For instance, in G.R. No. 121833, the RTC therein
expressly stated that the captain of M/V P. Aboitiz was negligent in
failing to take a course of action that would prevent the vessel from
sailing into the typhoon. In G.R. No. 130752, the RTC concluded that
Aboitiz failed to show that it had exercised the required
extraordinary diligence in steering the vessel before, during and
after the storm. In G.R. No. 137801, the RTC categorically stated
that the sinking of M/V P. Aboitiz was attributable to the negligence
or fault of Aboitiz. In all instances, the Court of Appeals affirmed
the factual findings of the trial courts.
The finding of actual fault on the part of Aboitiz is central to the
issue of its liability to the respondents. Aboitiz’s contention, that
with the sinking of M/V P. Aboitiz, its liability to the cargo shippers
and shippers should be limited only to the insurance proceeds of
the vessel absent any finding of fault on the part of Aboitiz, is not
supported by the record. Thus, Aboitiz is not entitled to the limited
liability rule and is, therefore, liable for the value of the lost cargoes
as so duly alleged and proven during trial.
Events have supervened during the pendency of the instant
petitions. On two other occasions, the Court ruled on separate
petitions involving monetary claims against Aboitiz as a result of
the 1980 sinking
of the vessel M/V P. Aboitiz. One of them is the consolidated
petitions of Monarch Ins. Co., Inc v. Court of Appeals,40 Allied
Guarantee Insurance Company v. Court of Appeals 41 and Equitable
Insurance Corporation v. Court of Appeals 42 (hereafter collectively
referred to as Monarch Insurance) promulgated on 08 June 2000.
This time, the petitioners consisted of claimants against Aboitiz
because either the execution of the judgment awarding full
indemnification of their claims was stayed or set aside or the lower
courts awarded damages only to the extent of the claimants’
proportionate share in the insurance proceeds of the vessel.
In Monarch Insurance, the Court deemed it fit to settle once and for
all this factual issue by declaring that the sinking of M/V P.
Aboitiz was caused by the concurrence of the unseaworthiness of
the vessel and the negligence of both Aboitiz and the vessel’s crew
and master and not because of force majeure. Notwithstanding this
finding, the Court did not reverse but reiterated instead the
pronouncement in GAFLAC  to the effect that the claimants be
treated as "creditors in an insolvent corporation whose assets are
not enough to satisfy the totality of claims against it." 43 The Court
explained that the peculiar circumstances warranted that
procedural rules of evidence be set aside to prevent frustrating the
just claims of shippers/insurers. Thus, the Court in Monarch
Insurance ordered Aboitiz to institute the necessary limitation and
distribution action before the proper RTC and to deposit with the
said court the insurance proceeds of and the freightage earned by
the ill-fated ship.
However, on 02 May 2006, the Court rendered a decision in Aboitiz
Shipping Corporation v. New India Assurance Company, Ltd. 44 (New
India), reiterating the well-settled principle that the exception to
the limited liability doctrine applies when the damage is due to the
fault of the shipowner or to the concurrent negligence of the
shipowner and the captain. Where the shipowner fails to overcome
the presumption of negligence, the doctrine of limited liability
cannot be applied.45 In New India, the Court clarified that the earlier
pronouncement in Monarch Insurance was not an abandonment of
the doctrine of limited liability and that the circumstances therein
still made the doctrine applicable.46
In New India, the Court declared that Aboitiz failed to discharge its
burden of showing that it exercised extraordinary diligence in the
transport of the goods it had on board in order to invoke the
limited liability doctrine. Thus, the Court rejected Aboitiz’s
argument that the award of damages to respondent therein should
be limited to its pro rata share in the insurance proceeds from the
sinking of M/V P. Aboitiz.
The instant petitions provide another occasion for the Court to
reiterate the well-settled doctrine of the real and hypothecary
nature of maritime law. As a general rule, a ship owner’s liability is
merely co-extensive with his interest in the vessel, except where
actual fault is attributable to the shipowner. Thus, as an exception
to the limited
liability doctrine, a shipowner or ship agent may be held liable for
damages when the sinking of the vessel is attributable to the actual
fault or negligence of the shipowner or its failure to ensure the
seaworthiness of the vessel. The instant petitions cannot be spared
from the application of the exception to the doctrine of limited
liability in view of the unanimous findings of the courts below that
both Aboitiz and the crew failed to ensure the seaworthiness of
the M/V P. Aboitiz.
WHEREFORE, the petitions in G.R. Nos. 121833, 130752 and
137801 are DENIED. The decisions of the Court of Appeals in CA-
G.R. SP No. 35975-CV, CA-G.R. SP No. 41696 and CA-G.R. CV No.
43458 are hereby AFFIRMED. Costs against petitioner.
SO ORDERED.
G.R. No. 200289               November 25, 2013
WESTWIND SHIPPING CORPORATION, Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS
INC., Respondents.
x-----------------------x
G.R. No. 200314
ORIENT FREIGHT INTERNATIONAL INC., Petitioner,
vs.
UCPB GENERAL INSURANCE CO., INC. and ASIAN TERMINALS
INC., Respondents.
DECISION
PERALTA, J.:
These two consolidated cases challenge, by way of petition for
certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
September 13, 2011 Decision1 and January 19, 2012 Resolution2 of
the Court of Appeals (CA) in CA-G.R. CV No. 86752, which reversed
and set aside the January 27, 2006 Decision3 of the Manila City
Regional Trial Court Branch (RTC) 30. The facts, as established by
the records, are as follows:
On August 23, 1993, Kinsho-Mataichi Corporation shipped from the
port of Kobe, Japan, 197 metal containers/skids of tin-free steel for
delivery to the consignee, San Miguel Corporation (SMC). The
shipment, covered by Bill of Lading No. KBMA-1074,4 was loaded
and received clean on board M/V Golden Harvest Voyage No. 66, a
vessel owned and operated by Westwind Shipping Corporation
(Westwind).
SMC insured the cargoes against all risks with UCPB General
Insurance Co., Inc. (UCPB) for US Dollars: One Hundred Eighty-Four
Thousand Seven Hundred Ninety-Eight and Ninety-Seven Centavos
(US$184,798.97), which, at the time, was equivalent to Philippine
Pesos: Six Million Two Hundred Nine Thousand Two Hundred
Forty-Five and Twenty-Eight Centavos (₱6,209,245.28).
The shipment arrived in Manila, Philippines on August 31, 1993
and was discharged in the custody of the arrastre operator, Asian
Terminals, Inc. (ATI), formerly Marina Port Services, Inc.5 During
the unloading operation, however, six containers/skids worth
Philippine Pesos: One Hundred Seventeen Thousand Ninety-Three
and Twelve Centavos (₱117,093.12) sustained dents and punctures
from the forklift used by the stevedores of Ocean Terminal
Services, Inc. (OTSI) in centering and shuttling the
containers/skids. As a consequence, the local ship agent of the
vessel, Baliwag Shipping Agency, Inc., issued two Bad Order Cargo
Receipt dated September 1, 1993.
On September 7, 1993, Orient Freight International, Inc. (OFII), the
customs broker of SMC, withdrew from ATI the 197
containers/skids, including the six in damaged condition, and
delivered the same at SMC’s warehouse in Calamba, Laguna
through J.B. Limcaoco Trucking (JBL). It was discovered upon
discharge that additional nine containers/skids valued at
Philippine Pesos: One Hundred Seventy-Five Thousand Six
Hundred Thirty-Nine and Sixty-Eight Centavos (₱175,639.68) were
also damaged due to the forklift operations; thus, making the total
number of 15 containers/skids in bad order.
Almost a year after, on August 15, 1994, SMC filed a claim against
UCPB, Westwind, ATI, and OFII to recover the amount
corresponding to the damaged 15 containers/skids. When UCPB
paid the total sum of Philippine Pesos: Two Hundred Ninety-Two
Thousand Seven Hundred Thirty-Two and Eighty Centavos
(₱292,732.80), SMC signed the subrogation receipt. Thereafter, in
the exercise of its right of subrogation, UCPB instituted on August
30, 1994 a complaint for damages against Westwind, ATI, and
OFII.6
After trial, the RTC dismissed UCPB’s complaint and the
counterclaims of Westwind, ATI, and OFII. It ruled that the right, if
any, against ATI already prescribed based on the stipulation in the
16 Cargo Gate Passes issued, as well as the doctrine laid down in
International Container Terminal Services, Inc. v. Prudential
Guarantee & Assurance Co. Inc.7 that a claim for reimbursement for
damaged goods must be filed within 15 days from the date of
consignee’s knowledge. With respect to Westwind, even if the
action against it is not yet barred by prescription, conformably with
Section 3 (6) of the Carriage of Goods by Sea Act (COGSA) and Our
rulings in E.E. Elser, Inc., et al. v. Court of Appeals, et al. 8 and
Belgian Overseas Chartering and Shipping N.V. v. Phil. First
Insurance Co., Inc.,9 the court a quo still opined that Westwind is
not liable, since the discharging of the cargoes were done by ATI
personnel using forklifts and that there was no allegation that it
(Westwind) had a hand in the conduct of the stevedoring
operations. Finally, the trial court likewise absolved OFII from any
liability, reasoning that it never undertook the operation of the
forklifts which caused the dents and punctures, and that it merely
facilitated the release and delivery of the shipment as the customs
broker and representative of SMC.
On appeal by UCPB, the CA reversed and set aside the trial court.
The fallo of its September 13, 2011 Decision directed:
WHEREFORE, premises considered, the instant appeal is hereby
GRANTED. The Decision dated January 27, 2006 rendered by the
court a quo is REVERSED AND SET ASIDE. Appellee Westwind
Shipping Corporation is hereby ordered to pay to the appellant
UCPB General Insurance Co., Inc., the amount of One Hundred
Seventeen Thousand and Ninety-Three Pesos and Twelve Centavos
(Php117,093.12), while Orient Freight International, Inc. is hereby
ordered to pay to UCPB the sum of One Hundred Seventy-Five
Thousand Six Hundred Thirty-Nine Pesos and Sixty-Eight Centavos
(Php175,639.68). Both sums shall bear interest at the rate of six
(6%) percent per annum, from the filing of the complaint on August
30, 1994 until the judgment becomes final and executory.
Thereafter, an interest rate of twelve (12%) percent per annum
shall be imposed from the time this decision becomes final and
executory until full payment of said amounts.
SO ORDERED.10
While the CA sustained the RTC judgment that the claim against
ATI already prescribed, it rendered a contrary view as regards the
liability of Westwind and OFII. For the appellate court, Westwind,
not ATI, is responsible for the six damaged containers/skids at the
time of its unloading. In its rationale, which substantially followed
Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping,
Inc.,11 it concluded that the common carrier, not the arrastre
operator, is responsible during the unloading of the cargoes from
the vessel and that it is not relieved from liability and is still bound
to exercise extraordinary diligence at the time in order to see to it
that the cargoes under its possession remain in good order and
condition. The CA also considered that OFII is liable for the
additional nine damaged containers/skids, agreeing with UCPB’s
contention that OFII is a common carrier bound to observe
extraordinary diligence and is presumed to be at fault or have acted
negligently for such damage. Noting the testimony of OFII’s own
witness that the delivery of the shipment to the consignee is part of
OFII’s job as a cargo forwarder, the appellate court ruled that
Article 1732 of the New Civil Code (NCC) does not distinguish
between one whose principal business activity is the carrying of
persons or goods or both and one who does so as an ancillary
activity. The appellate court further ruled that OFII cannot excuse
itself from liability by insisting that JBL undertook the delivery of
the cargoes to SMC’s warehouse. It opined that the delivery
receipts signed by the inspector of SMC showed that the
containers/skids were received from OFII, not JBL. At the most, the
CA said, JBL was engaged by OFII to supply the trucks necessary to
deliver the shipment, under its supervision, to SMC.
Only Westwind and OFII filed their respective motions for
reconsideration, which the CA denied; hence, they elevated the case
before Us via petitions docketed as G.R. Nos. 200289 and 200314,
respectively.
Westwind argues that it no longer had actual or constructive
custody of the containers/skids at the time they were damaged by
ATI’s forklift operator during the unloading operations. In
accordance with the stipulation of the bill of lading, which allegedly
conforms to Article 1736 of the NCC, it contends that its
responsibility already ceased from the moment the cargoes were
delivered to ATI, which is reckoned from the moment the goods
were taken into the latter’s custody. Westwind adds that ATI,
which is a completely independent entity that had the right to
receive the goods as exclusive operator of stevedoring and arrastre
functions in South Harbor, Manila, had full control over its
employees and stevedores as well as the manner and procedure of
the discharging operations.
As for OFII, it maintains that it is not a common carrier, but only a
customs broker whose participation is limited to facilitating
withdrawal of the shipment in the custody of ATI by overseeing
and documenting the turnover and counterchecking if the quantity
of the shipments were in tally with the shipping documents at
hand, but without participating in the physical withdrawal and
loading of the shipments into the delivery trucks of JBL. Assuming
that it is a common carrier, OFII insists that there is no need to rely
on the presumption of the law – that, as a common carrier, it is
presumed to have been at fault or have acted negligently in case of
damaged goods – considering the undisputed fact that the damages
to the containers/skids were caused by the forklift blades, and that
there is no evidence presented to show that OFII and Westwind
were the owners/operators of the forklifts. It asserts that the
loading to the trucks were made by way of forklifts owned and
operated by ATI and the unloading from the trucks at the SMC
warehouse was done by way of forklifts owned and operated by
SMC employees. Lastly, OFII avers that neither the undertaking to
deliver nor the acknowledgment by the consignee of the fact of
delivery makes a person or entity a common carrier, since delivery
alone is not the controlling factor in order to be considered as such.
Both petitions lack merit.
The case of Philippines First Insurance Co., Inc. v. Wallem Phils.
Shipping, Inc.12 applies, as it settled the query on which between a
common carrier and an arrastre operator should be responsible for
damage or loss incurred by the shipment during its unloading. We
elucidated at length:
Common carriers, from the nature of their business and for reasons
of public policy, are bound to observe extraordinary diligence in
the vigilance over the goods transported by them. Subject to certain
exceptions enumerated under Article 1734 of the Civil Code,
common carriers are responsible for the loss, destruction, or
deterioration of the goods. The extraordinary responsibility of the
common carrier lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person
who has a right to receive them.
For marine vessels, Article 619 of the Code of Commerce provides
that the ship captain is liable for the cargo from the time it is turned
over to him at the dock or afloat alongside the vessel at the port of
loading, until he delivers it on the shore or on the discharging
wharf at the port of unloading, unless agreed otherwise. In
Standard Oil Co. of New York v. Lopez Castelo, the Court
interpreted the ship captain’s liability as ultimately that of the
shipowner by regarding the captain as the representative of the
shipowner.
Lastly, Section 2 of the COGSA provides that under every contract
of carriage of goods by sea, the carrier in relation to the loading,
handling, stowage, carriage, custody, care, and discharge of such
goods, shall be subject to the responsibilities and liabilities and
entitled to the rights and immunities set forth in the Act. Section 3
(2) thereof then states that among the carriers’ responsibilities are
to properly and carefully load, handle, stow, carry, keep, care for,
and discharge the goods carried.
xxxx
On the other hand, the functions of an arrastre operator involve the
handling of cargo deposited on the wharf or between the
establishment of the consignee or shipper and the ship's tackle.
Being the custodian of the goods discharged from a vessel, an
arrastre operator's duty is to take good care of the goods and to
turn them over to the party entitled to their possession.
Handling cargo is mainly the arrastre operator's principal work so
its drivers/operators or employees should observe the standards
and measures necessary to prevent losses and damage to
shipments under its custody.
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the
Court explained the relationship and responsibility of an arrastre
operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre
operator is akin to that of a depositor and warehouseman. The
relationship between the consignee and the common carrier is
similar to that of the consignee and the arrastre operator. Since it is
the duty of the ARRASTRE to take good care of the goods that are in
its custody and to deliver them in good condition to the consignee,
such responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with and
obligated to deliver the goods in good condition to the consignee.
(Emphasis supplied) (Citations omitted)
The liability of the arrastre operator was reiterated in Eastern
Shipping Lines, Inc. v. Court of Appeals with the clarification that
the arrastre operator and the carrier are not always and
necessarily solidarily liable as the facts of a case may vary the rule.
Thus, in this case, the appellate court is correct insofar as it ruled
that an arrastre operator and a carrier may not be held solidarily
liable at all times. But the precise question is which entity had
custody of the shipment during its unloading from the vessel?
The aforementioned Section 3 (2) of the COGSA states that among
the carriers’ responsibilities are to properly and carefully load, care
for and discharge the goods carried. The bill of lading covering the
subject shipment likewise stipulates that the carrier’s liability for
loss or damage to the goods ceases after its discharge from the
vessel. Article 619 of the Code of Commerce holds a ship captain
liable for the cargo from the time it is turned over to him until its
delivery at the port of unloading.
In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V
Farland, it was ruled that like the duty of seaworthiness, the duty of
care of the cargo is non-delegable, and the carrier is accordingly
responsible for the acts of the master, the crew, the stevedore, and
his other agents. It has also been held that it is ordinarily the duty
of the master of a vessel to unload the cargo and place it in
readiness for delivery to the consignee, and there is an implied
obligation that this shall be accomplished with sound machinery,
competent hands, and in such manner that no unnecessary injury
shall be done thereto. And the fact that a consignee is required to
furnish persons to assist in unloading a shipment may not relieve
the carrier of its duty as to such unloading.
xxxx
It is settled in maritime law jurisprudence that cargoes while being
unloaded generally remain under the custody of the carrier x x x.13
In Regional Container Lines (RCL) of Singapore v. The Netherlands
Insurance Co. (Philippines), Inc.14 and Asian Terminals, Inc. v.
Philam Insurance Co., Inc.,15 the Court echoed the doctrine that
cargoes, while being unloaded, generally remain under the custody
of the carrier. We cannot agree with Westwind’s disputation that
"the carrier in Wallem clearly exercised supervision during the
discharge of the shipment and that is why it was faulted and held
liable for the damage incurred by the shipment during such time."
What Westwind failed to realize is that the extraordinary
responsibility of the common carrier lasts until the time the goods
are actually or constructively delivered by the carrier to the
consignee or to the person who has a right to receive them. There
is actual delivery in contracts for the transport of goods when
possession has been turned over to the consignee or to his duly
authorized agent and a reasonable time is given him to remove the
goods.16 In this case, since the discharging of the containers/skids,
which were covered by only one bill of lading, had not yet been
completed at the time the damage occurred, there is no reason to
imply that there was already delivery, actual or constructive, of the
cargoes to ATI. Indeed, the earlier case of Delsan Transport Lines,
Inc. v. American Home Assurance Corp.17 serves as a useful guide,
thus:
Delsan’s argument that it should not be held liable for the loss of
diesel oil due to backflow because the same had already been
actually and legally delivered to Caltex at the time it entered the
shore tank holds no water. It had been settled that the subject
cargo was still in the custody of Delsan because the discharging
thereof has not yet been finished when the backflow occurred.
Since the discharging of the cargo into the depot has not yet been
completed at the time of the spillage when the backflow occurred,
there is no reason to imply that there was actual delivery of the
cargo to the consignee. Delsan is straining the issue by insisting
that when the diesel oil entered into the tank of Caltex on shore,
there was legally, at that moment, a complete delivery thereof to
Caltex. To be sure, the extraordinary responsibility of common
carrier lasts from the time the goods are unconditionally placed in
the possession of, and received by, the carrier for transportation
until the same are delivered, actually or constructively, by the
carrier to the consignee, or to a person who has the right to receive
them. The discharging of oil products to Caltex Bulk Depot has not
yet been finished, Delsan still has the duty to guard and to preserve
the cargo. The carrier still has in it the responsibility to guard and
preserve the goods, a duty incident to its having the goods
transported.
To recapitulate, common carriers, from the nature of their business
and for reasons of public policy, are bound to observe
extraordinary diligence in vigilance over the goods and for the
safety of the passengers transported by them, according to all the
circumstances of each case. The mere proof of delivery of goods in
good order to the carrier, and their arrival in the place of
destination in bad order, make out a prima facie case against the
carrier, so that if no explanation is given as to how the injury
occurred, the carrier must be held responsible. It is incumbent
upon the carrier to prove that the loss was due to accident or some
other circumstances inconsistent with its liability.18
The contention of OFII is likewise untenable. A customs broker has
been regarded as a common carrier because transportation of
goods is an integral part of its business. 19 In Schmitz Transport &
Brokerage Corporation v. Transport Venture, Inc.,20 the Court
already reiterated: It is settled that under a given set of facts, a
customs broker may be regarded as a common
carrier.1âwphi1 Thus, this Court, in A.F. Sanchez Brokerage, Inc. v.
The Honorable Court of Appeals held:
The appellate court did not err in finding petitioner, a customs
broker, to be also a common carrier, as defined under Article 1732
of the Civil Code, to wit, Art. 1732. Common carriers are persons,
corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land,
water, or air, for compensation, offering their services to the public.
xxxx
Article 1732 does not distinguish between one whose principal
business activity is the carrying of goods and one who does such
carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker
whose principal function is to prepare the correct customs
declaration and proper shipping documents as required by law is
bereft of merit. It suffices that petitioner undertakes to deliver the
goods for pecuniary consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held
that as the transportation of goods is an integral part of a customs
broker, the customs broker is also a common carrier. For to declare
otherwise "would be to deprive those with whom [it] contracts the
protection which the law affords them notwithstanding the fact
that the obligation to carry goods for [its] customers, is part and
parcel of petitioner’s business."21
That OFII is a common carrier is buttressed by the testimony of its
own witness, Mr. Loveric Panganiban Cueto, that part of the
services it offers to clients is cargo forwarding, which includes the
delivery of the shipment to the consignee.22 Thus, for undertaking
the transport of cargoes from ATI to SMC’s warehouse in Calamba,
Laguna, OFII is considered a common carrier. As long as a person
or corporation holds itself to the public for the purpose of
transporting goods as a business, it is already considered a
common carrier regardless of whether it owns the vehicle to be
used or has to actually hire one.
As a common carrier, OFII is mandated to observe, under Article
1733 of the Civil Code,23 extraordinary diligence in the vigilance
over the goods24 it transports according to the peculiar
circumstances of each case. In the event that the goods are lost,
destroyed or deteriorated, it is presumed to have been at fault or to
have acted negligently unless it proves that it observed
extraordinary diligence.25 In the case at bar it was established that
except for the six containers/skids already damaged OFII received
the cargoes from ATI in good order and condition; and that upon its
delivery to SMC additional nine containers/skids were found to be
in bad order as noted in the Delivery Receipts issued by OFII and as
indicated in the Report of Cares Marine Cargo Surveyors. Instead of
merely excusing itself from liability by putting the blame to ATI and
SMC it is incumbent upon OFII to prove that it actively took care of
the goods by exercising extraordinary diligence in the carriage
thereof. It failed to do so. Hence its presumed negligence under
Article 1735 of the Civil Code remains unrebutted.
WHEREFORE, premises considered the petitions of Westwind and
OFII in G.R. Nos. 200289 and 200314 respectively are DENIED. The
September 13 2011 Decision and January 19 2012 Resolution of
the Court of Appeals in CA-G.R. CV No. 86752 which reversed and
set aside the January 27 2006 Decision of the Manila City Regional
Trial Court Branch 30 are AFFIRMED.
SO ORDERED.
G.R. No. 179446               January 10, 2011
LOADMASTERS CUSTOMS SERVICES, INC., Petitioner,
vs.
GLODEL BROKERAGE CORPORATION and R&B INSURANCE
CORPORATION, Respondents.
DECISION
MENDOZA, J.:
This is a petition for review on certiorari under Rule 45 of the
Revised Rules of Court assailing the August 24, 2007 Decision1 of
the Court of Appeals (CA) in CA-G.R. CV No. 82822, entitled "R&B
Insurance Corporation v. Glodel Brokerage Corporation and
Loadmasters Customs Services, Inc.," which held petitioner
Loadmasters Customs Services, Inc. (Loadmasters) liable to
respondent Glodel Brokerage Corporation (Glodel) in the amount of
₱1,896,789.62 representing the insurance indemnity which R&B
Insurance Corporation (R&B Insurance)  paid to the insured-
consignee, Columbia Wire and Cable Corporation (Columbia).
THE FACTS:
On August 28, 2001, R&B Insurance issued Marine Policy No. MN-
00105/2001 in favor of Columbia to insure the shipment of 132
bundles of electric copper cathodes against All Risks. On August 28,
2001, the cargoes were shipped on board the vessel "Richard Rey"
from Isabela, Leyte, to Pier 10, North Harbor, Manila. They arrived
on the same date.
Columbia engaged the services of Glodel for the release and
withdrawal of the cargoes from the pier and the subsequent
delivery to its warehouses/plants. Glodel, in turn, engaged the
services of Loadmasters for the use of its delivery trucks to
transport the cargoes to Columbia’s warehouses/plants in Bulacan
and Valenzuela City.
The goods were loaded on board twelve (12) trucks owned by
Loadmasters, driven by its employed drivers and accompanied by
its employed truck helpers. Six (6) truckloads of copper cathodes
were to be delivered to Balagtas, Bulacan, while the other six (6)
truckloads were destined for Lawang Bato, Valenzuela City. The
cargoes in six truckloads for Lawang Bato were duly delivered in
Columbia’s warehouses there. Of the six (6) trucks en route to
Balagtas, Bulacan, however, only five (5) reached the destination.
One (1) truck, loaded with 11 bundles or 232 pieces of copper
cathodes, failed to deliver its cargo.
Later on, the said truck, an Isuzu with Plate No. NSD-117, was
recovered but without the copper cathodes. Because of this
incident, Columbia filed with R&B Insurance a claim for insurance
indemnity in the amount of ₱1,903,335.39. After the requisite
investigation and adjustment, R&B Insurance paid Columbia the
amount of ₱1,896,789.62 as insurance indemnity.
R&B Insurance, thereafter, filed a complaint for damages against
both Loadmasters and Glodel before the Regional Trial Court,
Branch 14, Manila (RTC), docketed as Civil Case No. 02-103040. It
sought reimbursement of the amount it had paid to Columbia for
the loss of the subject cargo. It claimed that it had been subrogated
"to the right of the consignee to recover from the party/parties
who may be held legally liable for the loss."2
On November 19, 2003, the RTC rendered a decision3 holding
Glodel liable for damages for the loss of the subject cargo and
dismissing Loadmasters’ counterclaim for damages and attorney’s
fees against R&B Insurance. The dispositive portion of the decision
reads:
WHEREFORE, all premises considered, the plaintiff having
established by preponderance of evidence its claims against
defendant Glodel Brokerage Corporation, judgment is hereby
rendered ordering the latter:
1. To pay plaintiff R&B Insurance Corporation the sum of
₱1,896,789.62 as actual and compensatory damages, with
interest from the date of complaint until fully paid;
2. To pay plaintiff R&B Insurance Corporation the amount
equivalent to 10% of the principal amount recovered as
and for attorney’s fees plus ₱1,500.00 per appearance in
Court;
3. To pay plaintiff R&B Insurance Corporation the sum of
₱22,427.18 as litigation expenses.
WHEREAS, the defendant Loadmasters Customs Services, Inc.’s
counterclaim for damages and attorney’s fees against plaintiff are
hereby dismissed.
With costs against defendant Glodel Brokerage Corporation.
SO ORDERED.4
Both R&B Insurance and Glodel appealed the RTC decision to the
CA.
On August 24, 2007, the CA rendered the assailed decision which
reads in part:
Considering that appellee is an agent of appellant Glodel, whatever
liability the latter owes to appellant R&B Insurance Corporation as
insurance indemnity must likewise be the amount it shall be paid
by appellee Loadmasters.
WHEREFORE, the foregoing considered, the appeal is PARTLY
GRANTED in that the appellee Loadmasters is likewise held liable
to appellant Glodel in the amount of ₱1,896,789.62 representing
the insurance indemnity appellant Glodel has been held liable to
appellant R&B Insurance Corporation.
Appellant Glodel’s appeal to absolve it from any liability is herein
DISMISSED.
SO ORDERED.5
Hence, Loadmasters filed the present petition for review on
certiorari before this Court presenting the following
ISSUES
1. Can Petitioner Loadmasters be held liable to
Respondent Glodel in spite of the fact that the latter
respondent Glodel did not file a cross-claim against it
(Loadmasters)?
2. Under the set of facts established and undisputed in
the case, can petitioner Loadmasters be legally
considered as an Agent of respondent Glodel?6
To totally exculpate itself from responsibility for the lost goods,
Loadmasters argues that it cannot be considered an agent of Glodel
because it never represented the latter in its dealings with the
consignee. At any rate, it further contends that Glodel has no
recourse against it for its (Glodel’s) failure to file a cross-claim
pursuant to Section 2, Rule 9 of the 1997 Rules of Civil Procedure.
Glodel, in its Comment,7 counters that Loadmasters is liable to it
under its cross-claim because the latter was grossly negligent in the
transportation of the subject cargo. With respect to Loadmasters’
claim that it is already estopped from filing a cross-claim, Glodel
insists that it can still do so even for the first time on appeal
because there is no rule that provides otherwise. Finally, Glodel
argues that its relationship with Loadmasters is that of Charter
wherein the transporter (Loadmasters) is only hired for the
specific job of delivering the merchandise. Thus, the diligence
required in this case is merely ordinary diligence or that of a good
father of the family, not the extraordinary diligence required of
common carriers.
R&B Insurance, for its part, claims that Glodel is deemed to have
interposed a cross-claim against Loadmasters because it was not
prevented from presenting evidence to prove its position even
without amending its Answer. As to the relationship between
Loadmasters and Glodel, it contends that a contract of agency
existed between the two corporations.8
Subrogation is the substitution of one person in the place of
another with reference to a lawful claim or right, so that he who is
substituted succeeds to the rights of the other in relation to a debt
or claim, including its remedies or securities.9 Doubtless, R&B
Insurance is subrogated to the rights of the insured to the extent of
the amount it paid the consignee under the marine insurance, as
provided under Article 2207 of the Civil Code, which reads:
ART. 2207. If the plaintiff’s property has been insured, and he has
received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained of,
the insurance company shall be subrogated to the rights of the
insured against the wrong-doer or the person who has violated the
contract. If the amount paid by the insurance company does not
fully cover the injury or loss, the aggrieved party shall be entitled to
recover the deficiency from the person causing the loss or injury.
As subrogee of the rights and interest of the consignee, R&B
Insurance has the right to seek reimbursement from either
Loadmasters or Glodel or both for breach of contract and/or tort.
The issue now is who, between Glodel and Loadmasters, is liable to
pay R&B Insurance for the amount of the indemnity it paid
Columbia.
At the outset, it is well to resolve the issue of whether Loadmasters
and Glodel are common carriers to determine their liability for the
loss of the subject cargo. Under Article 1732 of the Civil Code,
common carriers are persons, corporations, firms, or associations
engaged in the business of carrying or transporting passenger or
goods, or both by land, water or air for compensation, offering their
services to the public.
Based on the aforecited definition, Loadmasters is a common
carrier because it is engaged in the business of transporting goods
by land, through its trucking service. It is a common carrier as
distinguished from a private carrier wherein the carriage is
generally undertaken by special agreement and it does not hold
itself out to carry goods for the general public.10 The distinction is
significant in the sense that "the rights and obligations of the
parties to a contract of private carriage are governed principally by
their stipulations, not by the law on common carriers."11
In the present case, there is no indication that the undertaking in
the contract between Loadmasters and Glodel was private in
character. There is no showing that Loadmasters solely and
exclusively rendered services to Glodel.
In fact, Loadmasters admitted that it is a common carrier.12
In the same vein, Glodel is also considered a common carrier within
the context of Article 1732. In its Memorandum,13 it states that it "is
a corporation duly organized and existing under the laws of the
Republic of the Philippines and is engaged in the business of
customs brokering." It cannot be considered otherwise because as
held by this Court in Schmitz Transport & Brokerage Corporation v.
Transport Venture, Inc.,14 a customs broker is also regarded as a
common carrier, the transportation of goods being an integral part
of its business.
Loadmasters and Glodel, being both common carriers, are
mandated from the nature of their business and for reasons of
public policy, to observe the extraordinary diligence in the
vigilance over the goods transported by them according to all the
circumstances of such case, as required by Article 1733 of the Civil
Code. When the Court speaks of extraordinary diligence, it is that
extreme measure of care and caution which persons of unusual
prudence and circumspection observe for securing and preserving
their own property or rights.15 This exacting standard imposed on
common carriers in a contract of carriage of goods is intended to
tilt the scales in favor of the shipper who is at the mercy of the
common carrier once the goods have been lodged for
shipment.16 Thus, in case of loss of the goods, the common carrier is
presumed to have been at fault or to have acted negligently. 17 This
presumption of fault or negligence, however, may be rebutted by
proof that the common carrier has observed extraordinary
diligence over the goods.
With respect to the time frame of this extraordinary responsibility,
the Civil Code provides that the exercise of extraordinary diligence
lasts from the time the goods are unconditionally placed in the
possession of, and received by, the carrier for transportation until
the same are delivered, actually or constructively, by the carrier to
the consignee, or to the person who has a right to receive them.18
Premises considered, the Court is of the view that both
Loadmasters and Glodel are jointly and severally liable to R & B
Insurance for the loss of the subject cargo. Under Article 2194 of
the New Civil Code, "the responsibility of two or more persons who
are liable for a quasi-delict is solidary."
Loadmasters’ claim that it was never privy to the contract entered
into by Glodel with the consignee Columbia or R&B Insurance as
subrogee, is not a valid defense. It may not have a direct
contractual relation with Columbia, but it is liable for tort under the
provisions of Article 2176 of the Civil Code on quasi-delicts which
expressly provide:
ART. 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and
is governed by the provisions of this Chapter.
Pertinent is the ruling enunciated in the case of Mindanao Terminal
and Brokerage Service, Inc. v. Phoenix Assurance Company of New
York,/McGee & Co., Inc.19 where this Court held that a tort may arise
despite the absence of a contractual relationship, to wit:
We agree with the Court of Appeals that the complaint filed by
Phoenix and McGee against Mindanao Terminal, from which the
present case has arisen, states a cause of action. The present action
is based on quasi-delict, arising from the negligent and careless
loading and stowing of the cargoes belonging to Del Monte
Produce. Even assuming that both Phoenix and McGee have only
been subrogated in the rights of Del Monte Produce, who is not a
party to the contract of service between Mindanao Terminal and
Del Monte, still the insurance carriers may have a cause of action in
light of the Court’s consistent ruling that the act that breaks the
contract may be also a tort. In fine, a liability for tort may arise
even under a contract, where tort is that which breaches the
contract. In the present case, Phoenix and McGee are not suing for
damages for injuries arising from the breach of the contract of
service but from the alleged negligent manner by which
Mindanao Terminal handled the cargoes belonging to Del Monte
Produce. Despite the absence of contractual relationship between
Del Monte Produce and Mindanao Terminal, the allegation of
negligence on the part of the defendant should be sufficient to
establish a cause of action arising from quasi-delict. [Emphases
supplied]
In connection therewith, Article 2180 provides:
ART. 2180. The obligation imposed by Article 2176 is demandable
not only for one’s own acts or omissions, but also for those of
persons for whom one is responsible.
xxxx
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any
business or industry.
It is not disputed that the subject cargo was lost while in the
custody of Loadmasters whose employees (truck driver and
helper) were instrumental in the hijacking or robbery of the
shipment. As employer, Loadmasters should be made answerable
for the damages caused by its employees who acted within the
scope of their assigned task of delivering the goods safely to the
warehouse.
Whenever an employee’s negligence causes damage or injury to
another, there instantly arises a presumption juris tantum that the
employer failed to exercise diligentissimi patris families in the
selection (culpa in eligiendo) or supervision (culpa in vigilando) of
its employees.20 To avoid liability for a quasi-delict committed by
its employee, an employer must overcome the presumption by
presenting convincing proof that he exercised the care and
diligence of a good father of a family in the selection and
supervision of his employee.21 In this regard, Loadmasters failed.
Glodel is also liable because of its failure to exercise extraordinary
diligence. It failed to ensure that Loadmasters would fully comply
with the undertaking to safely transport the subject cargo to the
designated destination. It should have been more prudent in
entrusting the goods to Loadmasters by taking precautionary
measures, such as providing escorts to accompany the trucks in
delivering the cargoes. Glodel should, therefore, be held liable with
Loadmasters. Its defense of force majeure is unavailing.
At this juncture, the Court clarifies that there exists no principal-
agent relationship between Glodel and Loadmasters, as
erroneously found by the CA. Article 1868 of the Civil Code
provides: "By the contract of agency a person binds himself to
render some service or to do something in representation or on
behalf of another, with the consent or authority of the latter." The
elements of a contract of agency are: (1) consent, express or
implied, of the parties to establish the relationship; (2) the object is
the execution of a juridical act in relation to a third person; (3) the
agent acts as a representative and not for himself; (4) the agent
acts within the scope of his authority.22
Accordingly, there can be no contract of agency between the
parties. Loadmasters never represented Glodel. Neither was it ever
authorized to make such representation. It is a settled rule that the
basis for agency is representation, that is, the agent acts for and on
behalf of the principal on matters within the scope of his authority
and said acts have the same legal effect as if they were personally
executed by the principal. On the part of the principal, there must
be an actual intention to appoint or an intention naturally inferable
from his words or actions, while on the part of the agent, there
must be an intention to accept the appointment and act on it. 23 Such
mutual intent is not obtaining in this case.
What then is the extent of the respective liabilities of Loadmasters
and Glodel? Each wrongdoer is liable for the total damage suffered
by R&B Insurance. Where there are several causes for the resulting
damages, a party is not relieved from liability, even partially. It is
sufficient that the negligence of a party is an efficient cause without
which the damage would not have resulted. It is no defense to one
of the concurrent tortfeasors that the damage would not have
resulted from his negligence alone, without the negligence or
wrongful acts of the other concurrent tortfeasor. As stated in the
case of Far Eastern Shipping v. Court of Appeals, 24
X x x. Where several causes producing an injury are concurrent and
each is an efficient cause without which the injury would not have
happened, the injury may be attributed to all or any of the causes
and recovery may be had against any or all of the responsible
persons although under the circumstances of the case, it may
appear that one of them was more culpable, and that the duty owed
by them to the injured person was not the same. No actor's
negligence ceases to be a proximate cause merely because it does
not exceed the negligence of other actors. Each wrongdoer is
responsible for the entire result and is liable as though his acts
were the sole cause of the injury.
There is no contribution between joint tortfeasors whose liability is
solidary since both of them are liable for the total damage. Where
the concurrent or successive negligent acts or omissions of two or
more persons, although acting independently, are in combination
the direct and proximate cause of a single injury to a third person,
it is impossible to determine in what proportion each contributed
to the injury and either of them is responsible for the whole
injury. Where their concurring negligence resulted in injury or
damage to a third party, they become joint tortfeasors and are
solidarily liable for the resulting damage under Article 2194 of the
Civil Code. [Emphasis supplied]
The Court now resolves the issue of whether Glodel can collect
from Loadmasters, it having failed to file a cross-claim against the
latter.1avvphi1
Undoubtedly, Glodel has a definite cause of action against
Loadmasters for breach of contract of service as the latter is
primarily liable for the loss of the subject cargo. In this case,
however, it cannot succeed in seeking judicial sanction against
Loadmasters because the records disclose that it did not properly
interpose a cross-claim against the latter. Glodel did not even pray
that Loadmasters be liable for any and all claims that it may be
adjudged liable in favor of R&B Insurance. Under the Rules, a
compulsory counterclaim, or a cross-claim, not set up shall be
barred.25 Thus, a cross-claim cannot be set up for the first time on
appeal.
For the consequence, Glodel has no one to blame but itself. The
Court cannot come to its aid on equitable grounds. "Equity, which
has been aptly described as ‘a justice outside legality,’ is applied
only in the absence of, and never against, statutory law or judicial
rules of procedure."26 The Court cannot be a lawyer and take the
cudgels for a party who has been at fault or negligent.
WHEREFORE, the petition is PARTIALLY GRANTED. The August
24, 2007 Decision of the Court of Appeals is MODIFIED to read as
follows:
WHEREFORE, judgment is rendered declaring petitioner
Loadmasters Customs Services, Inc. and respondent Glodel
Brokerage Corporation jointly and severally liable to respondent
R&B Insurance Corporation for the insurance indemnity it paid to
consignee Columbia Wire & Cable Corporation and ordering both
parties to pay, jointly and severally, R&B Insurance Corporation a]
the amount of ₱1,896,789.62 representing the insurance
indemnity; b] the amount equivalent to ten (10%) percent thereof
for attorney’s fees; and c] the amount of ₱22,427.18 for litigation
expenses.
The cross-claim belatedly prayed for by respondent Glodel
Brokerage Corporation against petitioner Loadmasters Customs
Services, Inc. is DENIED.
SO ORDERED.
G.R. No. 150255. April 22, 2005
SCHMITZ TRANSPORT & BROKERAGE
CORPORATION, Petitioners,
vs.
TRANSPORT VENTURE, INC., INDUSTRIAL INSURANCE
COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL
now INCHCAPE SHIPPING SERVICES, Respondents.
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision1 of the Court of
Appeals, as well as its Resolution2 dated September 28, 2001
denying the motion for reconsideration, which affirmed that of
Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case
No. 92-631323 holding petitioner Schmitz Transport Brokerage
Corporation (Schmitz Transport), together with Black Sea Shipping
Corporation (Black Sea), represented by its ship agent Inchcape
Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily
liable for the loss of 37 hot rolled steel sheets in coil that were
washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from
the port of Ilyichevsk, Russia on board M/V "Alexander Saveliev" (a
vessel of Russian registry and owned by Black Sea) 545 hot rolled
steel sheets in coil weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in
favor of the consignee, Little Giant Steel Pipe Corporation (Little
Giant),4 were insured against all risks with Industrial Insurance
Company Ltd. (Industrial Insurance) under Marine Policy No. M-
91-3747-TIS.5
The vessel arrived at the port of Manila on October 24, 1991 and
the Philippine Ports Authority (PPA) assigned it a place of berth at
the outside breakwater at the Manila South Harbor.6
Schmitz Transport, whose services the consignee engaged to secure
the requisite clearances, to receive the cargoes from the shipside,
and to deliver them to its (the consignee’s) warehouse at Cainta,
Rizal,7 in turn engaged the services of TVI to send a barge and
tugboat at shipside.
On October 26, 1991, around 4:30 p.m., TVI’s tugboat "Lailani"
towed the barge "Erika V" to shipside.8
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning
the barge alongside the vessel, left and returned to the port
terminal.9 At 9:00 p.m., arrastre operator Ocean Terminal Services
Inc. commenced to unload 37 of the 545 coils from the vessel unto
the barge.
By 12:30 a.m. of October 27, 1991 during which the weather
condition had become inclement due to an approaching storm, the
unloading unto the barge of the 37 coils was accomplished.10 No
tugboat pulled the barge back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves,11 the
crew of the barge abandoned it and transferred to the vessel. The
barge pitched and rolled with the waves and eventually capsized,
washing the 37 coils into the sea.12 At 7:00 a.m., a tugboat finally
arrived to pull the already empty and damaged barge back to the
pier.13
Earnest efforts on the part of both the consignee Little Giant and
Industrial Insurance to recover the lost cargoes proved futile.14
Little Giant thus filed a formal claim against Industrial Insurance
which paid it the amount of ₱5,246,113.11. Little Giant thereupon
executed a subrogation receipt15 in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz
Transport, TVI, and Black Sea through its representative Inchcape
(the defendants) before the RTC of Manila, for the recovery of the
amount it paid to Little Giant plus adjustment fees, attorney’s fees,
and litigation expenses.16
Industrial Insurance faulted the defendants for undertaking the
unloading of the cargoes while typhoon signal No. 1 was raised in
Metro Manila.17
By Decision of November 24, 1997, Branch 21 of the RTC held all
the defendants negligent for unloading the cargoes outside of the
breakwater notwithstanding the storm signal.18 The dispositive
portion of the decision reads:
WHEREFORE, premises considered, the Court renders judgment in
favor of the plaintiff, ordering the defendants to pay plaintiff jointly
and severally the sum of ₱5,246,113.11 with interest from the date
the complaint was filed until fully satisfied, as well as the sum of
₱5,000.00 representing the adjustment fee plus the sum of 20% of
the amount recoverable from the defendants as attorney’s fees plus
the costs of suit. The counterclaims and cross claims of defendants
are hereby DISMISSED for lack of [m]erit.19
To the trial court’s decision, the defendants Schmitz Transport and
TVI filed a joint motion for reconsideration assailing the finding
that they are common carriers and the award of excessive
attorney’s fees of more than ₱1,000,000. And they argued that they
were not motivated by gross or evident bad faith and that the
incident was caused by a fortuitous event. 20
By resolution of February 4, 1998, the trial court denied the motion
for reconsideration. 21
All the defendants appealed to the Court of Appeals which, by
decision of June 27, 2001, affirmed in toto the decision of the trial
court, 22 it finding that all the defendants were common carriers —
Black Sea and TVI for engaging in the transport of goods and
cargoes over the seas as a regular business and not as an isolated
transaction,23 and Schmitz Transport for entering into a contract
with Little Giant to transport the cargoes from ship to port for a
fee.24
In holding all the defendants solidarily liable, the appellate court
ruled that "each one was essential such that without each other’s
contributory negligence the incident would not have happened and
so much so that the person principally liable cannot be
distinguished with sufficient accuracy."25
In discrediting the defense of fortuitous event, the appellate court
held that "although defendants obviously had nothing to do with
the force of nature, they however had control of where to anchor
the vessel, where discharge will take place and even when the
discharging will commence."26
The defendants’ respective motions for reconsideration having
been denied by Resolution27 of September 28, 2001, Schmitz
Transport (hereinafter referred to as petitioner) filed the present
petition against TVI, Industrial Insurance and Black Sea.
Petitioner asserts that in chartering the barge and tugboat of TVI, it
was acting for its principal, consignee Little Giant, hence, the
transportation contract was by and between Little Giant and TVI.28
By Resolution of January 23, 2002, herein respondents Industrial
Insurance, Black Sea, and TVI were required to file their respective
Comments.29
By its Comment, Black Sea argued that the cargoes were received
by the consignee through petitioner in good order, hence, it cannot
be faulted, it having had no control and supervision thereover.30
For its part, TVI maintained that it acted as a passive party as it
merely received the cargoes and transferred them unto the barge
upon the instruction of petitioner.31
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event,
independent of any act of negligence on the part of petitioner Black
Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach
to Black Sea, petitioner and TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code
absolves any party from any and all liability arising therefrom:
ART. 1174. Except in cases expressly specified by the law, or when
it is otherwise declared by stipulation, or when the nature of the
obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which
though foreseen, were inevitable.
In order, to be considered a fortuitous event, however, (1) the
cause of the unforeseen and unexpected occurrence, or the failure
of the debtor to comply with his obligation, must be independent of
human will; (2) it must be impossible to foresee the event which
constitute the caso fortuito, or if it can be foreseen it must be
impossible to avoid; (3) the occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in any manner;
and (4) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor.32
[T]he principle embodied in the act of God doctrine strictly
requires that the act must be occasioned solely by the violence of
nature. Human intervention is to be excluded from creating or
entering into the cause of the mischief. When the effect is found to
be in part the result of the participation of man, whether due to his
active intervention or neglect or failure to act, the whole
occurrence is then humanized and removed from the rules
applicable to the acts of God.33
The appellate court, in affirming the finding of the trial court that
human intervention in the form of contributory negligence by all
the defendants resulted to the loss of the cargoes,34 held that
unloading outside the breakwater, instead of inside the
breakwater, while a storm signal was up constitutes negligence.35 It
thus concluded that the proximate cause of the loss was Black Sea’s
negligence in deciding to unload the cargoes at an unsafe place and
while a typhoon was approaching.36
From a review of the records of the case, there is no indication that
there was greater risk in loading the cargoes outside the
breakwater. As the defendants proffered, the weather on October
26, 1991 remained normal with moderate sea condition such that
port operations continued and proceeded normally.37
The weather data report,38 furnished and verified by the Chief of
the Climate Data Section of PAG-ASA and marked as a common
exhibit of the parties, states that while typhoon signal No. 1 was
hoisted over Metro Manila on October 23-31, 1991, the sea
condition at the port of Manila at 5:00 p.m. - 11:00 p.m. of October
26, 1991 was moderate. It cannot, therefore, be said that the
defendants were negligent in not unloading the cargoes upon the
barge on October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes
were completely loaded by 12:30 in the morning 39 is, however, a
material fact which the appellate court failed to properly consider
and appreciate40 — the proximate cause of the loss of the cargoes.
Had the barge been towed back promptly to the pier, the
deteriorating sea conditions notwithstanding, the loss could have
been avoided. But the barge was left floating in open sea until big
waves set in at 5:30 a.m., causing it to sink along with the
cargoes.41 The loss thus falls outside the "act of God doctrine."
The proximate cause of the loss having been determined, who
among the parties is/are responsible therefor?
Contrary to petitioner’s insistence, this Court, as did the appellate
court, finds that petitioner is a common carrier. For it undertook to
transport the cargoes from the shipside of "M/V Alexander
Saveliev" to the consignee’s warehouse at Cainta, Rizal. As the
appellate court put it, "as long as a person or corporation holds
[itself] to the public for the purpose of transporting goods as [a]
business, [it] is already considered a common carrier regardless if
[it] owns the vehicle to be used or has to hire one." 42 That petitioner
is a common carrier, the testimony of its own Vice-President and
General Manager Noel Aro that part of the services it offers to its
clients as a brokerage firm includes the transportation of cargoes
reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as
Executive Vice-President and General Manager of said Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and
transport business of the company. I also handle the various
division heads of the company for operation matters, and all other
related functions that the President may assign to me from time to
time, Sir.
Q: Now, in connection [with] your duties and functions as you
mentioned, will you please tell the Honorable Court if you came to
know the company by the name Little Giant Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that
company, if you can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company.
What work or duty did you perform in behalf of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau
of Customs. We [are] also in-charged of the delivery of the goods to
their warehouses. We also handled the clearances of their
shipment at the Bureau of Customs, Sir.
xxx
Q: Now, what precisely [was] your agreement with this Little Giant
Steel Pipe Corporation with regards to this shipment? What work
did you do with this shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter
and then the delivery of [the] cargo[es] from lighter to BASECO
then to the truck and to the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr.
Witness, you are supposed to perform, what equipment do (sic)
you require or did you use in order to effect this unloading, transfer
and delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this
unloading [from] vessel to lighter, and on this we hired or we sub-
contracted with [T]ransport Ventures, Inc. which [was] in-charged
(sic) of the barges. Also, in BASECO compound we are leasing
cranes to have the cargo unloaded from the barge to trucks, [and]
then we used trucks to deliver [the cargoes] to the consignee’s
warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the
consignee’s warehouse?
A: We utilized of (sic) our own trucks and we have some other
contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court
why is it you have to contract for the barges of Transport Ventures
Incorporated in this particular operation?
A: Firstly, we don’t own any barges. That is why we hired the
services of another firm whom we know [al]ready for quite
sometime, which is Transport Ventures, Inc. (Emphasis supplied)43
It is settled that under a given set of facts, a customs broker may be
regarded as a common carrier. Thus, this Court, in A.F. Sanchez
Brokerage, Inc. v. The Honorable Court of Appeals,44 held:
The appellate court did not err in finding petitioner, a customs
broker, to be also a common carrier, as defined under Article 1732
of the Civil Code, to wit,
Art. 1732. Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
xxx
Article 1732 does not distinguish between one whose principal
business activity is the carrying of goods and one who does such
carrying only as an ancillary activity. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker
whose principal function is to prepare the correct customs
declaration and proper shipping documents as required by law is
bereft of merit. It suffices that petitioner undertakes to deliver the
goods for pecuniary consideration.45
And in Calvo v. UCPB General Insurance Co. Inc.,46 this Court held
that as the transportation of goods is an integral part of a customs
broker, the customs broker is also a common carrier. For to declare
otherwise "would be to deprive those with whom [it] contracts the
protection which the law affords them notwithstanding the fact
that the obligation to carry goods for [its] customers, is part and
parcel of petitioner’s business."47
As for petitioner’s argument that being the agent of Little Giant, any
negligence it committed was deemed the negligence of its principal,
it does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the
release of the cargoes. In effecting the transportation of the cargoes
from the shipside and into Little Giant’s warehouse, however,
petitioner was discharging its own personal obligation under a
contact of carriage.
Petitioner, which did not have any barge or tugboat, engaged the
services of TVI as handler48 to provide the barge and the tugboat. In
their Service Contract,49 while Little Giant was named as the
consignee, petitioner did not disclose that it was acting on
commission and was chartering the vessel for Little Giant. 50 Little
Giant did not thus automatically become a party to the Service
Contract and was not, therefore, bound by the terms and conditions
therein.
Not being a party to the service contract, Little Giant
cannot directly sue TVI based thereon but it can maintain a cause of
action for negligence.51
In the case of TVI, while it acted as a private carrier for which it
was under no duty to observe extraordinary diligence, it was still
required to observe ordinary diligence to ensure the proper and
careful handling, care and discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are
guilty of fraud, negligence, or delay, and those who in any manner
contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the
omission of that diligence which is required by the nature of the
obligation and corresponds with the circumstances of the persons,
of the time and of the place. When negligence shows bad faith, the
provisions of articles 1171 and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be
observed in the performance, that which is expected of a good
father of a family shall be required.
Was the reasonable care and caution which an ordinarily prudent
person would have used in the same situation exercised by TVI?52
This Court holds not.
TVI’s failure to promptly provide a tugboat did not only increase
the risk that might have been reasonably anticipated during the
shipside operation, but was the proximate cause of the loss. A
man of ordinary prudence would not leave a heavily loaded barge
floating for a considerable number of hours, at such a precarious
time, and in the open sea, knowing that the barge does not have
any power of its own and is totally defenseless from the ravages of
the sea. That it was nighttime and, therefore, the members of the
crew of a tugboat would be charging overtime pay did not excuse
TVI from calling for one such tugboat.
As for petitioner, for it to be relieved of liability, it should, following
Article 173953 of the Civil Code, prove that it exercised due diligence
to prevent or minimize the loss, before, during and after the
occurrence of the storm in order that it may be exempted from
liability for the loss of the goods.
While petitioner sent checkers54 and a supervisor55 on board the
vessel to counter-check the operations of TVI, it failed to take all
available and reasonable precautions to avoid the loss. After noting
that TVI failed to arrange for the prompt towage of the barge
despite the deteriorating sea conditions, it should have summoned
the same or another tugboat to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily
liable56 for the loss of the cargoes. The following pronouncement of
the Supreme Court is instructive:
The foundation of LRTA’s liability is the contract of carriage and its
obligation to indemnify the victim arises from the breach of that
contract by reason of its failure to exercise the high diligence
required of the common carrier. In the discharge of its commitment
to ensure the safety of passengers, a carrier may choose to hire its
own employees or avail itself of the services of an outsider or an
independent firm to undertake the task. In either case, the common
carrier is not relieved of its responsibilities under the contract of
carriage.
Should Prudent be made likewise liable? If at all, that liability could
only be for tort under the provisions of Article 2176 and related
provisions, in conjunction with Article 2180 of the Civil Code. x x
x [O]ne might ask further, how then must the liability of the
common carrier, on one hand, and an independent contractor, on
the other hand, be described? It would be solidary. A contractual
obligation can be breached by tort and when the same act or
omission causes the injury, one resulting in culpa contractual and
the other in culpa aquiliana, Article 2194 of the Civil Code can well
apply. In fine, a liability for tort may arise even under a contract,
where tort is that which breaches the contract. Stated differently,
when an act which constitutes a breach of contract would have
itself constituted the source of a quasi-delictual liability had no
contract existed between the parties, the contract can be said to
have been breached by tort, thereby allowing the rules on tort to
apply.57
As for Black Sea, its duty as a common carrier extended only from
the time the goods were surrendered or unconditionally placed in
its possession and received for transportation until they were
delivered actually or constructively to consignee Little Giant.58
Parties to a contract of carriage may, however, agree upon a
definition of delivery that extends the services rendered by the
carrier. In the case at bar, Bill of Lading No. 2 covering the
shipment provides that delivery be made "to the port of
discharge or so near thereto as she may safely get, always
afloat."59 The delivery of the goods to the consignee was not from
"pier to pier" but from the shipside of "M/V Alexander Saveliev"
and into barges, for which reason the consignee contracted the
services of petitioner. Since Black Sea had constructively delivered
the cargoes to Little Giant, through petitioner, it had discharged its
duty.60
In fine, no liability may thus attach to Black Sea.
Respecting the award of attorney’s fees in an amount over
₱1,000,000.00 to Industrial Insurance, for lack of factual and legal
basis, this Court sets it aside. While Industrial Insurance was
compelled to litigate its rights, such fact by itself does not justify
the award of attorney’s fees under Article 2208 of the Civil Code.
For no sufficient showing of bad faith would be reflected in a
party’s persistence in a case other than an erroneous conviction of
the righteousness of his cause.61 To award attorney’s fees to a party
just because the judgment is rendered in its favor would be
tantamount to imposing a premium on one’s right to litigate or
seek judicial redress of legitimate grievances.62
On the award of adjustment fees: The adjustment fees and expense
of divers were incurred by Industrial Insurance in its voluntary but
unsuccessful efforts to locate and retrieve the lost cargo. They do
not constitute actual damages.63
As for the court a quo’s award of interest on the amount claimed,
the same calls for modification following the ruling in Eastern
Shipping Lines, Inc. v. Court of Appeals 64 that when the demand
cannot be reasonably established at the time the demand is made,
the interest shall begin to run not from the time the claim is made
judicially or extrajudicially but from the date the judgment of the
court is made (at which the time the quantification of damages may
be deemed to have been reasonably ascertained).65
WHEREFORE, judgment is hereby rendered ordering petitioner
Schmitz Transport & Brokerage Corporation, and Transport
Venture Incorporation jointly and severally liable for the amount of
₱5,246,113.11 with the MODIFICATION that interest at SIX
PERCENT per annum of the amount due should be computed from
the promulgation on November 24, 1997 of the decision of the trial
court. Costs against petitioner.
SO ORDERED.
G.R. No. 187701               July 23, 2014
PHILAM INSURANCE COMPANY, INC. (now CHARTIS
PHILIPPINES INSURANCE, INC.*), Petitioner,
vs.
HEUNG-A SHIPPING CORPORATION and WALLEM PHILIPPINES
SHIPPING, INC., Respondents.
x-----------------------x
G.R. No. 187812
HEUNG-A SHIPPING CORPORATION and WALLEM PHILIPPINES
SHIPPING, INC., Petitioners,
vs.
PHILAM INSURANCE COMPANY, INC. (now CHARTIS
PHILIPPINES INSURANCE, INC.), Respondent.
DECISION
REYES, J.:
At bar are consolidated petitions for review on certiorari1 under
Rule 45 of the Rules of Court assailing the Decision2 dated January
30, 2009 of the Court of Appeals (CA) in CA-G.R. CV No. 89482
affirming with modifications the Decision3 dated February 26, 2007
of the Regional Trial Court (RTC) of Makati City, Branch 148, in
Civil Case No. 01-889.
The Factual Antecedents
On December 19, 2000, Novartis Consumer Health Philippines, Inc.
(NOVARTIS) imported from Jinsuk Trading Co. Ltd., (JINSUK) in
South Korea, 19 pallets of 200 rolls of Ovaltine Power 18
Glaminated plastic packaging material.
In order to ship the goods to the Philippines, JINSUK engaged the
services of Protop Shipping Corporation (PROTOP), a freight
forwarder likewise based in South Korea, to forward the goods to
their consignee, NOVARTIS.
Based on Bill of Lading No. PROTAS 200387 issued by PROTOP, the
cargo was on freight prepaid basis and on "shipper’s load and
count" which means that the "container [was] packed with cargo by
one shipper where the quantity, description and condition of the
cargo is the sole responsibility of the shipper." 4 Likewise stated in
the bill of lading is the name Sagawa Express Phils., Inc., (SAGAWA)
designated as the entity in the Philippines which will obtain the
delivery contract.
PROTOP shipped the cargo through Dongnama Shipping Co. Ltd.
(DONGNAMA) which in turn loaded the same on M/V Heung-A
Bangkok V-019 owned and operated by Heung-A Shipping
Corporation, (HEUNG-A), a Korean corporation, pursuant to a ‘slot
charter agreement’ whereby a space in the latter’s vessel was
reserved for the exclusive use of the former. Wallem Philippines
Shipping, Inc. (WALLEM) is the ship agent of HEUNG-A in the
Philippines. NOVARTIS insured the shipment with Philam
Insurance Company, Inc. (PHILAM, now Chartis Philippines
Insurance, Inc.) under All Risk Marine Open Insurance Policy No.
MOP-0801011828 against all loss, damage, liability, or expense
before, during transit and even after the discharge of the shipment
from the carrying vessel until its complete delivery to the
consignee’s premises. The vessel arrived at the port ofManila,
South Harbor, on December 27, 2000 and the subject shipment
contained in Sea Van Container No. DNAU 420280-9 was
discharged without exception into the possession, custody and care
of Asian Terminals, Inc. (ATI) as the customs arrastre operator.
The shipment was thereafter withdrawn on January 4, 2001, by
NOVARTIS’ appointed broker, Stephanie Customs Brokerage
Corporation (STEPHANIE) from ATI’s container yard.
The shipment reached NOVARTIS’ premises on January 5, 2001 and
was thereupon inspected by the company’s Senior Laboratory
Technician, Annie Rose Caparoso (Caparoso).5
Upon initial inspection, Caparoso found the container van locked
with its load intact. After opening the same, she inspected its
contents and discovered that the boxes of the shipment were wet
and damp. The boxes on one side of the van were in disarray while
others were opened or damaged due to the dampness. Caparoso
further observed that parts of the container van were damaged and
rusty. There were also water droplets on the walls and the floor
was wet. Since the damaged packaging materials might
contaminate the product they were meant to hold, Caparoso
rejected the entire shipment.
Renato Layug and Mario Chin, duly certified adjusters of the Manila
Adjusters and Surveyors Company wereforthwith hailed to inspect
and conduct a survey of the shipment.6 Their Certificate of
Survey7 dated January 17, 2001 yielded results similar to the
observations of Caparoso, thus:
[T]he sea van panels/sidings and roofing were noted with varying
degrees of indentations and partly corroded/rusty. Internally,
water bead clung along the roofs from rear to front section. The
mid section dented/sagged with affected area was noted
withminutes hole evidently due to thinning/corroded rusty metal
plates. The shipment was noted with several palletized cartons
already in collapsed condition due to wetting. The van’s entire floor
length was also observed wet.8
All 17 pallets of the 184 cartons/rolls contained in the sea van were
found wet/water damaged. Sixteen (16)cartons/rolls supposedly
contained in 2 pallets were unaccounted for although the surveyors
remarked that this may be due to short shipment by the supplier
considering that the sea van was fully loaded and can no longer
accommodate the said unaccounted items. The survey report
further stated that the "wetting sustained by the shipment may
have reasonably be attributed to the water seepage that gain entry
into the sea van container damageroofs (minutes hole) during
transit period[sic]."9
Samples from the wet packing materials/boxes were submitted to
the chemist of Precision Analytical Services, Inc. (PRECISION),
Virgin Hernandez (Hernandez), and per Laboratory Report No.
042-07 dated January 16, 2001, the cause of wetting in the carton
boxes and kraft paper/lining materials as well as the aluminum foil
laminated plastic packaging material, was salt water.10
Aggrieved, NOVARTIS demanded indemnification for the
lost/damaged shipment from PROTOP, SAGAWA, ATI and
STEPHANIE but was denied. Insurance claims were, thus, filed with
PHILAM which paid the insured value of the shipment inthe
adjusted amount of One Million Nine Hundred Four Thousand Six
Hundred Thirteen Pesos and Twenty Centavos (₱1,904,613.20).
Claiming that after such payment, it was subrogated to all the rights
and claims of NOVARTIS against the parties liable for the
lost/damaged shipment, PHILAM filed on June 4, 2001, a complaint
for damages against PROTOP, as the issuer of Bill of Lading No.
PROTAS 200387, its ship agent in the Philippines, SAGAWA,
consignee, ATI and the broker, STEPHANIE.
On October 12, 2001, PHILAM sent a demand letter to WALLEM for
reimbursement of the insurance claims paid to NOVARTIS. 11 When
WALLEM ignored the demand, PHILAM impleaded it as additional
defendant in an Amended Complaint duly admitted by the trial
court on October 19, 2001.12
On December 11, 2001, PHILAM filed a Motion to Admit Second
Amended Complaint this time designating PROTOP as the
owner/operator of M/V Heung-A Bangkok V-019 and adding
HEUNG-A as party defendant for being the registered owner of the
vessel.13 The motion was granted and the second amended
complaint was admitted by the trial court on December 14, 2001.14
PROTOP, SAGAWA, ATI, STEPHANIE, WALLEM and HEUNG-A
denied liability for the lost/damaged shipment.
SAGAWA refuted the allegation that it is the ship agent of PROTOP
and argued that a ship agent represents the owner of the vessel and
not a mere freight forwarder like PROTOP. SAGAWA averred that
its only role with respect to the shipment was to inform NOVARTIS
of its arrival in the Philippines and to facilitate the surrender of the
original bill of lading issued by PROTOP.
SAGAWA further remarked that it was deprived an opportunity to
examine and investigate the nature and extent of the damage while
the matter was still fresh so as tosafeguard itself from
false/fraudulent claims because NOVARTIS failed totimely give
notice about the loss/damage.15
SAGAWA admitted that it has a non-exclusive agency agreement
with PROTOP to serve as the latter’s delivery contact person in the
Philippines with respect to the subject shipment. SAGAWA is also a
freight forwarding company and that PROTOPwas not charged any
fee for the services rendered by SAGAWA with respect to the
subject shipment and instead the latter was given US$10 as
commission.16 For having been dragged into court on a baseless
cause, SAGAWA counterclaimed for damages in the form of
attorney’s fees.
ATI likewise interposed a counterclaim for damages against
PHILAM for its allegedly baseless complaint. ATI averred that it
exercised due care and diligence in handling the subject container.
Also, NOVARTIS, through PHILAM, is now barred from filing any
claim for indemnification because the latter failed to file the same
within 15 days from receipt of the shipment. 17 Meanwhile,
STEPHANIE asserted that its only role with respect to the shipment
was its physical retrieval from ATI and thereafter its delivery to
NOVARTIS. That entire time, the sealwas intact and not broken.
Also, based on the Certificate of Survey, the damage to the
shipment was due to salt water which means that it could not have
occurred while STEPHANIE was in possession thereof during its
delivery from ATI’s container yard to NOVARTIS’ premises.
STEPHANIE counterclaimed for moral damages and attorney’s
fees.18
WALLEM alleged that the damageand shortages in the shipment
were the responsibility of the shipper, JINSUK, because it was taken
on board on a "shipper’s load and count" basis which means that it
was the shipper that packed, contained and stuffed the shipment in
the container van without the carrier’s participation. The container
van was already sealed when it was loadedon the vessel and hence,
the carrier was in no position to verify the condition and other
particulars of the shipment.
WALLEM also asserted that the shipment was opened long after it
was discharged from the vessel and that WALLEM or HEUNG-A
were not present during the inspection, examination and survey.
WALLEM pointed the blame to PROTOP because its obligation to
the shipper as freight forwarder carried the concomitant
responsibility of ensuring the shipment’s safety from the port of
loading until the final place of delivery. WALLEM claimed to
haveexercised due care and diligence in handling the shipment.
In the alternative, WALLEM averred that any liability which may be
imputed to it is limited only to US$8,500.00 pursuant to the
Carriage of Goods by Sea Act (COGSA).19
HEUNG-A argued that it is not the carrier insofar as NOVARTIS is
concerned. The carrier was either PROTOP, a freight forwarder
considered as a non-vessel operating common carrier or
DONGNAMA which provided the container van to
PROTOP.20 HEUNG-A denied being the carrier of the
subjectshipment and asserted that its only obligation was to
provide DONGNAMA a space on board M/V Heung-A Bangkok V-
019.
PROTOP failed to file an answer to the complaint despite having
been effectively served with alias summons. It was declared in
default in the RTC Order dated June 6, 2002.21
 Ruling of the RTC
In a Decision22 dated February 26, 2007, the RTC ruled that the
damage to the shipment occurred onboard the vessel while in
transit from Korea to the Philippines.
HEUNG-A was adjudged as the common carrier of the subject
shipment by virtue of the admissions of WALLEM’s witness, Ronald
Gonzales (Gonzales) that despite the slot charter agreement with
DONGNAMA, it was still the obligation of HEUNG-A to transport the
cargo from Busan, Korea to Manila and thus any damage to the
shipment is the responsibility of the carrier to the consignee.
The RTC further observed that HEUNG-A failed to present evidence
showing that it exercised the diligence required of a common
carrier in ensuring the safety of the shipment.
The RTC discounted the slot charter agreement between HEUNG-A
and DONGNAMA, and held that it did not bind the consignee who
was not a party thereto. Further, it was HEUNG-A’s duty to ensure
that the container van was in good condition by taking an initiative
to state in its contract and demand from the owner of the container
van that it should be in a good condition all the time. Such initiative
cannot be shifted to the shipper because it is in no position to
demand the same from the owner of the container van.
WALLEM was held liable as HEUNG-A’s ship agent in the
Philippines while PROTOP was adjudged liable because the damage
sustained by the shipment was due to the bad condition of the
container van. Also, based on the statement at the backof the bill of
lading, it assumed responsibility for loss and damage as freight
forwarder, viz:
6.1 The responsibility of the Freight Forwarder for the goods under
these conditions covers the period from the time the Freight
Forwarder has taken the goods in his charge to the time of the
delivery.
6.2 The Freight Forwarde[r] shall beliable for loss or damage to the
goods as well as for delay in delivery if the occurrence which
caused the loss, damage, delay in delivery took place while the
goods were in his charge as defined in clause 2.1.a unless the
Freight Forwarder proves that no fault or neglect of his own
servants or agents or any other person referred to in Clause 2.2 has
caused or contributed to such loss, damage or delay. However, the
Freight Forwarder shall only be liable for loss following from delay
in delivery if the Consignor has made a declaration of interest in
timely delivery which has been accepted by the Freight Forwarder
and stated in this FBL.23
PHILAM was declared to havebeen validly subrogated in
NOVARTIS’ stead and thus entitled to recover the insurance claims
it paid to the latter.
ATI and STEPHANIE were exonerated from any liability. SAGAWA
was likewise adjudged not liable for the loss/damage to the
shipment by virtue of the phrase "Shipper’s Load and Count"
reflected in the bill of lading issued by PROTOP. Since the container
van was packed under the sole responsibility of the shipper in
Korea, SAGAWA, which is based in the Philippines, had no chance
to check if the contents were in good condition or not. The RTC
concluded that SAGAWA cannot be expected to observe the
diligence or care required of a carrier or ship agent. SAGAWA, ATI
and STEPHANIE’s counterclaims for attorney’s fees were granted
and PHILAM was ordered to pay the same for having been filed a
‘shotgun case’ against them. Accordingly, the dispositive portion of
the RTC decision read:
WHEREFORE, premises considered, judgment is hereby rendered
declaring defendants PROTOP SHIPPING CORPORATION, HEUNG-A
SHIPPING CORPORATION and WALLEM PHILIPPINES SHIPPING,
INC. solidarily liable to pay x x x PHILAM INSURANCE COMPANY,
INC. the following amounts:
1. [P]1,904,613.20 plus interest of 12% per annum from December
26, 2001 (date of service of summons to defendant Heung-A) until
full payment;
2. [P]350,000.00 as attorney’s fees; and 3. Cost of suit.
With regards to the counter claims, x x x PHILAM INSURANCE
COMPANY, INC. is hereby ordered to pay defendants SAGAWA
EXPRESS PHILIPPINES, INC., ASIAN TERMINALS, INC., and
STEPHANIE CUSTOMS BROKERAGE CORPORATION the amount of
[P]100,000.00 each as attorney’s fees.
SO ORDERED.24
Ruling of the CA
An appeal to the CA was interposed by PHILAM, WALLEM and
HEUNG-A. In a Decision25 dated January 30, 2009, the CA agreed
with the RTC that PROTOP, HEUNG-A and WALLEM are liable for
the damaged shipment. The fact that HEUNG-A was not a party to
the bill of lading did not negate the existence of a contract of
carriage between HEUNG-A and/or WALLEM and NOVARTIS. A bill
of lading is not indispensable for the creation of a contract of
carriage. By agreeing to transport the goods contained in the sea
van providedby DONGNAMA, HEUNG-A impliedly entered into a
contract of carriage with NOVARTIS with whom the goods were
consigned. Hence, it assumed the obligations of a common carrier
to observe extraordinary diligence in the vigilance over the goods
transported by it. Further the Slot Charter Agreement did not
change HEUNG-A’s character as a common carrier.
Moreover, the proximate cause ofthe damage was the failure of
HEUNG-A to inspect and examine the actual condition of the sea
van before loading it on the vessel. Also, propermeasures in
handling and stowage should have been adopted to prevent
seepage of sea water into the sea van.
The CA rejected WALLEM and HEUNG-A’s argument that
NOVARTIS failed to comply with Article 366 of the Code of
Commerce requiring that a claim must be made against the carrier
within 24 hours from receipt of the merchandise because such
provision applies only to inter-island shipments within the
Philippines.
The CA limited the liability of PROTOP, WALLEM and HEUNG-A to
US$8,500.00 pursuant to the liability limitation under the COGSA
since the shipper failed to declare the value of the subject cargo in
the bill of lading and since they could not be made answerable for
the two (2) unaccounted pallets because the shipment was on a
"shipper’s load, count and seal" basis.
The attorney’s fees awarded to SAGAWA, ATI and STEPHANIE were
deleted because it was not shown that PHILAM was motivated by
malice and bad faith in impleading them as defendants. Thus, the
CA decision was disposed as follows:
WHEREFORE, premises considered, the appealed Decision is
hereby AFFIRMED with MODIFICATION.Defendants PROTOP
SHIPPING CORPORATION, HEUNG-A SHIPPING CORPORATION
[and] WALLEM PHILIPPINES SHIPPING,INC.’s solidary liability to
PHILAM INSURANCE COMPANY, INC. is reduced to $8,500.00 plus
interest per annum from26 December 2001 (date ofservice of
summons to defendant Heung-A) until full payment. The award of
attorney’s fees in the amount of One Hundred Thousand Pesos
([P]100,000.[00]) each to SAGAWA EXPRESS PHILIPPINES, INC.,
ASIAN TERMINALS, INC. and STEPHANIE CUSTOMS BROKERAGE is
hereby DELETED.
SO ORDERED.26
The foregoing judgment was reiterated in the CA
Resolution27 dated May 8, 2009 which denied the motions for
reconsideration filed by PHILAM, WALLEM and HEUNG-A.
PHILAM thereafter filed a petition for review before the Court
docketed as G.R. No. 187701. WALLEM and HEUNG-A followed suit
and their petition was docketed as G.R. No. 187812. Considering
that both petitions involved similar parties and issue, emanated
from the same Civil Case No. 01-889 and assailed the same CA
judgment, they were ordered consolidated in a Resolution28 dated
January 13, 2010.
In G.R. No. 187701, PHILAM raised the following grounds:
THE HONORABLE [CA] COMMITTED SERIOUS
ERROR WHEN IT RULED IN ITS DECISION OF 30
JANUARY 2009 THAT [HEUNG-A and WALLEM]
HAVE THE RIGHT TO LIMIT THEIR LIABILITY
UNDER THE PACKAGE LIMITATION OF
LIABILITY OF SECTION 4(5) OF THE CARRIAGE
OF GOODS BY SEA ACT, 1924, IN VIEW OF ITS
OBSERVATION THAT [NOWHERE] IN THE BILL
OF LADING DID THE SHIPPER DECLARE THE
VALUE OF THE SUBJECT CARGO;
THE HONORABLE [CA] COMMITTED SERIOUS
ERROR WHEN IT COMPLETELY DISREGARDED
THE FUNDAMENTAL BREACHES OF [HEUNG-A
and WALLEM] OF [THEIR] OBLIGATIONS AND
RESPONSIBILITIES UNDER THE CONTRACT OF
CARRIAGE AND LAW OF THE CASE AS LEGAL
GROUNDS TO PRECLUDE ITS AVAILMENT OF
THE PACKAGE LIMITATION OF LIABILITY
UNDER SECTION 4(5) OF THE CARRIAGE OF
GOODS BY SEA ACT, 1924.29
In G.R. No. 187812, HEUNG-A and WALLEM argued that:
THE [CA] COMMITTED A SERIOUS ERROR OF
LAW IN RULING THAT THE CODE
OFCOMMERCE, SPECIFICALLY ARTICLE 366
THEREOF, DOES NOT APPLY IN THIS CASE[;]
THE [CA] COMMITTED A SERIOUS ERROR OF
LAW IN RULING THAT THE SO-CALLED
"PARAMOUNT CLAUSE" IN THE BILL OF
LADING, WHICH PROVIDED THAT "COGSA"
SHALL GOVERN THE TRANSACTION, RESULTED
IN THE EXCLUSION OR INAPPLICABILITY OF
THE CODE OF COMMERCE[;]
THE [CA] COMMITTED A SERIOUS ERROR OF
LAW IN NOT RULING THAT [PHILAM] HAS NO
RIGHT OF ACTION AGAINST [HEUNG-A and
WALLEM] INSOFAR AS DAMAGE TO CARGO IS
CONCERNED IN VIEW OF THE FACT THAT NO
TIMELY CLAIM WAS FILED PURSUANT TO
ARTICLE 366 OF THE CODE OF COMMERCE OR
THE PROVISIONS OF THE BILL OF LADING
NO.DNALGOBUM 005019[;]
THE [CA] GRAVELY ABUSED ITS DISCRETION
AMOUNTING TO EXCESS OR LACK OF
JURISDICTION IN FINDING THAT THE
CONTAINERIZED CARGO WAS DAMAGED
WHILE IN THE POSSESSION OR CUSTODY OF
THE VESSEL "HEUNG-A BANGKOK".30
Issues
The arguments proffered by the parties can be summed up into the
following issues: (1) Whether the shipment sustained damage
while in the possession and custody of HEUNG-A, and if so, whether
HEUNG-A’s liability can be limited to US$500 per package pursuant
tothe COGSA; (2) Whether or not NOVARTIS/PHILAM failed to file a
timely claim against HEUNG-A and/or WALLEM.
Ruling of the Court
It must be stressed that the question on whether the subject
shipment sustained damaged while in the possession and custody
of HEUNG-A is a factual matter which has already beendetermined
by the RTC and the CA. The courts a quowere uniform in finding
that the goods inside the container van were damaged by sea water
whilein transit on board HEUNG-A’s vessel.
Being a factual question, it is notreviewable in the herein petition
filed under Rule 45 of the Rules of Court. It isnot the Court’s duty to
evaluate and weigh the evidence all over again as such function is
conceded to be within the expertise of the trial court whose
findings, when supported by substantial evidence on record and
affirmed by the CA, are regarded with respect, if not binding effect,
by this Court.31
There are certain instances, however, when the Court is compelled
to deviate from this rule, dismantle the factual findings of the
courts a quoand conduct a probe into the factual questions at issue.
These circumstances are: (1) the inference made ismanifestly
mistaken, absurd or impossible; (2) there is grave abuse of
discretion; (3) the findings are grounded entirely on speculations,
surmises or conjectures; (4) the judgment of the CA is based on
misapprehension of facts; (5) the CA, in making its findings, went
beyond the issues of the case and the same is contrary to the
admissions of both appellant and appellee; (6) the findings of fact
are conclusions without citation of specific evidence on which
theyare based; (7) the CA manifestly overlooked certain relevant
facts not disputed by the parties and which, if properly considered,
would justify a different conclusion; and (8) the findings of fact of
the CA are premised on the absence ofevidence and are
contradicted by the evidence on record.32
None of the foregoing instances is extant from records of the
present case. Instead, the Court finds that the factual findings of the
courts a quo are supported by evidence on record.
The uncontested results of the inspection survey conducted by
Manila Adjusters Surveyors Company showed that sea water
seeped into the panels/sidings and roofing of the container van.
This was confirmed by the examination conducted by Hernandez,
the chemist of PRECISION, on samples from the cartons, boxes,
aluminum foil and laminated plastic packaging materials. Based on
the laboratory examination results, the contents of the van were
drenched by sea water, an element which is highly conspicuous in
the high seas. It can thus be reasonably concluded that negligence
occurred while the container van was in transit, in HEUNG-A’s
possession, control and custody as the carrier.
Although the container van had defects, they were not, however, so
severe as to accommodate heavy saturation of sea water. The holes
were tiny and the rusty portions did not cause gaps or tearing.
Hence, the van was still in a suitable condition to hold the goods
and protect them from natural weather elements or even the
normal flutter of waves in the seas.
The scale of the damage sustained by the cargo inside the van could
have been only caused by large volume of sea water since not a
single package inside was spared. Aside from the defective
condition of the van, some other circumstance or occurrence
contributed to the damages sustained by the shipment. Since the
presence of sea water is highly concentrated in the high seas and
considering HEUNG-A’s failure to demonstrate how it exercised
due diligence in handling and preserving the container van while in
transit, it is liable for the damages sustained thereby.
As the carrier of the subject shipment, HEUNG-A was bound to
exercise extraordinary diligence in conveying the same and its slot
charter agreement with DONGNAMA did not divest it of such
characterization nor relieve it of any accountability for the
shipment.
Based on the testimony of Gonzales,33 WALLEM’s employee and
witness, the charter party between HEUNG-A and DONGNAMA was
a contract of affreightment and not a bare boat or demise charter,
viz:
Q: Now, the space charter that you are mentioning is not either a
bareboat or a demise?
A: Yes, sir.
Q: Okay. So in other words, that space charter party is only to allow
the shipper, Dongnama, to load its cargo for a certain specified
space?
A: Yes, sir.34
A charter party has been defined in Planters Products, Inc. v. Court
of Appeals35 as:
[A] contract by which an entire ship, orsome principal part thereof,
is let by the owner to another person for a specified time or use; a
contract of affreightment by which the owner of a ship or other
vessel lets the whole or a part of her to a merchant or other person
for the conveyance of goods, on a particular voyage, in
consideration of the payment of freight. x x x.36 (Citations omitted)
A charter party has two types. First, it could be a contract of
affreightment whereby the use of shipping space on vessels is
leased in part or as a whole, to carry goods for others. The charter-
party provides for the hire of vessel only, either for a determinate
period of time (time charter) or for a single or consecutive voyage
(voyage charter). The shipowner supplies the ship’s stores, pay for
the wages ofthe master and the crew, and defray the expenses for
the maintenance of the ship.37 The voyage remains under the
responsibility of the carrier and it is answerable for the loss of
goods received for transportation. The charterer is free from
liability to third persons in respect of the ship.38
Second, charter by demise or bareboat charter under which the
whole vessel is let to the charterer with a transfer to him of its
entire command and possession and consequent control over its
navigation, including the master and the crew, who are his
servants.39 The charterer mans the vessel with his own people and
becomes, in effect, the owner for the voyage or service stipulated
and hence liable for damages or loss sustained by the goods
transported.40
Clearly then, despite its contract of affreightment with
DONGNAMA, HEUNG-A remained responsible as the carrier, hence,
answerable for the damages incurred by the goods received for
transportation. "[C]ommon carriers, from the nature of their
business and for reasons of public policy, are bound to observe
extraordinary diligenceand vigilance with respect to the safety of
the goods and the passengers they transport. Thus, common
carriers are required to render service with the greatest skill and
foresight and ‘to use all reasonable means to ascertain the nature
and characteristics of the goods tendered for shipment, and
toexercise due care in the handling and stowage, including such
methods as their nature requires.’"41
"[C]ommon carriers, as a general rule, are presumed to have been
at fault or negligent if the goods they transported deteriorated or
got lost or destroyed. That is, unless they provethat they exercised
extraordinary diligence in transporting the goods. Inorder to avoid
responsibility for any loss or damage, therefore, they have the
burden of proving that they observed such diligence." 42 Further,
under Article 1742 of the Civil Code, even if the loss, destruction, or
deterioration of the goods should be caused by the faulty nature of
the containers, the common carrier must exercise due diligence to
forestall or lessen the loss.
Here, HEUNG-A failed to rebut this prima faciepresumption when it
failed to give adequate explanation as to how the shipment inside
the container van was handled, stored and preserved to forestall or
prevent any damage or loss while the same was inits possession,
custody and control.
PROTOP is solidarily liable with HEUNG-A for the lost/damaged
shipment in view of the bill of lading the former issued to
NOVARTIS. "A bill of lading is a written acknowledgement of the
receipt of goods and an agreement to transport and to deliver them
at a specified place to a person named or on his or her order. It
operates both as a receipt and as a contract. It is a receipt for the
goods shipped and a contract to transport and deliver the same as
therein stipulated."43 PROTOP breached its contract with
NOVARTIS when it failed to deliver the goods in the same quantity,
quality and description as stated in Bill of Lading No. PROTAS
200387.
The CA did not err in applying the provisions of the COGSA
specifically, the rule on Package Liability Limitation.
Under Article 1753 of the Civil Code, the law of the country to
which the goods are to be transported shall govern the liability of
the common carrier for their loss, destruction or deterioration.
Since the subject shipment was being transported from South
Korea to the Philippines, the Civil Code provisions shall apply. In all
mattersnot regulated by the Civil Code, the rights and obligations of
common carriers shall be governed by the Code of Commerce and
by special laws,44 such as the COGSA.
While the Civil Code contains provisions making the common
carrier liable for loss/damage to the goods transported, it failed to
outline the manner of determining the amount of suchliability.
Article372 of the Code of Commerce fills in this gap, thus:
Article 372. The value of the goods which the carrier must pay in
cases if loss or misplacement shall be determined in accordance
with that declared in the bill of lading, the shipper not being
allowed to present proof that among the goods declared therein
there were articles of greater value and money.
Horses, vehicles, vessels, equipment and all other principal and
accessory means of transportation shall be especially bound
infavor of the shipper, although with respect to railroads said
liability shall be subordinated to the provisions of the laws of
concession with respect to the property, and to what this Code
established as to the manner and form of effecting seizures and
attachments against said companies. (Emphasis ours)
In case, however, of the shipper’s failure to declare the value of the
goods in the bill of lading, Section 4, paragraph 5 of the COGSA
provides:
Neither the carrier nor the ship shall in any event be or become
liable for any loss or damage to or in connection with the
transportation of goods in an amount exceeding $500 per package
lawful money of the United States, or in case of goods not shipped
in packages, per customary freight unit, or the equivalent of that
sum in other currency, unless the nature and value of such goods
have been declared by the shipper before shipment and inserted in
the bill of lading. This declaration, if embodied in the bill of lading
shall be prima facieevidence, but shall be conclusive on the carrier.
Hence, when there is a loss/damage to goods covered by contracts
of carriage from a foreign port to a Philippine port and in the
absence a shipper’s declaration of the value of the goods in the bill
of lading, as in the present case, the foregoing provisions of the
COGSA shall apply. The CA, therefore, did not err in ruling that
HEUNG-A, WALLEM and PROTOP’s liability is limited to $500 per
package or pallet.45
The Court likewise affirms the CA in pronouncing HEUNG-A,
WALLEM and PROTOP liable only for the lost/damaged 17 pallets
instead of 19 pallets stated in the bill of lading. This is because, per
the "Shipper’s Load and Count" arrangement, the contents are not
required to be checked and inventoried by the carrier at the port of
loading or before said carrier enters the port of unloading in the
Philippines since it is the shipper who has the sole responsibility
for the quantity, description and condition of the cargoes shipped
in container vans.46 As such, the carrier cannot be held responsible
for any discrepancy if the description in the bill of lading is
different from the actual contents of the container.47
Consonant with the ruling in the recent Asian Terminals, Inc. v.
Philam Insurance Co., Inc.,48 the prescriptive period for filing an
action for lost/damaged goods governed by contracts of carriage
by sea to and from Philippine ports in foreign trade is governed by
paragraph 6,Section 3 of the COGSA which states:
(6) Unless notice of loss or damageand the general nature of such
loss or damage be given in writing to the carrier or his agent at the
port of discharge before or at the time of the removal of the goods
into the custody of the person entitled to delivery thereof under the
contract of carriage, such removal shall be prima facieevidence of
the delivery by the carrier of the goods as described in the bill of
lading. If the loss or damage is not apparent, the notice must be
given within three days of the delivery.
Said notice of loss or damage maybe endorsed upon the receipt for
the goods given by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has
at the time of their receipt been the subject of joint survey or
inspection. In any event the carrier and the ship shall be discharged
from all liability in respect of loss or damage unless suit is brought
withinone year after delivery of the goods or the date when the
goods should have been delivered: Provided, That if a notice of loss
or damage, either apparent or concealed, is not given as provided
for in this section, that fact shall not affect or prejudice the right of
the shipper to bring suit within one year after the delivery of the
goods or the date when the goods should have been delivered.
It was further ruled in Asian Terminals that pursuant to the
foregoing COGSA prov:sion, failure to comply with the notice
requirement shall not affect or prejudice the right of the shipper to
bring suit within one year after delivery of the goods.
The consignee, NOV ARTIS, received the subject shipment on
January 5, 2001. PHILAM, as the subrogee of NOVARTIS, filed a
claim against PROTOP on June 4, 2001, against WALLEM on
October 12, 2001 and against HEUNG-A on December 11, 2001, or
all within the one-year prescriptive period. Verily then, despite
NOV AR TIS' failure to comply with the three-day notice
requirement, its subrogee PHILAM is not barred from seeking
reimbursement from PROTOP, HEUNG-A and WALLEM because the
demands for payment were timely filed.
The amount which PHILAM is entitled to receive shall earn a legal
interest at the rate of six percent (6%) per annum from the date of
finality of this judgment until its full satisfaction pursuant to Nacar
v. Gallery Frames.49
WHEREFORE, all the foregoing considered, the Decision dated
January 30, 2009 of the Court of Appeals in CA-G.R. CV No. 89482 is
hereby AFFlHMED with MODIFICATION in that the interest rate on
the award of US$8,500.00 shall be six percent (6%) per annum
from the date of finality of this judgment until fully paid.
SO ORDERED.
G.R. No. 181375 July 13, 2016
PHIL-NIPPON KYOEI, CORP., Petitioner,
vs.
ROSALIA T. GUDELOSAO, on her behalf and in behalf of minor
children CHRISTY MAE T. GUDELOSAO and ROSE ELDEN T.
GUDELOSAO, CARMEN TANCONTIAN, on her behalf and in
behalf of the children CAMELA B. TANCONTIAN, BEVERLY B.
TANCONTIAN, and ACE B. TANCONTIAN, Respondents.
DECISION
JARDELEZA, J.:
This is a petition for review on certiorari1under Rule 45 of the
Revised Rules of Court filed by Phil-Nippon Kyoei, Corp.
(Petitioner) from the Decision2 of the Court of Appeals (CA) dated
October 4, 2007 (CA Decision) and its Resolution3 dated January
11, 2008 in CA-G.R. SP No. 95456. The CA reinstated the Labor
Arbiter's Decision4 dated August 5, 2004 (LA Decision) with the
modification, among others, that petitioner is liable to respondents
under the insurance cover it procured from South Sea Surety &
Insurance Co., Inc. (SSSICI). The CA ruled that petitioner's liability
would be extinguished only upon payment by SSSICI of the
insurance proceeds to respondents.5
Facts
Petitioner, a domestic shipping corporation, purchased a "Ro-Ro"
passenger/cargo vessel "MV Mahlia" in Japan in February
2003.6 For the vessel's one month conduction voyage from Japan to
the Philippines, petitioner, as local principal, and Top Ever Marine
Management Maritime Co., Ltd. (TMCL), as foreign principal, hired
Edwin C. Gudelosao, Virgilio A. Tancontian, and six other
crewmembers. They were hired through the local manning agency
of TMCL, Top Ever Marine Management Philippine Corporation
(TEMMPC). TEMMPC, through their president and general
manager, Capt. Oscar Orbeta (Capt. Orbeta), and the eight
crewmembers signed separate contracts of employment. Petitioner
secured a Marine Insurance Policy (Maritime Policy No. 00001)
from SSSICI over the vessel for P10,800,000.00 against loss,
damage, and third party liability or expense, arising from the
occurrence of the perils of the sea for the voyage of the vessel from
Onomichi, Japan to Batangas, Philippines. This Marine Insurance
Policy included Personal Accident Policies for the eight
crewmembers for P3,240,000.00 each in case of accidental death or
injury.7
On February 24, 2003, while still within Japanese waters, the vessel
sank due to extreme bad weather condition. Only Chief Engineer
Nilo Macasling survived the incident while the rest of the
crewmembers, including Gudelosao and Tancontian, perished.8
Respondents, as heirs and beneficiaries of Gudelosao and
Tancontian, filed separate complaints for death benefits and other
damages against petitioner, TEMMPC, Capt. Orbeta, TMCL, and
SSSICI, with the Arbitration Branch of the National Labor Relations
Commission (NLRC).9
On August 5, 2004, Labor Arbiter (LA) Pablo S. Magat rendered a
Decision10 finding solidary liability among petitioner, TEMMPC,
TMCL and Capt. Orbeta. The LA also found SSSICI liable to the
respondents for the proceeds of the Personal Accident Policies and
attorney's fees. The LA, however, ruled that the liability of
petitioner shall be deemed extinguished only upon SSSICI's
payment of the insurance proceeds. The dispositive portion of the
LA Decision reads:
WHEREFORE, premises considered, CAPT. OSCAR ORBETA,
[TEMMPC], [TMCL], and PHIL-NIPPON KYOEI
CORPORATION are hereby directed to pay solidarily the
complainants as follows:
Death Burial 10% atty's
Benefits Expenses [fees]
1. ROSALIA T.
US$50,000 US$1,000 US$5,100
GUDELOSAO:
2. CARMEN B.
US$50,000 US$1,000 US$5,100
TANCONTIAN:
3. CARMELA B.
US$7,000 US$700
TANCONTIAN:
4. BEVERLY B.
US$7,000 US$700
TANCONTIAN:
5. ACE B. TANCONTIAN: US$7,000 US$700
Further, respondent SOUTH SEA SURETY & INSURANCE CO.,
INC. is hereby directed to pay as beneficiaries complainants
ROSALIA T. GUDELOSAO and CARMEN B.
TANCONTIAN [P]3,240,000.00 each for the proceeds of the
Personal Accident Policy Cover it issued for each of the deceased
seafarers EDWIN C. GUDELOSAO and VIRGILIO A. T ANCONTIAN
plus 10% attorney's fees thereof at [P]324,000.00 each thereof or a
total of [P]648,000.00.
Nevertheless, upon payment of said proceeds to said widows by
respondent SOUTH SEA SURETY & INSURANCE CO.,
INC., respondent PHIL-NIPPON CORPORATION's liability to all the
complainants is deemed extinguished.
Any other claim is hereby dismissed for lack of merit.
SO ORDERED.11
On appeal, the NLRC modified the LA Decision in a
Resolution12 dated February 28, 2006, the dispositive portion of
which reads:
WHEREFORE, premises considered, the Appeals of Complainants
and PNKC are GRANTED but only partially in the case of
Complainants' Appeal, and the Appeal of [SSSICI] is DISMISSED for
lack of merit. Accordingly, the Decision is SUSTAINED subject to the
modification that [SSSICI] is DIRECTED to pay Complainants in
addition to their awarded claims, in the appealed decision,
additional death benefits of US$7,000 each to the minor children of
Complainant Gudelosao, namely, Christy Mae T. Gudelosao and
Rose Elden T. Gudelosao.
As regards the other issues, the appealed Decision is SUSTAINED.
SO ORDERED.13
The NLRC absolved petitioner, TEMMPC and TMCL and Capt.
Orbeta from any liability based on the limited liability rule.14 It,
however, affirmed SSSICI's liability after finding that the Personal
Accident Policies answer for the death benefit claims under the
Philippine Overseas Employment Administration Standard
Employment Contract (POEASEC).15 Respondents filed a Partial
Motion for Reconsideration which the NLRC denied in a Resolution
dated May 5, 2006.16
Respondents filed a petition for certiorari17before the CA where
they argued that the NLRC gravely abused its discretion in ruling
that TEMMPC, TMCL, and Capt. Orbeta are absolved from the terms
and conditions of the POEA-SEC by virtue of the limited liability
rule. Respondents also argued that the NLRC gravely abused its
discretion in ruling that the obligation to pay the surviving heirs
rests solely on SSSICI. The CA granted the petition, the dispositive
portion thereof reads:
WHEREFORE for being impressed with merit the petition is hereby
GRANTED. Accordingly, the Resolution dated February 28, 2006,
and Resolution, dated May 5, 2006, of the public respondent NLRC
are hereby SET ASIDE.  The Decision of the Labor Arbiter dated
[August 5, 2004] is REINSTATED, subject to the following
modifications:
(1) [R]espondents CAPT. OSCAR ORBETA, [TEMMPC] and [TMCL]
(the manning agency), are hereby directed to pay solidarily the
complainants as follows:
Death Burial 10% atty's
Benefits Expenses fees
ROSALIA T.
US$50,000 US$1,000 US$5,1OO
GUDELOSAO:
CARMEN B.
US$50,000 US$1,000 US$5,1OO
TANCONTIAN:
CARMELA B.
US$7,000 US$700
TANCONTIAN:
BEVERLY B.
US$7,000 US$700
TANCONTIAN:
ACE B. TANCONTIAN: US$7,000 US$700
Further, [respondents] CAPT. OSCAR ORBETA, [TEMMPC] and
[TMCL] (the manning agency) are hereby directed to pay solidarily
the complainants in addition to their awarded claims, additional
death benefits of US$7,000 each to the minor children of petitioner
Rosalia T. Gudelosao, namely, Christy Mae T. Gudelosao and Rose
Elden T. Gudelosao.
Respondent SOUTH SEA SURETY & INSURANCE CO., INC. is hereby
directed to pay as beneficiaries complainants ROSALIA T.
GUDELOSAO and CARMEN B. TANCONTIAN [P]3,240,000.00 each
for the proceeds of the Personal Accident Policy Cover it issued for
each of the deceased seafarers EDWIN C. GUDELOSAO and
VIRGILIO A. TANCONTIAN plus 10% attorney's fees thereof at
[P]324,000.00 each thereof or a total of [P]648,000.00.
Nevertheless, upon payment of said proceeds to said widows by
respondent SOUTH SEA SURETY & INSURANCE CO., INC.,
respondent PHIL-NIPPON CORPORATION's liability to all the
complainants is deemed extinguished.
SO ORDERED.18
The CA found that the NLRC erred when it ruled that the obligation
of petitioner, TEMMPC and TMCL for the payment of death benefits
under the POEA-SEC was ipso facto transferred to SSSICI upon the
death of the seafarers. TEMMPC and TMCL cannot raise the defense
of the total loss of the ship because its liability under POEA-SEC is
separate and distinct from the liability of the shipowner.19 To
disregard the contract, which has the force of law between the
parties, would defeat the purpose of the Labor Code and the rules
and regulations issued by the Department of Labor and
Employment (DOLE) in setting the minimum terms and conditions
of employment for the protection of Filipino seamen. 20 The CA
noted that the benefits being claimed are not dependent upon
whether there is total loss of the vessel, because the liability
attaches even if the vessel did not sink.21 Thus, it was error for the
NLRC to absolve TEMMPC and TMCL on the basis of the limited
liability rule.
Significantly though, the CA ruled that petitioner is not liable under
the POEA-SEC, but by virtue of its being a shipowner.22 Thus,
petitioner is liable for the injuries to passengers even without a
determination of its fault or negligence.1âwphi1 It is for this reason
that petitioner obtained insurance from SSSICI - to protect itself
against the consequences of a total loss of the vessel caused by the
perils of the sea. Consequently, SSSICI's liability as petitioner's
insurer directly arose from the contract of insurance against
liability (i.e.,  Personal Accident Policy).23 The CA then ordered that
petitioner's liability will only be extinguished upon payment by
SSSICI of the insurance proceeds.24
Petitioner filed a Motion for Reconsideration 25 dated November 5,
2007 but this was denied by the CA in its Resolution 26 dated
January 11, 2008. On the other hand, since SSSICI did not file a
motion for reconsideration of the CA Decision, the CA issued a
Partial Entry of Judgment27 stating that the decision became final
and executory as to SSSICI on October 27, 2007.
Hence, this petition where petitioner claims that the CA erred in
ignoring the fundamental rule in Maritime Law that the shipowner
may exempt itself from liability by abandoning the vessel and
freight it may have earned during the voyage, and the proceeds of
the insurance if any. Since the liability of the shipowner is limited
to the value of the vessel unless there is insurance, any claim
against petitioner is limited to the proceeds arising from the
insurance policies procured from SSSICI. Thus, there is no reason in
making petitioner's exoneration from liability conditional on
SSSICI's payment of the insurance proceeds.
On December 8, 2008, TEMMPC filed its Manifestation28 informing
us of TEMMPC and TMCL's Joint Motion to Dismiss the Petition and
the CA's Resolution29 dated January 11, 2008 granting it. The
dismissal is based on the execution of the Release of All Rights and
Full Satisfaction Claim30 (Release and Quitclaim) on December 14,
2007 between respondents and TEMMPC, TMCL, and Capt. Orbeta.
In a Resolution31 dated January 28, 2009, we noted that TEMMPC,
TMCL, and Capt. Orbeta will no longer comment on the Petition.
On the other hand, SSSICI filed its Comment32 to the petition dated
September 3, 2010. It alleged that the NLRC has no jurisdiction
over the insurance claim because claims on the Personal Accident
Policies did not arise from employer-employee relations. It also
alleged that petitioner filed a complaint for sum of money 33 in the
Regional Trial Court (RTC) of Manila, Branch 46, where it prays for
the payment of the insurance proceeds on the individual Marine
Insurance Policy with a Personal Accident Policy covering the
crewmembers of MV Mahlia. This case was eventually dismissed
and is now subject of an appeal34 before the CA. SSSICI prays that
this matter be considered in resolving the present case.35
Issues
I. Whether the doctrine of real and hypothecary nature of maritime
law (also known as the limited liability rule) applies in favor of
petitioner.
II. Whether the CA erred in ruling that the liability of petitioner is
extinguished only upon SSSICI's payment of insurance proceeds.
Discussion
I. Liability under the POEA
Standard Employment Contract.
At the outset, the CA erred in absolving petitioner from the
liabilities under the POEA-SEC. Petitioner was the local principal of
the deceased seafarers for the conduction trip of MV Mahlia.
Petitioner hired them through TMCL, which also acted through its
agent, TEMMPC. Petitioner admitted its role as a principal of its
agents TMCL, TEMMPC and Capt. Orbeta in their Joint Partial
Appeal36 before the NLRC.37 As such, it is solidarily liable with
TEMMPC and TMCL for the benefits under the POEA-SEC.
Doctrine of limited liability is not
applicable to claims under POEA-SEC.
In this jurisdiction, the limited liability rule is embodied in Articles
587, 590 and 837 under Book III of the Code of Commerce, viz:
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which arise from the conduct
of the captain in the care of the goods which the vessel carried; but
he may exempt himself therefrom by abandoning the vessel with
all her equipment and the freightage he may have earned during
the voyage.
Art. 590. The co-owners of a vessel shall be civilly liable, in the
proportion of their contribution to the common fund, for the
results of the acts of the captain, referred to in Art. 587.
Each part-owner may exempt himself from this liability by the
abandonment before a notary of the part of the vessel belonging to
him.
Art. 837. The civil liability incurred by the shipowners in the cases
prescribed in this section, shall be understood as limited to the
value of the vessel with all its appurtenances and freightage earned
during the voyage.
Article 83 7 applies the limited liability rule in cases of collision.
Meanwhile, Articles 587 and 590 embody the universal principle of
limited liability in all cases wherein the shipowner or agent may be
properly held liable for the negligent or illicit acts of the
captain.38 These articles precisely intend to limit the liability of the
shipowner or agent to the value of the vessel, its appurtenances
and freightage earned in the voyage, provided that the owner or
agent abandons the vessel.39 When the vessel is totally lost, in
which case abandonment is not required because there is no vessel
to abandon, the liability of the shipowner or agent for damages is
extinguished.40 Nonetheless, the limited liability rule is not absolute
and is without exceptions. It does not apply in cases: (1) where the
injury or death to a passenger is due either to the fault of the
shipowner, or to the concurring negligence of the shipowner and
the captain; (2) where the vessel is insured; and (3) in workmen's
compensation claims.41
In Abueg v. San Diego,42 we ruled that the limited liability rule found
in the Code of Commerce is inapplicable in a liability created by
statute to compensate employees and laborers, or the heirs and
dependents, in cases of injury received by or inflicted upon them
while engaged in the performance of their work or employment, to
wit:
The real  and hypothecary  nature of the liability of the shipowner or
agent embodied in the provisions of the Maritime Law, Book III,
Code of Commerce, had its origin in the prevailing conditions of the
maritime trade and sea voyages during the medieval ages, attended
by innumerable hazards and perils. To offset against these adverse
conditions and to encourage shipbuilding and maritime commerce,
it was deemed necessary to confine the liability of the owner or
agent arising from the operation of a ship to the vessel, equipment,
and freight, or insurance, if any, so that if the shipowner or agent
abandoned the ship, equipment, and freight, his liability was
extinguished.
But the provisions of the Code of Commerce invoked by appellant
have no room in the application of the Workmen's Compensation
Act which seeks to improve, and aims at the amelioration of, the
condition of laborers and employees. It is not the liability for the
damage or loss of the cargo or injury to, or death of, a passenger by
or through the misconduct of the captain or master of the ship; nor
the liability for the loss of the ship as a result of collision; nor the
responsibility for wages of the crew, but a liability created by a
statute to compensate employees and laborers in cases of injury
received by or inflicted upon them, while engaged in the
performance of their work or employment, or the heirs and
dependents of such laborers and employees in the event of death
caused by their employment. Such compensation has nothing to do
with the provisions of the Code of Commerce regarding maritime
commerce. It is an item in the cost of production which must be
included in the budget of any well-managed
industry.43 (Underscoring supplied.)
We see no reason why the above doctrine should not apply here.
Act No. 3428, otherwise known as The Workmen's Compensation
Act44 is the first law on workmen's compensation in the Philippines
for work-related injury, illness, or death. This was repealed on
November 1, 1974 by the Labor Code,45 and was further amended
on December 27, 1974 by Presidential Decree No. 626.46 The
pertinent provisions are now found in Title II, Book IV of the Labor
Code on Employees Compensation and State Insurance Fund.
The death benefits granted under Title II, Book IV of the Labor
Code are similar to the death benefits granted under the POEA-
SEC.47 Specifically, its Section 20(A)(l) and (4)(c) provides that:
1. In case of work-related death of the seafarer, during the term of
his contract the employer shall pay his beneficiaries the Philippine
Currency equivalent to the amount of Fifty Thousand US dollars
(US$50,000) and an additional amount of Seven Thousand US
dollars (US$7,000) to each child under the age of twenty-one (21)
but not exceeding four (4) children, at the exchange rate prevailing
during the time of payment.
xxx
4. The other liabilities of the employer when the seafarer dies as a
result of work-related injury or illness during the term of
employment are as follows:
xxx
c. The employer shall pay the beneficiaries of the seafarer the
[Philippine] currency equivalent to the amount of One Thousand
US dollars (US$1,000) for burial expenses at the exchange rate
prevailing during the time of payment.
Akin to the death benefits under the Labor Code, these benefits
under the POEA-SEC are given when the employee dies due to a
work-related cause during the term of his contract.48 The liability of
the shipowner or agent under the POEA-SEC has likewise nothing
to do with the provisions of the Code of Commerce regarding
maritime commerce. The death benefits granted under the POEA-
SEC is not due to the death of a passenger by or through the
misconduct of the captain or master of the ship; nor is it the
liability for the loss of the ship as result of collision; nor the liability
for wages of the crew. It is a liability created by contract between
the seafarers and their employers, but secured through the State's
intervention as a matter of constitutional and statutory duty to
protect Filipino overseas workers and to secure for them the best
terms and conditions possible, in order to compensate the
seafarers' heirs and dependents in the event of death while
engaged in the performance of their work or employment. The
POEA-SEC prescribes the set of standard provisions established
and implemented by the POEA containing the minimum
requirements prescribed by the government for the employment of
Filipino seafarers. While it is contractual in nature, the POEA-SEC is
designed primarily for the protection and benefit of Filipino
seamen in the pursuit of their employment on board ocean-going
vessels.49 As such, it is deemed incorporated in every Filipino
seafarers' contract of employment.50 It is established pursuant to
POEA's power "to secure the best terms and conditions of
employment of Filipino contract workers and ensure compliance
therewith" and "to protect the well-being of Filipino workers
overseas"51 pursuant to Article 17 of the Labor Code as amended by
Executive Order (EO) Nos. 79752 and 247.53
But while the nature of death benefits under the Labor Code and
the POEA-SEC are similar, the death benefits under the POEA-SEC
are intended to be separate and distinct from, and in addition to,
whatever benefits the seafarer is entitled to under Philippine laws,
including those benefits which may be claimed from the State
Insurance Fund.54
Thus, the claim for death benefits under the POEA-SEC is the same
species as the workmen's compensation claims under the Labor
Code – both of which belong to a different realm from that of
Maritime Law. Therefore, the limited liability rule does not apply to
petitioner's liability under the POEA-SEC.
Nevertheless, the Release and Quitclaim benefit petitioner as a
solidary debtor.
All the same, the Release and Quitclaim executed between
TEMMPC, TMCL and Capt. Oscar Orbeta, and respondents
redounded to the benefit of petitioner as a solidary debtor.
Petitioner is solidarily liable with TEMMPC and TMCL for the death
benefits under the POEA-SEC. The basis of the solidary liability of
the principal with the local manning agent is found in the second
paragraph of Section 10 of the Migrant Workers and Overseas
Filipino Act of 1995,55 which, in part, provides: "[t]he liability of the
principal/employer and the recruitment/placement agency for any
and all claims under this section shall be joint and several." This
provision, is in tum, implemented by Section 1 (e)(8), Rule 2, Part II
of the POEA Rules and Regulations Governing the Recruitment and
Employment of Seafarers, which requires the undertaking of the
manning agency to "[a]ssume joint and solidary liability with the
employer for all claims and liabilities which may arise in
connection with the implementation of the employment contract
[and POEA-SEC]."
We have consistently applied the Civil Code provisions on solidary
obligations, specifically Articles 121756 and 1222,57 to labor
cases.58 We explained in Varorient Shipping Co., Inc. v. NLRC59the
nature of the solidary liability in labor cases, to wit:
x x x The POEA Rules holds her, as a corporate officer, solidarily
liable with the local licensed manning agency. Her liability is
inseparable from those of Varorient and Lagoa. If anyone of them is
held liable then all of them would be liable for the same
obligation. Each of the solidary debtors, insofar as the
creditor/s is/are concerned, is the debtor of the entire
amount; it is only with respect to his co-debtors that he/she is
liable to the extent of his/her share in the obligation. Such
being the case, the Civil Code allows each solidary debtor, in
actions filed by the creditor/s, to avail himself of all defenses
which are derived from the nature of the obligation and of
those which are personal to him, or pertaining to his share. He
may also avail of those defenses personally belonging to his co-
debtors, but only to the extent of their share in the debt. Thus,
Varorient may set up all the defenses pertaining to Colarina and
Lagoa; whereas Colarina and Lagoa are liable only to the extent to
which Varorient may be found liable by the court. The complaint
against Varorient, Lagoa and Colarina is founded on a common
cause of action; hence, the defense or the appeal by anyone of these
solidary debtors would redound to the benefit of the others.
xxx
x x x If Varorient were to be found liable and made to pay pursuant
thereto, the entire obligation would already be extinguished even if
no attempt was made to enforce the judgment against Colarina.
Because there existed a common cause of action against the
three solidary obligors, as the acts and omissions imputed
against them are one and the same, an ultimate finding that
Varorient was not liable would, under these circumstances,
logically imply a similar exoneration from liability for Colarina
and Lagoa, whether or not they interposed any
defense.60 (Emphasis supplied.)
Thus, the rule is that the release of one solidary debtor redounds to
the benefit of the others.61 Considering that petitioner is solidarily
liable with TEMMPC and TMCL, we hold that the Release and
Quitclaim executed by respondents in favor of TEMMPC and TMCL
redounded to petitioner's benefit. Accordingly, the liabilities of
petitioner under Section 20(A)(l) and (4)(c) of the POEA-SEC to
respondents are now deemed extinguished. We emphasize,
however, that this pronouncement does not foreclose the right of
reimbursement of the solidary debtors who paid (i.e., TEMMPC and
TMCL) from petitioner as their co-debtor.
II. Liability under the Personal
Accident Policies.
The NLRC has jurisdiction over the
claim on the Personal Accident
Policies.
We find that the CA correctly upheld the NLRC's jurisdiction to
order SSSICI to pay respondents the value of the proceeds of the
Personal Accident Policies.
The Migrant Workers and Overseas Filipinos Act of 1995 gives the
Labor Arbiters of the NLRC the original and exclusive jurisdiction
over claims arising out of an employer-employee relationship or by
virtue of any law or contract involving Filipino workers for
overseas deployment, including claims for actual, moral, exemplary
and other forms of damage. It further creates a joint and several
liability among the principal or employer, and the
recruitment/placement agency, for any and all claims involving
Filipino workers, viz:
SEC. 10. Money Claims. - Notwithstanding any provision of law to
the contrary, the Labor Arbiters of the National Labor
Relations Commission (NLRC) shall have the original and
exclusive jurisdiction to hear and decide, within ninety (90)
calendar days after the filing of the complaint, the claims
arising out of an employer-employee relationship or by virtue of
any law or contract involving Filipino workers for overseas
deployment including claims for actual, moral, exemplary and
other forms of damages. Consistent with this mandate, the NLRC
shall endeavor to update and keep abreast with the developments
in the global services industry.
The liability of the principal/employer and the
recruitment/placement agency for any and all claims under this
section shall be joint and several. This provision shall be
incorporated in the contract for overseas employment and shall be
a condition precedent for its approval. The performance bond to be
filed by the recruitment/placement agency, as provided by law,
shall be answerable for all money claims or damages that may be
awarded to the workers. If the recruitment/placement agency is a
juridical being, the corporate officers and directors and partners as
the case may be, shall themselves be jointly and solidarily liable
with the corporation or partnership for the aforesaid claims and
damages. x x x (Emphasis supplied.)
In Finman General Assurance Corp. v. Inocencio,62 we upheld the
jurisdiction of the POEA to determine a surety's liability under its
bond. We ruled that the adjudicatory power to do so is not vested
with the Insurance Commission exclusively. The POEA (now the
NLRC) is vested with quasi-judicial powers over all cases, including
money claims, involving employer-employee relations arising out
of or by virtue of any law or contract involving Filipino workers for
overseas employment.63 Here, the award of the insurance proceeds
arose out of the personal accident insurance procured by petitioner
as the local principal over the deceased seafarers who were
Filipino overseas workers. The premiums paid by petitioner were,
in actuality, part of the total compensation paid for the services of
the crewmembers.64 Put differently, the labor of the employees is
the true source of the benefits which are a form of additional
compensation to them. Undeniably, such claim on the personal
accident cover is a claim under an insurance contract involving
Filipino workers for overseas deployment  within the jurisdiction of
the NLRC.
It must also be noted that the amendment under Section 37-A of
the Migrant Workers and Overseas Filipinos Act of 1995 on
Compulsory Insurance Coverage does not apply.1âwphi1 The
amendment requires the claimant to bring any question or dispute
in the enforcement of any insurance policy before the Insurance
Commission for mediation or adjudication. The amendment,
however, took effect on May 8, 2010 long after the Personal
Accident Policies in this case were procured in 2003. Accordingly,
the NLRC has jurisdiction over the claim for proceeds under the
Personal Accident Policies.
In any event, SSSICI can no longer assail its liability under the
Personal Accident Policies. SSSICI failed to file a motion for
reconsideration on the CA Decision. In a Resolution dated April 24,
2008, the CA certified in a Partial Entry of Judgment that the CA
Decision with respect to SSSICI has become final and executory and
is recorded in the Book of Entries of Judgments.65 A decision that
has acquired finality becomes immutable and unalterable. This
quality of immutability precludes the modification of a final
judgment, even if the modification is meant to correct erroneous
conclusions of fact and law. This holds true whether the
modification is made by the court that rendered it or by the highest
court in the land. Thus, SSSICI's liability on the Personal Accident
Policies can no longer be disturbed in this petition.
SSSICI 's liability as insurer under the
Personal Accident Policies is direct.
We, however, find that the CA erred in ruling that "upon payment
of [the insurance] proceeds to said widows by respondent SOUTH
SEA SURETY & INSURANCE CO., INC., respondent PHIL-NIPPON
CORPORATION's liability to all the complainants is deemed
extinguished."66
This ruling makes petitioner's liability conditional upon SSSICI's
payment of the insurance proceeds. In doing so, the CA determined
that the Personal Accident Policies are casualty insurance,
specifically one of liability insurance. The CA determined that
petitioner, as insured, procured from SSSICI the Personal Accident
Policies in order to protect itself from the consequences of the total
loss of the vessel caused by the perils of the sea. The CA found that
the liabilities insured against are all monetary claims, excluding the
benefits under the POEA-SEC, of respondents in connection with
the sinking of the vessel.
We rule that while the Personal Accident Policies are casualty
insurance, they do not answer for petitioner's liabilities arising
from the sinking of the vessel. It is an indemnity insurance
procured by petitioner for the benefit of the seafarers. As a result,
petitioner is not directly liable to pay under the policies because it
is merely the policyholder of the Personal Accident Policies.
Section 176 (formerly Sec. 174) of The Insurance Code67 defines
casualty insurance as follows:
SEC. 174. Casualty insurance is insurance covering loss or
liability arising from accident or mishap, excluding certain
types of loss which by law or custom are considered as falling
exclusively within the scope of other types of insurance such
as fire or marine. It includes, but is not limited to, employer's
liability insurance, motor vehicle liability insurance, plate glass
insurance, burglary and theft insurance, personal accident and
health insurance as written by non-life insurance
companies, and other substantially similar kinds of
insurance. (Emphasis supplied.)
Based on Section 176, casualty insurance may cover liability or loss
arising from accident or mishap.1âwphi1 In a liability insurance,
the insurer assumes the obligation to pay third party in whose
favor the liability of the insured arises.68 On the other hand,
personal accident insurance refers to insurance against death or
injury by accident or accidental means.69 In an accidental death
policy, the accident causing the death is the thing insured against.70
Notably, the parties did not submit the Personal Accident Policies
with the NLRC or the CA. However, based on the pleadings
submitted by the parties, SSSICI admitted that the crewmembers of
MV Mahlia are insured for the amount of P3,240,000.00, payable
upon the accidental death of the crewmembers.71 It further
admitted that the insured risk is the loss of life or bodily injury
brought about by the violent external event or accidental
means.72 Based on the foregoing, the insurer itself admits that what
is being insured against is not the liability of the shipowner for
death or injuries to passengers but the death of the seafarers
arising from accident.
The liability of SSSICI to the beneficiaries is direct under the
insurance contract.73 Under the contract, petitioner is the
policyholder, with SSSICI as the insurer, the crewmembers as
the cestui que vie or the person whose life is being insured with
another as beneficiary of the proceeds,74 and the latter's heirs as
beneficiaries of the policies. Upon petitioner's payment of the
premiums intended as additional compensation to the
crewmembers, SSSICI as insurer undertook to indemnify the
crewmembers' beneficiaries from an unknown or contingent
event.75 Thus, when the CA conditioned the extinguishment of
petitioner's liability on SSSICI's payment of the Personal Accident
Policies' proceeds, it made a finding that petitioner is subsidiarily
liable for the face value of the policies. To reiterate, however, there
is no basis for such finding; there is no obligation on the part of
petitioner to pay the insurance proceeds because petitioner is, in
fact, the obligee or policyholder in the Personal Accident Policies.
Since petitioner is not the party liable for the value of the insurance
proceeds, it follows that the limited liability rule does not apply as
well.
One final note. Petitioner's claim that the limited liability rule and
its corresponding exception (i.e.,  where the vessel is insured) apply
here is irrelevant because petitioner was not found liable under
tort or quasi-delict. Moreover, the insurance proceeds
contemplated under the exception in the case of a lost vessel are
the insurance over the vessel and pending freightage for the
particular voyage.76 It is not the insurance in favor of the seafarers,
the proceeds of which are intended for their beneficiaries. Thus, if
ever petitioner is liable for the value of the insurance proceeds
under tort or quasi-delict,  it would be from the Marine Insurance
Policy over the vessel and not from the Personal Accident Policies
over the seafarers.
WHEREFORE, the petition is PARTLY GRANTED. The CA Decision
dated October 4, 2007 and the Resolution dated January 11, 2008
of the Court of Appeals are AFFIRMED WITH THE FOLLOWING
MODIFICATIONS:
(1) The death benefits are limited to the amount granted under the
Release of All Rights and Full Satisfaction of Claim dated December
14, 2007 executed between respondents and Top Ever Marine
Management Company Ltd., Top Ever Marine Management
Philippine Corporation, and Captain Oscar Or beta;
(2) As a solidary co-debtor, petitioner's liability to respondents
under the POEA-SEC is also extinguished by virtue of the Release of
All Rights and Full Satisfaction of Claim dated December 14, 2007;
and
(3) The last paragraph of the dispositive portion of the CA Decision
dated October 4, 2007 stating: "Nevertheless, upon payment of said
proceeds to said widows by respondent SOUTH SEA SURETY &
INSURANCE CO., INC., respondent PHIL-NIPPON CORPORATION's
liability to all the complainants is deemed extinguished ... "
is DELETED.
SO ORDERED.
G.R. No. 182864               January 12, 2015
EASTERN SHIPPING LINES, INC., Petitioner,
vs.
BPI/MS INSURANCE CORP., & MITSUI SUMITOMO INSURANCE
CO., LTD., Respondents.
DECISION
PEREZ, J.:
Before this Court is a Petition for Review on Certiorari 1 of the
Decision2 of the Second Division of the Court of Appeals in CA-G.R.
CV No. 88744 dated 31 January 2008, modifying the Decision of the
Regional Trial Court (RTC) by upholding the liability of Eastern
Shipping Lines, Inc. (ESLI) but absolving Asian Terminals, Inc. (ATI)
from liability and deleting the award of attorney's fees.
The facts gathered from the records follow:
On 29 December 2004, BPI/MS Insurance Corporation (BPI/MS)
and Mitsui Sumitomo Insurance Company Limited (Mitsui) filed a
Complaint3 before the RTC of Makati City against ESLI and ATI to
recover actual damages amounting to US$17,560.48 with legal
interest, attorney’s fees and costs of suit.
In their complaint, BPI/MS and Mitsui alleged that on 2 February
2004 at Yokohama, Japan, Sumitomo Corporation shipped on board
ESLI’s vessel M/V "Eastern Venus 22" 22 coils of various Steel
Sheet weighing 159,534 kilograms in good order and condition for
transportation to and delivery at the port of Manila, Philippines in
favor of consignee Calamba Steel Center, Inc. (Calamba Steel)
located in Saimsim, Calamba, Laguna as evidenced by a Bill of
Lading with Nos. ESLIYMA001. The declared value of the shipment
was US$83,857.59 as shown by an Invoice with Nos. KJGE-03-1228-
NT/KE3. The shipment was insured with the respondents BPI/MS
and Mitsui against all risks under Marine Policy No. 103-
GG03448834.
On 11 February 2004, the complaint alleged that the shipment
arrived at the port of Manila in an unknown condition and was
turned over to ATI for safekeeping. Upon withdrawal of the
shipment by the Calamba Steel’s representative, it was found out
that part of the shipment was damaged and was in bad order
condition such that there was a Request for Bad Order Survey. It
was found out that the damage amounted to US$4,598.85
prompting Calamba Steel to reject the damaged shipment for being
unfit for the intended purpose.
On 12 May 2004 at Kashima, Japan, Sumitomo Corporation again
shipped on board ESLI’s vessel M/V "Eastern Venus 25" 50 coils in
various Steel Sheet weighing 383,532 kilograms in good order and
condition for transportation to and delivery at the port of Manila,
Philippines in favor of the same consignee Calamba Steel
asevidenced by a Bill of Lading with Nos. ESLIKSMA002. The
declared value of the shipment was US$221,455.58 as evidenced by
Invoice Nos. KJGE-04-1327-NT/KE2. The shipment was insured
with the respondents BPI/MS and Mitsui against all risks under
Marine Policy No. 104-GG04457785.
On 21 May 2004, ESLI’s vessel withthe second shipment arrived at
the port of Manila partly damaged and in bad order. The coils
sustained further damage during the discharge from vessel to
shore until its turnover to ATI’s custody for safekeeping.
Upon withdrawal from ATI and delivery to Calamba Steel, it was
found out that the damage amounted to US$12,961.63. As it did
before, Calamba Steel rejected the damaged shipment for being
unfit for the intended purpose.
Calamba Steel attributed the damages on both shipments to ESLI as
the carrier and ATI as the arrastre operator in charge of the
handling and discharge of the coils and filed a claim against them.
When ESLI and ATI refused to pay, Calamba Steel filed an insurance
claim for the total amount of the cargo against BPI/MS and Mitsuias
cargo insurers. As a result, BPI/MS and Mitsui became subrogated
in place of and with all the rights and defenses accorded by law in
favor of Calamba Steel.
Opposing the complaint, ATI, in itsAnswer, denied the allegations
and insisted that the coils in two shipments were already damaged
upon receipt from ESLI’s vessels. It likewise insisted that it
exercised due diligence in the handling of the shipments and
invoked that in case of adverse decision, its liability should not
exceed ₱5,000.00 pursuant to Section 7.01, Article VII 4 of the
Contract for Cargo Handling Services between Philippine Ports
Authority (PPA) and ATI.5 A cross-claim was also filed against ESLI.
On its part, ESLI denied the allegations of the complainants and
averred that the damage to both shipments was incurred while the
same were in the possession and custody of ATI and/or of the
consignee or its representatives. It also filed a cross-claim against
ATI for indemnification in case of liability.6
To expedite settlement, the case was referred to mediation but it
was returned to the trial court for further proceedings due tothe
parties’ failure to resolve the legal issues as noted inthe Mediator’s
Report dated 28 June 2005.7
On 10 January 2006, the court issued a Pre-Trial Order wherein the
following stipulations wereagreed upon by the parties:
1. Parties admitted the capacity of the parties to sue and
be sued;
2. Parties likewise admitted the existence and due
execution of the Bill of Lading covering various steel
sheets in coil attached to the Complaint as Annex A;
3. Parties admitted the existence of the Invoiceissued by
Sumitomo Corporation, a true and faithful copy of which
was attached to the Complaint as Annex B;
4. Parties likewise admitted the existence of the Marine
Cargo Policy issued by the Mitsui Sumitomo Insurance
Company, Limited, copy of which was attached to the
Complaint as Annex C;
5. [ATI] admitted the existence and due execution of the
Request for Bad Order Survey dated February 13, 2004,
attached to the Complaint as Annex D;
6. Insofar as the second cause of action, [ESLI] admitted
the existence and due execution of the document [Bill of
Lading Nos. ESLIKSMA002, Invoice with Nos. KJGE-04-
1327-NT/KE2 and Marine Cargo Policy against all risks
on the second shipment] attachedto the Complaint as
Annexes E, F and G;
7. [ATI] admitted the existence of the Bill of Lading
together with the Invoices and Marine Cargo Policy. [It]
likewise admitted by [ATI] are the Turn Over Survey of
Bad Order Cargoes attached to the Complaint as Annexes
H, H-1 and J.8
The parties agreed that the procedural issue was whether there
was a valid subrogation in favor of BPI/MS and Mitsui; and that the
substantive issues were, whether the shipments suffered damages,
the cause of damage, and the entity liable for reparation of the
damages caused.9 Due to the limited factual mattersof the case, the
parties were required to present their evidence through affidavits
and documents. Upon submission of these evidence, the case was
submitted for resolution.10
BPI/MS and Mitsui, to substantiate their claims, submitted the
Affidavits of (1) Mario A. Manuel (Manuel),11 the Cargo Surveyor of
Philippine Japan Marine Surveyors and Sworn Measurers
Corporation who personally examined and conducted the surveys
on the two shipments; (2) Richatto P. Almeda,12 the General
Manager of Calamba Steel who oversaw and examined the
condition, quantity, and quality of the shipped steel coils, and who
thereafter filed formal notices and claims against ESLI and ATI; and
(3) Virgilio G. Tiangco, Jr.,13 the Marine Claims Supervisor of
BPI/MS who processed the insurance claims of Calamba Steel.
Along with the Affidavits were the Bills of Lading14 covering the
two shipments, Invoices,15 Notices of Loss of Calamba
Steel,16 Subrogation Form,17 Insurance Claims,18 Survey
Reports,  Turn Over Survey of Bad Order Cargoes20 and Request
19
for Bad Order Survey.21
ESLI, in turn, submitted the Affidavits of Captain Hermelo M.
Eduarte,22 Manager of the Operations Department of ESLI, who
monitored in coordination with ATI the discharge of the two
shipments, and Rodrigo Victoria (Rodrigo),23 the Cargo Surveyor of
R & R Industrial and Marine Services, Inc., who personally surveyed
the subject cargoes on board the vessel as well as the manner the
ATI employees discharged the coils. The documents presented
were the Bills of Lading, Secretary’s Certificate24 of PPA, granting
ATI the duty and privilege to provide arrastre and stevedoring
services at South Harbor, Port of Manila, Contract for Cargo
Handling Services,25 Damage Report26 and Turn Over Report made
by Rodrigo.27 ESLI also adopted the Survey Reports submitted by
BPI/MS and Mitsui.28
Lastly, ATI submitted the Affidavits of its Bad Order Inspector
Ramon Garcia (Garcia)29 and Claims Officer Ramiro De Vera.30 The
documents attached to the submissions were the Turn Over
Surveys of Bad Cargo Order,31 Requests for Bad Order
Survey,32 Cargo Gatepasses issued by ATI,33 Notices of Loss/Claims
of Calamba Steel34 and Contract for Cargo Handling Services.35
On 17 September 2006, RTC Makati City rendered a decision
finding both the ESLI and ATI liable for the damages sustained by
the two shipments. The dispositive portion reads: WHEREFORE,
judgment is hereby rendered in favor of [BPI/MS and Mitsui] and
against [ESLI Inc.] and [ATI], jointly and severally ordering the
latter to pay [BPI/MS and Mitsui] the following: 1. Actual damages
amounting to US$17,560.48 plus 6% legal interest per annum
commencing from the filing of this complaint, until the same is fully
paid;
2. Attorney’s fees in a sum equivalent to 20% of the
amount claimed;
3. Costs of suit.36
Aggrieved, ESLI and ATI filed their respective appeals before the
Court of Appeals on both questions of fact and law.37
Before the appellate court, ESLI argued that the trial court erred
when it found BPI/MS has the capacity to sue and when it assumed
jurisdiction over the case. It also questioned the ruling on its
liability since the Survey Reports indicated that the cause ofloss
and damage was due to the "rough handling of ATI’s stevedores
during discharge from vessel to shore and during loading operation
onto the trucks."It invoked the limitation of liability of US$500.00
per package asprovided in Commonwealth Act No. 65 or the
Carriage of Goods by Sea Act (COGSA).38 On the other hand, ATI
questioned the capacity to sue of BPI/MS and Mitsui and the award
of attorney’s fees despite its lack of justification in the body of the
decision. ATI also imputed error on the part of the trial court when
it ruled that ATI’s employees were negligent in the ruling of the
shipments. It also insisted on the applicability of the provision of
COGSA on limitation of liability.39
In its Decision,40 the Court of Appeals absolved ATI from liability
thereby modifying the decision of the trial court. The dispositive
portions reads:
WHEREFORE, the appeal of ESLI is DENIED, while that of ATI is
GRANTED. The assailed Judgment dated September 17, 2006 of
Branch 138, RTC of Makati City inCivil Case No. 05-108 is hereby
MODIFIED absolving ATI from liability and deleting the award of
attorney’s fees. The rest of the decision is affirmed.41
Before this Court, ESLI seeks the reversal of the ruling on its
liability.
At the outset, and notably, ESLI included among its arguments the
attribution of liability to ATI but it failed to implead the latter as a
party to the present petition. This non-inclusion was raised by
BPI/MS and Mitsui as an issue42 in its Comment/Opposition43 and
Memorandum:44 For reasons known only to [ESLI],it did not
implead ATI as a party respondent in this case when it could have
easily done so. Considering the nature of the arguments raised by
petitioner pointing to ATI as solely responsible for the damages
sustained by the subject shipments, it is respectfully submitted that
ATI is an indispensable party in this case. Without ATI being
impleaded, the issue of whether ATI is solely responsible for the
damages could not be determined with finality by this Honorable
Court. ATI certainly deserves to be heard on the issue but it could
not defend itself because it was not impleaded before this Court.
Perhaps, this is the reason why [ESLI] left out ATI in this case so
that it could not rebut while petitioner puts it at fault.45
ESLI in its Reply46 put the blame for the non-exclusion of ATI to
BPI/MS and Mitsui:
[BPI/MS and Mitsui] claim that herein [ESLI] did not implead [ATI]
as a party respondent in the Petition for Review on Certiorari it had
filed. Herein Petitioner submits that it is not the obligation of [ESLI]
to implead ATI as the same isalready the look out of [BPI/MS and
Mitsui]. If [BPI/MS and Mitsui] believe that ATI should be made
liable, they should have filed a Motion for Reconsideration with the
Honorable Court of Appeals. The fact that [BPI/MS and Mitsui] did
not even lift a finger to question the decision of the Honorable
Court of Appeals goes to show that [BPI/MS and Mitsui] are not
interested as to whether or not ATI is indeed liable.47
It is clear from the exchange that both [ESLI] and [BPI/MS and
Mitsui] are aware of the non-inclusion of ATI, the arrastre operator,
as a party to this review of the Decision of the Court of Appeals. By
blaming each other for the exclusion of ATI, [ESLI] and [BPI/MS
and Mitsui] impliedly agree that the absolution of ATI from liability
isfinal and beyond review. Clearly, [ESLI] is the consequential loser.
It alone must bear the proven liability for the loss of the shipment.
It cannot shift the blame to ATI, the arrastreoperator, which has
been cleared by the Court of Appeals. Neither can it argue that the
consignee should bear the loss.
Thus confined, we go to the merits of the arguments of ESLI.
First Issue: Liability of ESLI
ESLI bases of its non-liability onthe survey reports prepared by
BPI/MS and Mitsui’s witness Manuel which found that the cause of
damage was the rough handling on the shipment by the stevedores
of ATI during the discharging operations.48 However, Manuel does
not absolve ESLI of liability. The witness in fact includes ESLI in the
findings of negligence. Paragraphs 3 and 11 of the affidavit of
witness Manuel attribute fault to both ESLI and ATI.
3. The vessel M.V. "EASTERN VENUS" V 22-S carrying the said
shipment of 22 coils of various steel sheets arrived at the port of
Manila and discharged the said shipment on or about 11 February
2004 to the arrastre operator [ATI]. I personally noticed that the 22
coils were roughly handled during their discharging from the
vessel to the pier of [ATI] and even during the loading operations of
these coils from the pier to the trucks that will transport the coils to
the consignees’s warehouse. During the aforesaid operations, the
employees and forklift operators of [ESLI] and [ATI] were very
negligent in the handling of the subject cargoes.
xxxx
11. The vessel M.V. "EASTERN VENUS" V 25-S carrying the said
shipment of 50 coils of various steel sheets arrived at the port of
Manila and discharged the said shipment on or about 21 May 2004
to the arrastre operator [ATI]. I personally noticed that the 50 coils
were roughly handled during their discharging from the vessel to
the pier of [ATI] and even during the loading operations of these
coils from the pier to the trucks that will transport the coils to the
consignees’s warehouse. During the aforesaid operations, the
employees and forklift operators of [ESLI] and [ATI] were very
negligent in the handling of the subject cargoes.49 (Emphasis
supplied).
ESLI cannot rely only on parts it chooses. The entire body of
evidence should determine the liability of the parties. From the
statements of Manuel, [ESLI] was negligent, whether solely or
together with ATI.
To further press its cause, ESLI cites the affidavit of its witness
Rodrigo who stated that the cause of the damage was the rough
mishandling by ATI’s stevedores.
The affidavit of Rodrigo states that his functions as a cargo
surveyor are, (1) getting hold of a copy of the bill of lading and
cargo manifest; (2) inspection and monitoring of the cargo on-
board, during discharging and after unloading from the vessel; and
(3) making a necessary report of his findings. Thus, upon arrival at
the South Harbor of Manila of the two vessels of ESLI on 11
February 2004 and on 21 May 2004, Rodrigo immediately boarded
the vessels to inspect and monitor the unloading of the cargoes. In
both instances, it was his finding that there was mishandling on the
part of ATI’s stevedores which he reported as the cause of the
damage.50 Easily seen, however, is the absence of a crucial point in
determining liability of either or both ESLI and ATI – lack of
determination whether the cargo was in a good order condition as
described in the bills of lading at the time of his boarding. As
Rodrigo admits, it was also his duty to inspect and monitor the
cargo on-board upon arrival of the vessel. ESLI cannot invoke its
non-liability solely on the manner the cargo was discharged and
unloaded. The actual condition of the cargoes upon arrival prior to
discharge is equally important and cannot be disregarded. Proof is
needed that the cargo arrived at the port of Manila in good order
condition and remained as such prior to its handling by ATI.
Common carriers, from the nature of their business and on public
policy considerations, are bound to observe extra ordinary
diligence in the vigilance over the goods transported by them.
Subject to certain exceptions enumerated under Article 173451 of
the Civil Code, common carriers are responsible for the loss,
destruction, or deterioration of the goods. The extraordinary
responsibility of the common carrier lasts from the time the goods
are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person
who has a right to receive them.52
In maritime transportation, a bill of lading is issued by a common
carrier as a contract, receipt and symbol of the goods covered by
it.1âwphi1 If it has no notation of any defect ordamage in the goods,
it is considered as a "clean bill of lading." A clean bill of lading
constitutes prima facie evidence of the receipt by the carrier of the
goods as therein described.53
Based on the bills of lading issued, it is undisputed that ESLI
received the two shipments of coils from shipper Sumitomo
Corporation in good condition at the ports of Yokohama and
Kashima, Japan. However, upon arrival at the port of Manila, some
coils from the two shipments were partly dented and crumpled as
evidenced by the Turn Over Survey of Bad Order Cargoes No.
67982 dated 13 February 200454 and Turn Over Survey of Bad
Order Cargoes Nos. 6836355 and 6836556 both dated 24 May 2004
signed by ESLI’s representatives, a certain Tabanao and Rodrigo
together with ATI’s representative Garcia. According toTurn Over
Survey of Bad Order Cargoes No. 67982, four coils and one skid
were partly dented and crumpled prior to turnover by ESLI to ATI’s
possession while a total of eleven coils were partly dented and
crumpled prior to turnover based on Turn Over Survey Bad Order
Cargoes Nos. 68363 and 68365.
Calamba Steel requested for a re-examination of the damages
sustained by the two shipments. Based on the Requests for Bad
Order Survey Nos. 5826757 and 5825458 covering the first shipment
dated 13 and 17 February 2004, four coils were damaged prior to
turnover. The second Request for Bad Order Survey No.
5865859 dated 25 May 2004 also affirmed the earlier findings that
elevencoils on the second shipment were damaged prior to
turnover.
In Asian Terminals, Inc., v. Philam Insurance Co., Inc.,60 the Court
based its ruling on liability on the Bad Order Cargo and Turn Over
of Bad Order. The Receipt bore a notation "B.O. not yet over to ATI,"
while the Survey stated that the said steel case was not opened at
the time of survey and was accepted by the arrastre in good order.
Based on these documents, packages in the Asian Terminals, Inc.
case were found damaged while in the custody of the carrier
Westwind Shipping Corporation.
Mere proof of delivery of the goods in good order to a common
carrier and of their arrival in bad order at their destination
constitutes a prima faciecase of fault or negligence against the
carrier. If no adequate explanation is given as to how the
deterioration, loss, or destruction of the goods happened, the
transporter shall be held responsible.61 From the foregoing, the
fault is attributable to ESLI. While no longer an issue, it may be
nonetheless state that ATI was correctly absolved of liability for the
damage.
Second Issue: Limitation of Liability
ESLI assigns as error the appellate court’s finding and reasoning
that the package limitation under the COGSA62 is inapplicable even
if the bills of lading covering the shipments only made reference to
the corresponding invoices. Noticeably, the invoices specified
among others the weight, quantity, description and value of the
cargoes, and bore the notation "Freight Prepaid" and "As
Arranged."63 ESLI argues that the value of the cargoes was not
incorporated in the bills of lading64 and that there was no evidence
that the shipper had presented to the carrier in writing prior to the
loading of the actual value of the cargo, and, that there was a no
payment of corresponding freight.65 Finally, despite the fact that
ESLI admits the existence of the invoices, it denies any knowledge
either of the value declared or of any information contained
therein.66
According to the New Civil Code, the law of the country to which
the goods are to be transported shall govern the liability of the
common carrier for their loss, destruction or deterioration.67 The
Code takes precedence as the primary law over the rights and
obligations of common carriers with the Code of Commerce and
COGSA applying suppletorily.68
The New Civil Code provides that a stipulation limiting a common
carrier’s liability to the value of the goods appearing in the bill of
lading is binding, unless the shipper or owner declares a greater
value.69 In addition, a contract fixing the sum that may be recovered
by the owner or shipper for the loss, destruction, or deterioration
of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon.70
COGSA, on the other hand, provides under Section 4, Subsection 5
that an amount recoverable in case ofloss or damage shall not
exceed US$500.00 per package or per customary freight unless the
nature and value of such goods have been declared by the shipper
before shipment and inserted in the bill of lading.
In line with these maritime law provisions, paragraph 13 of bills of
lading issued by ESLI to the shipper specifically provides a similar
restriction:
The value of the goods, in calculating and adjusting any claims for
which the Carrier may be liable shall, to avoid uncertainties and
difficulties in fixing value, be deemed to the invoice value of the
goods plus ocean freight and insurance, if paid, Irrespective of
whether any other value is greater or less, and any partial loss or
damage shall be adjusted pro rataon the basis of such value;
provided, however, that neither the Carrier nor the ship shall in
any event be or become liable for any loss, non-delivery or
misdelivery of or damage or delay to, or in connection with the
custody or transportation of the goods in an amount exceeding
$500.00 per package lawful money of the United States, or in case
of goods not shipped in packages, per customary freight unit,
unless the nature of the goods and a valuation higher than $500.00
is declared in writing by the shipper on delivery to the Carrier and
inserted in the bill of lading and extra freight is paid therein as
required by applicable tariffs to obtain the benefit of such higher
valuation. In which case even if the actual value of the goods per
package orunit exceeds such declared value, the value shall
nevertheless be deemed to be the declared value and any Carrier’s
liability shall not exceed such declared value and any partial loss or
damage shall be adjusted pro-rata on the basis thereof. The Carrier
shall not be liable for any loss or profit or any consequential or
special damage and shall have the option of replacing any lost
goods and replacing o reconditioning any damage goods. No oral
declaration or agreement shall be evidence of a value different
from that provided therein.71
xxxx
Accordingly, the issue whether or not ESLI has limited liability as a
carrier is determined by either absence or presence of proof that
the nature and value of the goods have been declared by Sumitomo
Corporation and inserted in the bills of lading.
ESLI contends that the invoices specifying the weight, quantity,
description and value of the cargo in reference to the bills of lading
do not prove the fact that the shipper complied with the
requirements mandated by the COGSA. It contends that there must
be an insertion of this declaration in the bill of lading itself to fall
outside the statutory limitation of liability.
ESLI asserts that the appellate court erred when it ruled that there
was compliance with the declaration requirement even if the value
of the shipment and fact of payment were indicated on the invoice
and not on the bill of lading itself.
There is no question about the declaration of the nature, weight
and description of the goods on the first bill of lading.
The bills of lading represent the formal expression of the parties’
rights, duties and obligations. It is the best evidence of the intention
of the parties which is to be deciphered from the language used in
the contract, not from the unilateral post facto assertions of one of
the parties, or of third parties who are strangers to the
contract.72 Thus, when the terms of an agreement have been
reduced to writing, it is deemed to contain all the terms agreed
upon and there can be, between the parties and their successors in
interest, no evidence of such terms other than the contents of the
written agreement.73
As to the non-declaration of the value of the goods on the second
bill of lading, we see no error on the part of the appellate court
when it ruled that there was a compliance of the requirement
provided by COGSA. The declaration requirement does not require
that all the details must be written down on the very bill of lading
itself. It must be emphasized that all the needed details are in the
invoice, which "contains the itemized list of goods shipped to a
buyer, stating quantities, prices, shipping charges," and other
details which may contain numerous sheets.74 Compliance can be
attained by incorporating the invoice, by way of reference, to the
bill of lading provided that the former containing the description of
the nature, value and/or payment of freight charges isas in this
case duly admitted as evidence.
In Unsworth Transport International(Phils.), Inc. v. Court of
Appeals,75 the Court held that the insertion of an invoice number
does not in itself sufficiently and convincingly show that petitioner
had knowledge of the value of the cargo. However, the same
interpretation does not squarely apply if the carrier had been
advised of the value of the goods as evidenced by the invoice and
payment of corresponding freight charges. It would be unfair for
ESLI to invoke the limitation under COGSA when the shipper in fact
paid the freight charges based on the value of the goods. In Adams
Express Company v. Croninger, 76 it was said: "Neither is it
conformable to plain principles of justice that a shipper may
understate the value of his property for the purpose of reducing the
rate, and then recover a larger value in case of loss. Nor does a
limitation based upon an agreed value for the purpose of adjusting
the rate conflict with any sound principle of public policy."
Conversely, but for the same reason, it is unjust for ESLI to invoke
the limitation when it is informed that the shipper paid the freight
charges corresponding to the value of the goods.
Also, ESLI admitted the existence and due execution of the Bills of
Lading and the Invoice containing the nature and value of the
goods on the second shipment. As written in the Pre-Trial
Order,77 the parties, including ESLI, admitted the existence and due
execution of the two Bills of Lading78 together with the Invoice on
the second shipment with Nos. KJGE-04-1327-NT/KE279 dated 12
May 2004. On the first shipment, ESLI admitted the existence of the
Invoice with Nos. KJGE-031228-NT/KE380 dated 2 February 2004.
The effect of admission of the genuineness and due execution of a
document means that the party whose signature it bears admits
that he voluntarily signed the document or itwas signed by another
for him and with his authority.81
A review of the bill of ladings and invoice on the second shipment
indicates that the shipper declared the nature and value of the
goods with the corresponding payment of the freight on the bills of
lading. Further, under the caption "description of packages and
goods," it states that the description of the goods to be transported
as "various steel sheet in coil" with a gross weight of 383,532
kilograms (89.510 M3).On the other hand, the amount of the goods
is referred in the invoice, the due execution and genuineness of
which has already been admitted by ESLI, is US$186,906.35 as
freight on board with payment of ocean freight of US$32,736.06
and insurance premium of US$1,813.17. From the foregoing, we
rule that the non-limitation of liability applies in the present case.
We likewise accord the same binding effect on the contents of the
invoice on the first shipment.1âwphi1 ESLI contends that what was
admitted and written on the pre-trial order was only the existence
of the first shipment’ invoice but not its contents and due
execution. It invokes admission of existence but renounces any
knowledge of the contents written on it.82
Judicial admissions are legally binding on the party making the
admissions. Pre-trial admission in civil cases is one of the instances
of judicial admissions explicitly provided for under Section 7,Rule
18 of the Rules of Court, which mandates that the contents of the
pre-trial order shall control the subsequent course of the action,
thereby, defining and limiting the issues to be tried. In Bayas v.
Sandiganbayan,83 this Court emphasized that:
Once the stipulations are reduced into writing and signed by the
parties and their counsels, they become binding on the parties who
made them. They become judicial admissions of the fact or facts
stipulated. Even if placed at a disadvantageous position, a party
may not be allowed to rescind them unilaterally, it must assume the
consequences of the disadvantage.84
Moreover, in Alfelor v. Halasan,85 this Court declared that:
A party who judicially admits a fact cannot later challenge that fact
as judicial admissions are a waiver of proof; production of evidence
is dispensed with. A judicial admission also removes an admitted
fact from the field of controversy. Consequently, an admission
made in the pleadings cannot be controverted by the party making
such admission and are conclusive as to such party, and all proofs
to the contrary or inconsistent there with should be ignored,
whether objection is interposed by the party or not. The
allegations, statements or admissions contained in a pleading are
conclusive as against the pleader. A party cannot subsequently take
a position contrary of or inconsistent with what was
pleaded.86 (Citations omitted)
The admission having been made in a stipulation of facts at pre-
trial by the parties, it must be treated as a judicial admission. Under
Section 4, of Rule 129 of the Rules of Court, a judicial admission
requires no proof.87
It is inconceivable that a shipping company with maritime
experience and resource like the ESLI will admit the existence of a
maritime document like an invoice even if it has no knowledge of
its contents or without having any copy thereof.
ESLI also asserts that the notation "Freight Prepaid" and "As
Arranged," does not prove that there was an actual declaration
made in writing of the payment of freight as required by COGSA.
ESLI did not as it could not deny payment of freight in the amount
indicated in the documents. Indeed, the earlier discussions on
ESLI's admission of the existence and due execution of the invoices,
cover and disprove the argument regarding actual declaration of
payment. The bills of lading bore a notation on the manner of
payment which was "Freight Prepaid" and "As Arranged" while the
invoices indicated the amount exactly paid by the shipper to ESLI.
WHEREFORE, we DENY the Petition for Review on Certiorari. The
Decision dated 31 January 2008 and Resolution dated 5 May 2008
of the Second Division of the Court of Appeals in CA-G.R. CV. No.
88744 are hereby AFFIRMED.
SO ORDERED.
G.R. No. 188118, November 23, 2015
FEDERAL PHOENIX ASSURANCE CO.,
LTD., Petitioner, v. FORTUNE SEA CARRIER, INC., Respondent.
DECISION
REYES, J.:
This is a Petition for Review on Certiorari1 under Rule 45 of the
Rules of Court assailing the Decision2 dated February 10, 2009 and
Resolution3 dated May 12, 2009 of the Court of Appeals (CA) in CA-
G.R. CV No. 88607. The assailed decision reversed and set aside the
Decision4 dated May 4, 2006 and the Order5 dated October 26, 2006
of the Regional Trial Court (RTC) of Makati City, Branch 143 finding
respondent Fortune Sea Carrier, Inc. (Fortune Sea) liable to pay
P260,000.00 as actual damages, attorney's fees and cost of suit.
On March 9, 1994, Fortune Sea agreed to lease its vessel M/V Ricky
Rey to Northern Mindanao Transport Co., Inc. (Northern
Transport). The Time Charter Party agreement executed by the
parties provides that the vessel shall be leased to Northern
Transport for 90 days to carry bags of cement to different ports of
destination. Later on, the parties extended the period of lease for
another 90 days.6
Sometime in June 1994, Northern Transport ordered 2,069 bales of
abaca fibers to be shipped on board M/V Ricky Rey by shipper
Manila Hemp Trading Corporation, for delivery to consignee
Newtech Pulp Inc. (Newtech) in Iligan City. The shipment was
covered by Bill of Lading No. 1 and was insured by petitioner
Federal Phoenix Assurance Co.,. Ltd. (Federal Phoenix).7
Upon arrival of M/V Ricky Rey at the Iligan City port on June 16,
1994, the stevedores started to discharge the abaca shipment the
following clay. At about 3:00 p.m., however, on June 18, 1994, the
stevedores noticed smoke coming out of the cargo haul where the
bales of abaca where located. Immediately, the lire was put off" by
the Iligan City Fire Department. Upon investigation, it was
discovered that 60 bales of abaca were damaged.8
As a result of the losses, Newtech filed an insurance claim for
P260,000.00 with Federal Phoenix. After evaluation, Federal
Phoenix paid Newtech P162,419.25 for the losses it incurred due to
the damaged and undelivered bales of abaca. Upon payment.
Federal Phoenix was subrogated to the rights of Newtech and
pursued its claim against Fortune Sea. Despite several demands to
Fortune Sea, however. Federal Phoenix's claims were not settled.
As a result, Federal Phoenix filed a Complaint 9 for Sum of Money
against Fortune Sea before the RTC of Makati.10
For its defense, Fortune Sea insisted that it was acting as a private
carrier at the time the incident occurred. It alleged that the Time
Charter Party agreement executed by the parties expressly
provided that M/V Ricky Rey shall be under the orders and
complete control of Northern Transport.11
Ruling of the RTC
On May 4, 2006, the RTC rendered a Decision in favor of Federal
Phoenix and ordered Fortune Sea to pay the amount of
P260,000.00 as actual damages, attorney's fees and cost of suit.
Fortune Sea filed a Motion for Reconsideration 12 but was denied in
an Order dated October 26, 2006.
Aggrieved, Fortune Sea appealed to the CA.
Ruling of the CA
On February 10, 2009, the CA issued a Decision reversing and
setting aside the Decision dated May 4, 2006 of the RTC and
ordered the dismissal of the complaint for sum of money filed by
Federal Phoenix against Fortune Sea for lack of merit. According to
the CA, although the agreement between Fortune Sea and Northern
Transport was denominated as Time Charter Party, it found
compelling reasons to hold that the contract was one of bareboat or
demise. Hence, Federal Phoenix filed this instant petition.
Ruling of the Court
The main issue in this case is whether or not the CA erred in
declaring that Fortune Sea was converted into a private carrier by
virtue of the charter party agreement it entered into with Northern
Transport.13
Admittedly, Fortune Sea is a corporation engaged in the business of
transporting cargo by water and for compensation, offering its
services to the public. As such, it is without a doubt, a common
carrier.
Fortune Sea, however, entered into a time-charter with Northern
Transport. Now, had the time-charter converted Fortune Sea into a
private carrier?
This Court rules in the affirmative.
Time and again, this Court have ruled that "[i]n determining the
nature of a contract, courts are not bound by the title or name
given by the parties. The decisive factor in evaluating an agreement
is the intention of the parties, as shown, not necessarily by the
terminology used in the contract but by their conduct, words,
actions and deeds prior to, during and immediately alter executing
the agreement."14
As correctly observed by the CA, the Time Charter Party agreement
executed by Fortune Sea and Northern Transport clearly shows
that the charter includes both the vessel and its crew thereby
making Northern Transport the owner pro hac vice of M/V Ricky
Rey during the whole period of the voyage, to
wit:chanRoblesvirtualLawlibrary
A perspicacious scrutiny of the Time Charter Party disclosed the
following provisions evincing that Northern Transport became the
owner pro hac vice  of M/V Ricky Rey during the whole period of
the voyage-—
"VI. OTHER TERMS AND
CONDITIONS:chanRoblesvirtualLawlibrary
F. Upon delivery of the vessel(s) and during the period of the
charter, SECOND PARTY (Northern Transport) assumes
operational control for the dispatch and direction of voyage of the
vessel(s).
H. The Master to prosecute all voyages with the utmost despatch
and to render customary assistance with the vessel(s) crew. The
Master to be under the orders of the SECOND PARTY (Northern
Transport) as regards employment of the other arrangements.
N. The SECOND PARTY (Northern Transport) to furnish MASTER
with all instructions and sailing directions and the Master and
Engineer to keep full and correct logs accessible to the SECOND
PARTY (Northern Transport) or their Supercargo.
To Our mind, the Time Charier Part[y] unequivocally established
that appellant Fortune Sea had completely and exclusively
relinquished possession, command and navigation of M/V Ricky
Rey to Northern Transport.15 (Citation omitted)cralawlawlibrary
Conformably, M/V Ricky Rey was converted into a private carrier
notwithstanding the existence of the Time Charter Party agreement
with Northern Transport since the said agreement was not limited
to the ship only but extends even to the control of its crew. Despite
the denomination as Time Charter by the parties, their agreement
undoubtedly reflected that their intention was to enter into a
Bareboat Charter Agreement.
Moreover, the CA likewise correctly ruled that the testimony of
Captain Alfredo Canon (Capt. Canon) of M/V Ricky Rey confirmed
that when the whole vessel was leased to Northern Transport, the
entire command and control over its navigation was likewise
transferred to it, to wit:chanRoblesvirtualLawlibrary
Q: Mr. Witness, you said awhile ago that as far as you know, the
purpose is to transport cement, now, you also mentioned that
in two or three instances goods other than cement, abaca and
fertilizer were transported during your watch. Now, you
mentioned that this was [sic] happened sometime in 1994, my
question was [sic], why did you transport abaca?
A I have [sic] received an order from [Northern Transport]
through radio and through its representative which [sic] was
on board our super cargo boat to proceed to Natu to load
abaca fiber and bring it to the port of Iligan, sir.
Q You were ordered by [Northern Transport]?
A Yes, sir, through its representative which [sic] was on board
super cargo to pick up abaca sir at Natu point [sic], Camarines
Sur.
Cour
t:
Q Was the order done verbally or in writing?
A Verbally, aside from that Ma'am, we received written through
radio.
Q Let us clarify that, was it done verbally or in writing?
A Two ways Ma'am, verbally and in writing Ma'am.
Q And you received the verbal order yourself?
A Ma'am yes.
Q How about the written order?
A The radio operator received the order Ma'am and informed
the super cargo through its representative of the [Northern
Transport] Ma'am.
xxx
x
Q After being ordered by [Northern Transport], what did you
do?
A Sir, I told the super cargo that the abaca is a combustible
cargo, sir.
Q So, what was its reaction to your statement?
A He told me just to follow orders. That was the order 'of their
company, sir.
Q Mr. Witness, what do you think is the basis of the [Northern
Transport] for giving you such an order?
A I think sir, it was the chartered party sir.16
xxx
x
Q Mr. Witness, what happened next after the order was given to
you?
A We proceeded to the Natu Port to load abaca fiber sir and
bring it to the port of Iligan sir. Natu Port sir is under the
Camarines Sur province sir.
Q Mr. Witness, upon reaching the port of Iligan as you
mentioned, do you recall any unusual incident that happened?
A Yes, [s]ir.
Q What was this incident?
A A fire broke while unloading the cargo at the port of Iligan, sir.
Q Which portion of the port did the fire occur?
A At the cargo haul [sic] sir.
Q Is that part of the ship?
A Yes, sir.
Q So, what happened when the lire broke out?
A We tried our best sir to put out the fire. With the help of the
Iligan City Firemen, we put out the fire in about twenty
minutes sir.
Q During the twenty minutes, was [sic] there any damaged
incurred by the ship or any to its contents?
A Only the abaca liber sir. Some abaca fibers were partially
burned.
Q As far as you know Mr Witness, what was the caused [sic] of
this fire?
A The caused [sic] of the lire was the cigarette butts improperly
dispatched by one of the stevedores unloading the cargo sir.
Q Are these stevedores under your employment?
A No, sir.
[A] No, sir. It was under the stevedoring company, sir.
Q Not [Fortune Sea]?
A Yes, sir.17
The above-cited testimonies of Capt. Canon undoubtedly show that
Northern Transport eflectively subjected not only the ship but
including its crew under its own exclusive control.
Moreover, although the master and crew of the vessel were those
of the shipowner, records show that at the time of the execution of
the charter party, Fortune Sea had completely relinquished
possession, command, and navigation of M/V Ricky Rey to
Northern Transport.
As such, the master and all the crew of the ship were all made
subject to the direct control and supervision of the charterer. In
fact, the instructions on the voyage and other relative directions or
orders were handed out by Northern Transport. Thus, the CA
correctly ruled that the nature of the vessel's charter is one of
bareboat or demise charter.
WHEREFORE, the Court hereby AFFIRMS the Decision of the Court
of Appeals dated February 10, 2009 in CA-G.R. CV No. 88607
finding the Time Charter Party agreement entered into by Fortune
Sea Carrier, Inc. and Northern Mindanao Transport Co., Inc. as in
reality a Bareboat Charter which effectively converted the subject
M/V Ricky Rey as a private carrier. As such, this Court
likewise AFFIRMS the decision of the CA in dismissing the
Complaint for Sum of Money filed by petitioner Federal Phoenix
Assurance Co., Ltd. for lack of merit.
SO ORDERED.
G.R. No. 195661 March 11, 2015
UNKNOWN OWNER OF THE VESSEL MN CHINA JOY, SAMSUN
SHIPPING LTD., and INTER-ASIA MARINE TRANSPORT,
INC., Petitioners,
vs.
ASIAN TERMINALS, INC., Respondent.
RESOLUTION
REYES, J.:
The instant petition for review on certiorari 1 assails the
Decision2 dated November 10, 2010 and Resolution3 dated
February 14, 2011 of the Court of Appeals (CA) in CA-G.R. CV No.
93164. The CA reversed and set aside the Decision4 dated January
30, 2009 of the Regional Trial Court (RTC) of Manila, Branch 51, in
Civil Case No. 99-93067, which dismissed for insufficiency of
evidence the complaint for damages5 filed by herein respondent
Asian Terminals, Inc. (ATI) against Unknown Owner of the Vessel
MJV China Joy (shipowner),6 Samsun Shipping Ltd. (Samsun) and
Inter-Asia Marine Transport, Inc. (Inter-Asia) (petitioners).
The CA aptly summed up the facts of the case as follows:
On 25 January 1997, the cargo ship M/V "China Joy" (the Vessel)
arrived at the Mariveles Grain Terminal Wharf, operated by
plaintiff [ATI].
According to the Berth Term Grain Bills of Lading, the Vessel
carried soybean meal that had been shipped by ContiQuincyBunge
L.L.C[.] (ContiQuincyBunge), an exporter of soybean meal and
related products, in favor of several consignees in the Philippines.
Under the Charter Party Agreement over M/V "China Joy,"
ContiQuincyBunge represented itself as the Charterer of the Vessel,
with San Miguel Foods, Inc. as Co-Charterer, and defendant
[Samsun] represented itself as the Agent of the Shipowners.
Samsun is a foreign corporation not doing business in the
Philippines.
On 3 February 1997[,] ATI used its Siwertell Unloader No. 2 to
unload the soybean meal from the Vessel’s Hold No. 2. The
Siwertell Unloader is a pneumatic vacubator that uses compressed
gas to vertically move heavy bulk grain from within the hatch of the
ship in order to unload it off the ship.
The unloading operations were suddenly halted when the head of
Unloader No. 2 hit a flat low-carbon or "mild" steel bar measuring
around 8 to 10 inches in length, 4 inches in width, and 1 ¼ inch in
thickness that was in the middle of the mass of soybean meal. The
flat steel bar lodged itself between the vertical screws of Unloader
No. 2, causing portions of screw numbers 2 and 3 to crack and be
sheared off under the torsional load.
According to the quotation of BMH Marine AB Sweden, the sole
manufacturer of Siwertell unloaders, the replacement cost of each
screw is US$12,395.00 or US$24,790.00 for the 2 screws plus
freight. The labor cost to remove and re-assemble the screws is
estimated at US$2,000.00.
On 4 February 1997, ATI sent a Note of Protest to the Master of the
Vessel for the damages sustained by its unloading equipment as a
result of encountering the flat steel bar among the soybean meal.
However, the Vessel’s Master wrote a note on the Protest stating
that it is not responsible for the damage because the metal piece
came from the cargo and not from the vessel itself.
On 5 March 1997, ATI sent a claim to defendant [Inter-Asia] for the
amount of US$37,185.00 plus US$2,000.00 labor cost representing
the damages sustained by its unloading equipment.
Inter-Asia rejected ATI’s claim for the alleged reason that it is not
the Shipowner’s Agent. Inter-Asia informed ATI that its principal is
Samsun. Moreover, according to Inter-Asia, the owner of the Vessel
is Trans-Pacific Shipping Co., c/o Lasco Shipping Company. Inter-
Asia, however, offered to relay ATI’s claim to Trans-Pacific through
Samsun.
As previously noted, the Charter Party Agreement states Samsun to
be the Agent of the Shipowners, but since Samsun is a foreign
corporation not licensed to do business in the Philippines, it
transacted its business through Inter-Asia. Hence, Inter-Asia is the
Agent of the Agent of the Shipowners.
When negotiations for settlement failed, ATI filed the instant
Complaint for Damages against Samsun, Inter-Asia and the
"Unknown Owner of the Vessel M/V ‘China Joy’" on 9 March 1999.
In the joint Answer, Inter-Asia reiterated that it is not the Agent of
the Shipowners.
Defendants further averred that the soybean meal was shipped on
board the M/V "China Joy" under a Free-In-and-Out-Stowed-and-
Trimmed (FIOST) Clause, which supposedly means that the
Shipper/Charterer itself (ContiQuincyBunge LLC) loaded the cargo
on board the Vessel, and the latter and her complement had no
participation therein except to provide the use of the Vessel’s gear.
Similarly, under the FIOST clause, the discharge of the cargo was to
be done by the consignees’ designated personnel without any
participation of the Vessel and her complement.
Defendants argued that since the metal foreign object was found in
the middle of the cargo, it could not have come from the bottom of
the hatch because the hatch had been inspected and found clean
prior to loading. Defendants further averred that neither could the
metal bar have been part of the Vessel that had broken off and
fallen into the hatch because tests conducted on the metal piece
revealed that said metal bar was not part of the Vessel.
Defendants concluded that the metal bar could only have been
already co-mingled with the soybean meal upon loading by
ContiQuincyBunge at loadport, and, therefore, defendants are not
liable for the damages sustained by the unloader of ATI. 7 (Citations
omitted)
Rulings of the RTC and CA
On January 30, 2009, the RTC rendered a Decision8 dismissing ATI’s
complaint for insufficiency of evidence. The RTC explained that
while the damage to ATI’s Siwertell Unloader No. 2 was proven,
"[t]he Court is at a quandary as to who caused the piece of metal to
[co-mingle] with the shipment."9
ATI thereafter filed an appeal,10 which the CA granted through the
herein assailed decision, the dispositive portion of which partially
states:
WHEREFORE, the appeal is GRANTED, x x x. Defendants- appellees
are found jointly and severally liable to [ATI] for the amount of
US$30,300.00 with interest thereon at 6% per annum from the
filing of the Complaint on 9 March 1999 until the judgment
becomes final and executory. Thereafter, an interest rate of 12%
per annum shall be imposed until the amount is fully and actually
paid.
SO ORDERED.11
The CA explained its ruling, viz:
As a rule of evidence, the doctrine of res ipsa loquitur is peculiar to
the law of negligence which recognizes that prima facie negligence
may be established without direct proof and furnishes a substitute
for specific proof of negligence.
xxxx
We find the application of the doctrine of res ipsa loquitur to be
appropriate in the case at bar.
First. Since the cargo to be unloaded was free-flowing soybean
meal in bulk, ATI correctly used a pneumatic vacubator unloader to
extract the soybean meal from the holds. Under normal unloading
procedures of bulk grain, it is not expected that a metal foreign
object would be among the grain to be unloaded. x x x.
Such an accident does not occur in the ordinary course of things,
unless the loading of the soybean meal at loadport was
mismanaged in some way that allowed a metal foreign object to be
co-mingled with the soybean meal cargo.
Second. The damage to the vertical screws of ATI’s unloader was
caused by the presence of the metal bar among the soybean meal in
Hold No. 2 of the ship: an instrumentality within the exclusive
control of the shipowner.
x x x According to defendants, "the vessel and her complement had
no participation in the loading and discharge of said bulk cargo
except to provide use of the vessel’s gear."
Defendants’argument is neither accurate nor meritorious. In
the first place, the terms of the Charter Party in this case was not
Free-In-and-Out-Stowed-and-Trimmed [FIOST] but Free-In-and-
Spout- Trimmed-and-Free-Out [FISTFO].
xxxx
x x x [I]t appears that the FIOST clause in a Charter Party
Agreement speaks of who is to bear the cost or expense of loading,
spout trimming and unloading the cargo. "Free In and Out" means
that the shipowner is free from such expenses. This becomes
clearer when the
FIOST clause is stipulated as an adjunct to the terms of payment of
the freight rate.
xxxx
Being a provision for the apportionment of expense (as an
exclusion from the rate of freight to be paid), the interpretation of
the FIOST clause should not be extended to mean an
apportionment of liability, unless specified in clear and
unambiguous terms.
While there are instances where a Charter Party Agreement clearly
states that the Charterer will be liable to third parties for damages
caused by its cargo (as in the case of spills of petroleum oil cargo,
or of damage to third parties caused by toxic cargo), there is no
such provision in this case. Therefore, liability or non-liability for
such damage cannot be presumed from the FIOST clause alone, and
the Charter Party Agreement must be closely scrutinized for the
parties’ intention on liability.
Clause 22 of the Charter Party Agreement states:
"At loadport, the stevedores[,] although arranged by charterers,
shippers, or their agents[, are] to be under the direction and
control of the Master. All claims for damage allegedly caused by
stevedores [are] to be settled between stevedores and Owners.
Charterers shall render assistance to Owners to settle such damage
in case of need."
x x x Clause 22 clearly states that loading shall be done under the
direction and control of the Master. Hence, if the metal bar that
damaged ATI’s unloader was inadvertently mixed into the soybean
meal during loading, by express provision of the Charter Party
Agreement, the cost of the damage should be borne by the
shipowner because the loading was done under the supervision
and control of the Master of the Vessel.
Hence, not only did defendants have presumed exclusive control of
the Vessel during the loading of the soybean meal by reason of
them being the owners or agents of the owners thereof, they also
had actual exclusive control thereof by express stipulation in the
Charter Party Agreement that the loading of the cargo shall be
under the direction and control of the Master of the Vessel.
This is as it should be, considering that the charter in this case is a
contract of affreightment by which the owner of a ship lets the
whole or part of her to a merchant or other person for the
conveyance of goods, on a particular voyage, in consideration of the
payment of freight. The Supreme Court has held that if the charter
is a contract of affreightment, the rights and the responsibilities of
ownership rest on the owner. The charterer is free from liability to
third persons in respect of the ship.
Third. There is neither allegation nor evidence in the record that
ATI’s negligence contributed to the damage of its unloader.
All 3 requisites of res ipsa loquitur being present, the presumption
or inference arises that defendants’ negligence was the proximate
cause of the damage to ATI’s unloader. The burden of evidence
shifted to defendants to prove otherwise. Th[e] defendants failed to
do so.
Defendants’ testimonial evidence consisted of the sole testimony of
the former Operations Manager of Inter-Asia, who x x x on cross-
examination, x x x admitted that he was not present at the loading
of the cargo and, therefore, did not actually see that the soybean
meal was free of any foreign metal object.
Defendants’ evidence, which heavily relies on (1) their erroneous
interpretation of the FIOST clause in the Charter Party Agreement;
(2) the Master’s unsupported allegation written on the Note of
Protest that the metal bar did not come from the vessel; and (3)
their witness’ dubious interpretation that the notation "loaded
clean" on the Berth Term[ ]Grain Bills of Lading means that the
soybean meal had no foreign material included therein, does not
present a satisfactory answer to the question:
How did the metal bar get co-mingled with the soybean meal, and
what did the Master of the Vessel do to prevent such an
occurrence? x x x.
By their failure to explain the circumstances that attended the
accident, when knowledge of such circumstances is accessible only
to them, defendants failed to overcome the prima facie
presumption that the accident arose from or was caused by their
negligence or want of care.
The res ipsa loquitur doctrine is based in part upon the theory that
the defendant in charge of the instrumentality which causes the
injury either knows the cause of the accident or has the best
opportunity of ascertaining it and that the plaintiff has no such
knowledge, and therefore is compelled to allege negligence in
general terms and to rely upon the proof of the happening of the
accident in order to establish negligence. x x x.
xxxx
The prima facie evidence of defendants’ negligence, being
unexplained and uncontroverted, is sufficient to maintain the
proposition affirmed. Hence, the negligence of the Master of the
Vessel is conclusively presumed to be the proximate cause of the
damage sustained by ATI’s unloader. Moreover, since the Master’s
liability is ultimately that of the shipowner because he is the
representative of the shipowner, the shipowner and its agents are
solidarily liable to pay ATI the amount of damages actually proved.
Articles 587 and 590 under Book III of the Code of Commerce
provide for the liability of the shipowner and its agents for acts of
the Master or Captain, as follows:
Art. 587. The ship agent shall also be civilly liable for the
indemnities in favor of third persons which may arise from the
conduct of the captain in the care of the goods which he loaded on
the vessel; but he may exempt himself therefrom by abandoning
the vessel with all her equipment and the freight it may have
earned during the voyage.
Art. 590. The co-owners of the vessel shall be civilly liable in the
proportion of their interests in the common fund for the results of
the acts of the captain referred to in Art. 587. 12 (Citations omitted,
italics and emphasis in the original, and underscoring ours)
Anent the amount of the herein petitioners’ solidary liability, the
CA found that only US$30,300.00 of ATI’s claim is supported by
evidence. The quotation submitted by the manufacturer of
Siwertell unloaders indicated that (a) the replacement cost for the
two damaged screws is US$24,790.00,
(b) freight cost is US$3,510.00, and (c) labor cost in removing and
re-assembling the screws is US$2,000.00.13
The CA, however, found no grounds to award attorney’s fees in
ATI’s favor lest it be "tantamount to imposing a premium on one’s
right to litigate."14
The herein petitioners filed a motion for reconsideration before the
CA, which denied the same through the Resolution issued on
February 14, 2011.
Issues
The instant petition raises the questions of whether or not the CA
erred in (a) applying the doctrine of res ipsa loquitur, and (b)
rejecting the argument that "the petitioners had no participation in
the loading and discharge of the bulk cargo except to provide use of
the vessel’s gear."15
In support thereof, the petitioners emphasize that the foreign metal
object was found in the middle of the cargo. Hence, it is logical to
conclude that the metal came in with the cargo and could not have
fallen off from some appurtenance of the vessel before or after
loading.16 The petitioners likewise claim that because of the Free-
In-and-Out Clause under which the cargo was carried, the charterer
chose who were to effect the loading, unloading and discharge of
the goods, which tasks were performed without the participation of
the vessel and its complement.17 Besides, notwithstanding Clause
22 of the Charter Party Agreement, the Master of the Vessel’s
control is figurative and pertains merely to the maintenance of the
vessel’s seaworthiness, and not to acts of covert negligence which
could have been committed without even the charterer’s own
knowledge.18 Further, while it is true that in a contract of
affreightment, the charterer is free from liability to third persons in
respect of the ship, in the instant petition, the offending factor
which caused the damage was not the vessel, but the cargo itself,
thus, the liability should instead rest upon the cargo owner, who
was not even impleaded as a party to the case. 19 The doctrine of res
ipsa loquitur hence finds application herein but in support of the
petitioners’ lack of culpability since they possessed neither the
knowledge nor the opportunity of ascertaining the presence of the
foreign metal object lodged in the middle of the soybean meal
cargo.20
In its Comment,21 ATI contends that "the law does not distinguish
between ‘covert’ and ‘evident’ negligence in determining whether
the doctrine of res ipsa loquitur applies." 22 An unusual event
occurred because proper care was not observed. The event took
place in Hold No. 2 of M/V China Joy, which was within the
shipowner’s exclusive control. There is likewise no evidence of
ATI’s negligence, which could have contributed to the damage of its
own unloader. Besides, ATI did not witness the loading of the
soybean meal cargo into M/V China Joy at the Port of New Orleans,
United States of America. Hence, ATI cannot furnish direct evidence
on whether or not the hold or hatch containing the cargo was
inspected and found clean prior to loading, and sealed thereafter.
ATI also asserts that the petitioners presented no evidence
conclusively proving that the foreign metal object was indeed in
the middle and not at the top or bottom of the soybean meal cargo.
Moreover, the petitioners’ only witness, Alejandro Gilhang, the
former Operations Manager of Inter-Asia, admitted that he was not
present during the loading, thus, he could not have seen if the cargo
was free of any foreign metal object.23
ATI likewise points out that the petitioners have not explicitly
quoted in verbatim any provision in the Charter Party Agreement,
which the latter invoke to vaguely argue that the loading of the
cargo pertains exclusively to the charterer. Therefore, the
petitioners have nary a legal basis for their assertion that the
shipowner has no liability insofar as the loading operations are
concerned. Besides, even if such provision in fact exists, ATI is not
privy to the Charter Party Agreement.24
Ruling of the Court
The Court agrees with the CA that the petitioners are liable to ATI
for the damage sustained by the latter’s unloader. However, the
Court finds the petitioners’ liability to be based on quasi-delict and
not on a contract of carriage. The Court likewise deems it proper to
modify the rate of interests on the amount of damages imposed by
the CA upon the petitioners.
The Court notes that the shipowner and shipowner’s agent,
Samsun, are all juridical entities not registered and not doing
business in the Philippines. It was the charterer’s agent, Inter-Asia,
a duly-registered domestic corporation, which had filed the instant
petition for itself and on behalf of the shipowner and Samsun. 25 In
the course of the proceedings too, none of the parties had raised
issues anent the validity of the service of summons and the courts’
acquisition of jurisdiction over the persons of the petitioners.
The petitioners present two issues for the Court’s resolution, to
wit:
(a)the applicability of the doctrine of res ipsa loquitur in
the case at bar; and
(b)who participated and should thus assume liability for
the loading of the soybean meal cargo.
In its Decision dated January 30, 2009, the RTC declared that while
ATI indeed sustained damages to its unloader, liability therefor
cannot, however, be established with certainty.
In the assailed decision, the CA, on the other hand, discussed in
detail why and how the three requisites to the application of the
doctrine of res ipsa loquitur are found to be attendant in the case at
bar. First, the co-mingling of the two foreign metal objects with the
soybean meal cargo and the consequent damage to ATI’s unloader
is an accident which ordinarily does not occur in the absence of
someone’s negligence. Second, the foreign metal objects were
found in the vessel’s Hold No. 2, which is within the exclusive
control of the petitioners. Third, records do not show that ATI’s
negligence had in any way contributed to the damage caused to its
unloader.
The Court agrees with the CA anent ATI’s entitlement to the
payment of damages from the petitioners and the applicability of
the doctrine of res ipsa loquitur. However, the Court finds as
misplaced the CA’s application of the laws on maritime commerce
and contracts of carriage for reasons discussed below.
There is no contract of carriage between the petitioners and ATI.
There is no contract of carriage between ATI, on one hand, and the
shipowner, Samsun, ContiQuincyBunge L.L.C., and Inter-Asia, on
the other. It likewise bears stressing that the subject of the
complaint, from which the instant petition arose, is not the damage
caused to the cargo, but to the equipment of an arrastre operator.
Further, ATI’s contractual relation is not with the petitioners, but
with the consignee and with the Philippine Ports Authority (PPA).
In Delgado Brothers, Inc. v. Home Insurance Company and Court of
Appeals,26 the Court discusses the functions of an arrastre operator,
viz:
Under this provision, petitioner’s functions as arrastre operator are
(1) to receive, handle, care for, and deliver all merchandise
imported and exported, upon or passing over Government-owned
wharves and piers in the Port of Manila, (2) as well as to record or
cheek all merchandise which may be delivered to said port at
shipside, and in general[,] (3) to furnish light and water services
and other incidental services in order to undertake its arrastre
service. Note that there is nothing in those functions which relate
to the trade and business of navigation x x x, nor to the use or
operation of vessels x x x. Both as to the nature of the functions and
the place of their performance (upon wharves and piers shipside),
petitioner’s services are clearly not maritime. As we held in the
Macondray case, they are no different from those of a depositary or
warehouseman. Granting, arguendo, that petitioner’s arrastre
service depends on, assists, or furthers maritime transportation x x
x, it may be deemed merely incidental to its aforementioned
functions as arrastre operator and does not, thereby, make
petitioner’s arrastre service maritime in character. 27 (Citations
omitted, italics in the original, emphasis and underscoring ours)
"The functions of an arrastre operator involve the handling of cargo
deposited on the wharf or between the establishment of the
consignee or shipper and the ship’s tackle. Being the custodian of
the goods discharged from a vessel, an arrastre operator’s duty is
to take good care of the goods and to turn them over to the party
entitled to their possession."28
"The legal relationship between an arrastre operator and a
consignee is akin to that between a warehouseman and a depositor.
As to both the nature of the functions and the place of their
performance, an arrastre operator’s services are clearly not
maritime in character."29
In Insurance Company of North America v. Asian Terminals,
Inc.,30 the Court explained that the liabilities of the arrastre
operator for losses and damages are set forth in the contract for
cargo handling services it had executed with the PPA. Corollarily
then, the rights of an arrastre operator to be paid for damages it
sustains from handling cargoes do not likewise spring from
contracts of carriage.
However, in the instant petition, the contending parties make no
references at all to any provisions in the contract for cargo
handling services ATI had executed with the PPA.
Article 2176 of the New Civil Code and the doctrine of res ipsa
loquitur apply.
Notwithstanding the above, the petitioners cannot evade liability
for the damage caused to ATI’s unloader in view of Article 2176 of
the New Civil Code, which pertinently provides as follows:
Art. 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and
is governed by the provisions of this Chapter.
In Taylor v. Manila Electric Railroad and Light Co.,31 the Court
explained that to establish a plaintiff’s right to recovery for quasi-
delicts, three elements must exist, to wit: (a) damages to the
plaintiff; (b) negligence by act or omission of which defendant
personally, or some person for whose acts it must respond, was
guilty; and (c) the connection of cause and effect between the
negligence and the damage.32
Negligence, on the other hand, is defined as the failure to observe
that degree of care, precaution and vigilance that the circumstances
justly demand, whereby another suffers injury.33
In the case under consideration, the parties do not dispute the facts
of damage upon ATI’s unloader, and of such damage being the
consequence of someone’s negligence. However, the petitioners
deny liability claiming that it was not established with reasonable
certainty whose negligence had caused the co-mingling of the metal
bars with the soybean meal cargo. The Court, on this matter, agrees
with the CA’s disquisition that the petitioners should be held jointly
and severally liable to ATI. ATI cannot be faulted for its lack of
direct access to evidence determinative as to who among the
shipowner, Samsun, ContiQuincyBunge and Inter-Asia should
assume liability. The CA had exhaustively discussed why the
doctrine of res ipsa loquitur applies. The metal bars which caused
damage to ATI’s unloader was found co-mingled with the cargo
inside Hold No. 2 of the ship, which was then within the exclusive
control of the petitioners. Thus, the presumption that it was the
petitioners’ collective negligence, which caused the damage, stands.
This is, however, without prejudice to the petitioners’ rights to seek
reimbursements among themselves from the party whose
negligence primarily caused the damage.
A modification of the interests imposed on the damages awarded is
in order.
Anent the interests imposed by the CA upon the damages to be paid
to ATI, modification of the same is in order.
In Nacar v. Gallery Frames,34 the Court declared:
To recapitulate and for future guidance, the guidelines laid down in
the case of Eastern Shipping Lines are accordingly modified to
embody BSP-MB Circular No. 799, as follows:
I. When an obligation, regardless of its source, i.e., law,
contracts, quasi-contracts, delicts or quasi-delicts is
breached, the contravenor can be held liable for
damages.1âwphi1 The provisions under Title XVIII on
"Damages" of the Civil Code govern in determining the
measure of recoverable damages.
II. With regard particularly to an award of interest in the
concept of actual and compensatory damages, the rate of
interest, as well as the accrual thereof, is imposed, as
follows:
1.When the obligation is breached, and it
consists in the payment of a sum of money, i.e., a
loan or forbearance of money, the interest due
should be that which may have been stipulated
in writing. Furthermore, the interest due shall
itself earn legal interest from the time it is
judicially demanded. In the absence of
stipulation, the rate of interest shall be 6% per
annum to be computed from default, i.e., from
judicial or extrajudicial demand under and
subject to the provisions of Article 1169 of the
Civil Code.
2.When an obligation, not constituting a loan or
forbearance of money, is breached, an interest
on the amount of damages awarded may be
imposed at the discretion of the court at the rate
of 6% per annum. No interest, however, shall be
adjudged on unliquidated claims or damages,
except when or until the demand can be
established with reasonable certainty.
 Accordingly, where the demand is established
with reasonable certainty, the interest shall
begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil
Code), but when such certainty cannot be so
reasonably established at the time the demand
is made, the interest shall begin to run only from
the date the judgment of the court is made (at
which time the quantification of damages may
be deemed to have been reasonably
ascertained). The actual base for the
computation of legal interest shall, in any case,
be on the amount finally adjudged.
3.When the judgment of the court awarding a
sum of money becomes final and executory, the
rate of legal interest, whether the case falls
under paragraph 1 or paragraph 2, above, shall
be 6% per annum from such finality until its
satisfaction, this interim period being deemed to
be by then an equivalent to a forbearance of
credit.
35
x x x x.  (Citation omitted, emphasis and italics in the
original, and underscoring ours)
The Court agrees with the CA that as regards ATI’s claim, only the
amount of US$30,300.00 is duly supported by evidence. However,
in view of Nacar, the said amount shall be subject to legal interest
at the rate of six percent (6%) per annum reckoned from the
finality of this Resolution, the date when the quantification of
damages may be deemed to have been reasonably ascertained,
until full satisfaction thereof.
WHEREFORE, the Decision dated November 10, 2010 of the Court
of Appeals in CA-G.R. CV No. 93164 is AFFIRMED with
MODIFICATION.1âwphi1 The petitioners, Unknown Owner of the
Vessel M/V China Joy, Samsun Shipping Ltd. and Inter-Asia Marine
Transport, Inc., are hereby ordered to pay the respondent, Asian
Terminals, Inc., actual and compensatory damages in the amount of
US$30,300.00, plus legal interest at the rate of six percent (6%) per
annum reckoned from the finality of this Resolution until full
satisfaction thereof.
SO ORDERED.
G.R. No. 201822, August 12, 2015
MARINA PORT SERVICES, INC.*, Petitioner, v. AMERICAN HOME
ASSURANCE CORPORATION, Respondent.
DECISION
DEL CASTILLO, J.:
This Petition for Review on Certiorari1 filed pursuant to Rule 45 of
the Rules of Court assails the December 29, 2011 Decision2 and
May 8, 2012 Resolution3 of the Court of Appeals (CA) in CA GR. CV
No. 88321, which granted the appeal filed therein by respondent
American Home Assurance Corporation (AHAC) and reversed and
set aside the October 17, 2006 Decision4 of the Regional Trial Court
(RTC), Pasig City, Branch 271 dismissing AHAC's Complaint5 for
Damages against petitioner Marina Port Services, Inc. (MPSI).
Factual Antecedents
On September 21, 1989, Countercorp Trading PTE., Ltd. shipped
from Singapore to the Philippines 10 container vans of soft wheat
flour with seals intact on board the vessel M/V Uni Fortune. The
shipment was insured against all risks by AHAC and consigned to
MSC Distributor (MSC).
Upon arrival at the Manila South Harbor on September 25, 1989,
the shipment was discharged in good and complete order condition
and with safety seals in place to the custody of the arrastre
operator, MPSI. After unloading and prior to hauling, agents of the
Bureau of Customs officially broke the seals, opened the container
vans, and examined the shipment for tax evaluation in the presence
of MSC's broker and checker. Thereafter, the customs inspector
closed the container vans and refastened them with safety wire
seals while MSC's broker padlocked the same. MPSI then placed the
said container vans in a back-to-back arrangement at the delivery
area of the harbor's container yard where they were watched over
by the security guards of MPSI and of the Philippine Ports
Authority.
On October 10, 1989, MSC's representative, AD's Customs Services
(ACS), took out five container vans for delivery to MSC. At the
compound's exit, MPSI issued to ACS the corresponding gate passes
for the vans indicating its turnover of the subject shipment to MSC.
However, upon receipt of the container vans at its warehouse, MSC
discovered substantial shortages in the number of bags of flour
delivered. Hence, it filed a formal claim for loss with MPSI.
From October 12 to 14, 1989 and pursuant to the gate passes
issued by MPSI, ACS took out the remaining five container vans
from the container yard and delivered them to MSC. Upon receipt,
MSC once more discovered substantial shortages. Thus, MSC filed
another claim with MPSI.
Per MSC, the total number of the missing bags of flour was 1,650
with a value of £257,083.00.
MPSI denied both claims of MSC. As a result, MSC sought insurance
indemnity for the lost cargoes from AHAC. AHAC paid MSC the
value of the missing bags of flour after finding the tetter's claim in
order. In turn, MSC issued a subrogation receipt in favor of AHAC.
Thereafter, AHAC filed a Complaint6 for damages against MPSI
before the RTC.
Ruling of the Regional Trial Court
AHAC averred in its Complaint that the partial loss of the bags of
flour was due to the fault or negligence of MPSI since the loss
happened while the shipment was still in MPSI's custody.
MPSL, on the other hand, disclaimed any liability. It essentally
maintained in its Answer7 that the bags of flour were inside sealed
container vans when it received the same; that it handled the
subject shipment with the diligence required of it; and, mat the
container vans were turned over by it to MSC in the same condition
that they were in at the time of their discharge from the vessel.
MPSI likewise countered that the failure of MSC to request for a bad
order survey belied the latter's claim for loss.
Trial then ensued.
On October 17, 2006, the RTC rendered a Decision8 dismissing
AHAC's Complaint. It held that while there was indeed a shortage of
1,650 sacks of soft wheat flour, AHAC's evidence failed to clearly
show that the loss happened while the subject shipment was still
under MPSI's responsibility. Hence, the dispositive portion of the
RTC Decision:LawlibraryofCRAlaw
WHEREFORE, premises considered, the complaint is hereby
DISMISSED.
SO ORDERED.
Ruling of the Court of Appeals
Aggrieved, AHAC appealed to the CA.
In its Decision10 dated December 29, 2011, the CA stressed that in a
claim for loss filed by a consignee, the burden of proof to show due
compliance with the obligation to deliver the goods to the
appropriate party devolves upon the arrastre operator. In
consonance with this, a presumption of fault or negligence for the
loss of the goods arises against the arrastre operator pursuant to
Articles 126511 and 198112 of the Civil Code. In this case, the CA
found that MPSI failed to discharge such burden and to rebut the
aforementioned presumption. Thus, it was held liable to AHAC for
the value of the missing bags of flour, viz.:LawlibraryofCRAlaw
We conclude that x x x MPSI was negligent in the handling and
safekeeping of the subject shipment. It did not create and
implement a more defined, concrete and effective measure to
detect, curb and prevent the loss or pilferage of cargoes in its
custody. This is manifested by the fact that [MPSI] never took any
action to address such complaint even after it received the formal
claim of loss in the first five (5) vans. As a consequence, more bags
of flour were eventually lost or pilfered in the remaining container
vans that were still in [MPSI's] custody at that time. Case law tells
us that negligence is that conduct which creates undue risk of harm
to another, the failure to observe that degree of care, precaution
and vigilance which the circumstance[s] justly demand, whereby
that other person suffers injury. Clearly, [MPSI] breached its
arrastre obligations to the consignee for it failed to deliver said
bags in good and complete condition.
In view of MPSI's failure to exercise that degree of diligence,
precaution and care the law [requires] of arrastre operators in the
performance of their duties to the consignee, [MPSI] is legally
bound to reimburse [AHAC] for the value of the missing bags of
flour that it paid to MSC pursuant to the insurance policy.13
In view of the same, the said court disposed of the appeal in this
wise:LawlibraryofCRAlaw
WHEREFORE, premises considered, the appeal is GRANTED. The
Decision of the Regional Trial Court of Pasig City, Branch 271 dated
17 October 2006 is REVERSED and SET ASIDE. Appellee Marina
Port Services, Inc. is ORDERED to pay appellant, American Home
Assurance Corporation, the sum of Two Hundred Fifty Seven
Thousand and Eighty Three Pesos (PhP257,083.00) with interest
thereon at Six percent (6%) [per annum] from the filing of this
complaint on 24 September 1990 until the decision becomes final
and executory, and thereafter, at the rate of twelve (12) percent
[per annum] until fully paid, and additionally, to pay the x x x sum
of Fifty Thousand Pesos (PhP50,000.00) as attorney's fees.
SO ORDERED.14
MPSI moved for reconsideration but the CA denied the same in its
Resolution15 dated May 8, 2012.
Hence, the present recourse.
Issue
The core issue to be resolved in this case is whether MPSI is liable
for the loss of the bags of flour.
Our Ruling
There is merit in the Petition.
Albeit involving factual questions, the
Court shall proceed to resolve this case
since it falls under several exceptions to
the rule that only questions of law are
proper in a petition for review on
certiorari.
At the outset, it is evident that the resolution of the instant case
requires the scrutiny of factual issues which are, however, outside
the scope of the present petition filed pursuant to Rule 45 of the
Rules of Court. However, the Court held in Asian Terminals, Inc. v.
Philam Insurance Co., Inc.16 that:LawlibraryofCRAlaw
But while it is not our duty to review, examine and evaluate or
weigh all over again the probative value of the evidence presented,
the Court may nonetheless resolve questions of fact when the case
falls under any of the following exceptions:LawlibraryofCRAlaw
(1) when the findings are grounded entirely on speculation,
surmises, or conjectures; (2) when the inference made is
manifestly mistaken, absurd, or impossible; (3) when there is grave
abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are
conflicting; (6) when in making its findings the Court of Appeals
went beyond the issues of the case, or its findings are contrary to
the admissions of both the appellant and the appellee; (7) when the
findings are contrary to those of the trial court; (8) when the
findings are conclusions without citation of specific evidence on
which they are based; (9) when the facts set forth in the petition as
well as in the petitioner's main and reply briefs are not disputed by
the respondent; and (10) when the findings of fact are premised on
the supposed absence of evidence and contradicted by the evidence
on record.17
The Court finds that the instant case falls under the
aforementioned second, fourth, fifth, and seventh exceptions.
Hence, it shall proceed to delve into factual matters essential to the
proper determination of the merits of this case.
Several well-entrenched legal principles
govern the relationship of an arrastre
operator and a consignee.
The relationship between an arrastre operator and a consignee is
similar to that between a warehouseman and a depositor, or to that
between a common carrier and the consignee and/or the owner of
the shipped goods.18 Thus, an arrastre operator should adhere to
the same degree of diligence as that legally expected of a
warehouseman or a common carrier19 as set forth in Section 3[b] of
the Warehouse Receipts [Act]20 and Article 1733 of the Civil
Code.21 As custodian of the shipment discharged from the vessel,
the arrastre operator must take good care of the same and turn it
over to the party entitled to its possession.22redarclaw
In case of claim for loss filed by a consignee or the insurer as
subrogee,23 it is the arrastre operator that carries the burden of
proving compliance with the obligation to deliver the goods to the
appropriate party.24 It must show that the losses were not due to its
negligence or that of its employees.25 It must establish that it
observed the required diligence in handling the
shipment.26 Otherwise, it shall be presumed that the loss was due to
its fault.27 In the same manner, an arrastre operator shall be liable
for damages if the seal and lock of the goods deposited and
delivered to it as closed and sealed, be broken through its
fault.28 Such fault on the part of the arrastre operator is likewise
presumed unless there is proof to the contrary.29redarclaw
MPSI was able to prove delivery of the
shipment to MSC in good and complete
condition and with locks and seals intact.
It is significant to note that MPSI, in order to prove that it properly
delivered the subject shipment consigned to MSC, presented 10
gate passes marked as Exhibits 4 to 13.30 Each of these gate passes
bore the duly identified signature31 of MSC's representative which
serves, among others, as an acknowledgement
that:LawlibraryofCRAlaw
Issuance of [the] Gate Pass constitutes delivery to and receipt by
consignee of the goods as described above in good order and
condition, unless an accompanying B.O. certificate duly issued and
noted on the face of [the] Gate Pass appears.32
As held in International Container Terminal Services, Inc. v.
Prudential Guarantee & Assurance Co., Inc.,33 the signature of the
consignee's representative on the gate pass is evidence of receipt of
the shipment in good order and condition.34redarclaw
Also, that MPSI delivered the subject shipment to MSC's
representative in good and complete condition and with lock and
seals intact is established by the testimonies of MPSFs employees
who were directly involved in the processing of the subject
shipment. Mr. Ponciano De Leon testified that as MPSI's delivery
checker, he personally examined the subject container vans and
issued the corresponding gate passes that were, in turn,
countersigned by the consignee's representative. MPSI's other
witness, Chief Claims Officer Sergio Icasiano (Icasiano), testified
that the broker, as the consignee's representative, neither
registered any complaints nor requested for an inspection, to
wit:LawlibraryofCRAlaw
RE-DIRECT EXAMINATION:
Atty. Laurente
xxxx
Q [A]fter receipt by the broker of the container van containing
the cargo, do you require the broker to issue you a report or
certification as to the appearance of the container van?
A [W]e only rely on the gate pass.
Q [A]nd you don't place there "the padlock is still intact or the
wirings still intact"?
A [I]t is stated in the gate pass, your Honor.
xxxx
Q [A]nd the findings [are counter-signed] by the
representative of the broker also on the same date?
A [Y]es, your honor.35
xxxx
RE-CROSS EXAMINATION
Atty. Laino
q [B]ut did you not say that in the gate pass it is stated there as
to the external appearance of the container van?
a [I]here was no indication of any inspection of the container
van x x x
meaning the container vans were all in good condition, sir.
q [Y]ou said a [while] ago that you did not receive any
complaint for broken seals, is it not?
a [Y]es, sir.
q [B]ut the complaint that you received indicates that there
were losses,
a [W]e did not receive any complaint from the broker, sir.
q [I]f the broker will complain they have to file a request for
inspection of the cargo so that they will know if there [are]
shortages x x x.
a [Y]es, sir.
[C]our
t
q [A]nd if the broker would notice or detect [something]
peculiar, the way the door of the container van appears
whether close[d] or not, they have to request for an
inspection[?]
a [Y]es, your honor.
q [O]r in the absence of the padlock or wirings, the broker will
request for an inspection[?]
a [Y]es,your honor[;] they can require for the examination of
the cargo.
q [B]ut there was no request at all by the broker?
a [T]here was none, your Honor.36
Verily, the testimonies of the aforementioned employees of MPSI
confirm that the container vans, together with their padlocks and
wirings, were in order at the time the gate passes were issued up to
the time the said container vans were turned over to ACS.
AHAC justifies the failure of ACS to immediately protest the alleged
loss or pilferage upon initial pick-up of the first batch of container
vans. According to it, ACS could not have discovered the loss at that
moment since the stripping of container vans in the pier area is not
allowed. The Court cannot, however, accept such excuse. For one,
AHAC's claim that stripping of the container vans is not allowed in
the pier area is a mere allegation without proof. It is settled that
"[m]ere allegations do not suffice; they must be substantiated by
clear and convincing proof."37 For another, even assuming that
stripping of the container vans is indeed not allowed at the pier
area, it is hard to believe that MSC or its representative ACS has no
precautionary measures to protect itself from any eventuality of
loss or pilferage. To recall, ACS's representative signed the gate
passes without any qualifications. This is despite the fact that such
signature serves as an acknowledgment of ACS's receipt of the
goods in good order and condition. If MSC was keen enough in
protecting its interest, it (through ACS) should have at least
qualified the receipt of the goods as subject to inspection, and
thereafter arrange for such an inspection in an area where the
same is allowed to be done. However, no such action or other
similar measure was shown to have been undertaken by MSC. What
is clear is that ACS accepted the container vans on its behalf
without any qualification. As aptly observed by the
RTC:LawlibraryofCRAlaw
During [the] period of tum-over of goods from the arrastre to
[ACS], there had been no protest on anything on the part of
consignee's representative x x x. Otherwise, the complaint would
have been shown [on] the gate passes. In fact, each gate pass
showed the date of delivery, the location of delivery, the truck
number of the truck used in the delivery, the actual quantity of
goods delivered, the numbers of the safety wires and padlocks of
the vans and the signatures of the receiver. More importantly, the
gate passes bared the fact that the shipments were turned-over by
[MPSI] to [ACS] on the same dates of customs inspections and
turnovers.38
There being no exception as to bad order, the subject shipment,
therefore, appears to have been accepted by MSC, through ACS, in
good order.39 "It logically follows [then] that the case at bar
presents no occasion for the necessity of discussing the diligence
required of an [arrastre operator] or of the theory of [its] prima
facie liability x x x, for from all indications, the shipment did not
suffer loss or damage while it was under the care x x x of the
arrastre operator x x x."40redarclaw
Even in the light of Article 1981, no
presumption of fault on the part of MPSI
arises since it was not sufficiently shown
that the container vans were re-opened
or that their locks and seals were broken
for the second time.
Indeed, Article 1981 of the Civil Code also mandates a presumption
of fault on the part of the arrastre operator as
follows:LawlibraryofCRAlaw
Article 1981. When the thing deposited is delivered closed and
sealed, the depositary must return it in the same condition, and he
shall be liable for damages should the seal or lock be broken
through his fault.
Fault on the part of the depositary is presumed, unless there is
proof to the contrary.
As regards the value of the thing deposited, the statement of the
depositor shall be accepted, when the forcible opening is imputable
to the depositary, should there be no proof to the contrary.
However, the courts may pass upon the credibility of the depositor
with respect to the value claimed by him.
When the seal or lock is broken, with or without the depositary's
fault, he shall keep the secret of the deposit.
However, no such presumption arises in this case considering that
it was not sufficiently shown that the container vans were re-
opened or that their locks and seals were broken for the second
time. As may be recalled, the container vans were opened by a
customs official for examination of the subject shipment and were
thereafter resealed with safety wires. While this fact is not disputed
by both parties, AHAC alleges that the container vans were re-
opened and this gave way to the alleged pilferage. The Court notes,
however, that AHAC based such allegation solely on the survey
report of the Manila Adjuster & Surveyors Company (MASCO). As
observed by the RTC:LawlibraryofCRAlaw
AHAC x x x claim[s] that there were two instances when the seals
were broken. [First], when the customs officer examined the
shipment and had it resealed with safety wires. [Second], when the
surveyor and consignee's broker visually inspected the shipment
and allegedly found the safety wires of the customs officer to have
been detached and missing which they then replaced. This second
instance is only upon their say so as there is no x x x documentary
or testimonial proof on the matter [other] than the [MASCO] survey
report.41
However, the person who prepared the said report was not
presented in court to testify on the same. Thus, the said survey
report has no probative value for being hearsay. "It is a basic rule
that evidence, whether oral or documentary, is hearsay, if its
probative value is not based on the personal knowledge of the
witness but on the knowledge of another person who is not on the
witness stand."42 Moreover, "an unverified and unidentified private
document cannot be accorded probative value. It is precluded
because the party against whom it is presented is deprived of the
right and opportunity to cross-examine the person to whom the
statements or writings are attributed. Its executor or author should
be presented as a witness to provide the other party to the
litigation the opportunity to question its contents. Being mere
hearsay evidence, failure to present the author of the letter renders
its contents suspect and of no probative value."43redarclaw
There being no other competent evidence that the container vans
were reopened or that their locks and seals were broken for the
second time, MPSI cannot be held liable for damages due to the
alleged loss of the bags of flour pursuant to Article 1981 of the Civil
Code.
At any rate, the goods were shipped
under "Shipper's Load and Count"
arrangement. Thus, protection against
pilferage of the subject shipment was
the consignees lookout.
At any rate, MPSI cannot just the same be held liable for the missing
bags of flour since the consigned goods were shipped under
"Shipper's Load and Count" arrangement. "This means that the
shipper was solely responsible for the loading of the container,
while the carrier was oblivious to the contents of the shipment.
Protection against pilferage of the shipment was the consignee's
lookout. The arrastre operator was, like any ordinary depositary,
duty-bound to take good care of the goods received from the vessel
and to turn the same over to the party entitled to their possession,
subject to such qualifications as may have validly been imposed in
the contract between the parties. The arrastre operator was not
required to verify the contents of the container received and to
compare them with those declared by the shipper because, as
earlier stated, the cargo was at the shipper's load and count. The
arrastre operator was expected to deliver to the consignee only the
container received from the carrier."44redarclaw
All told, the Court holds that MPSI is not liable for the loss of the
bags of flour.
WHEREFORE, the Petition is GRANTED. The Decision dated
December 29, 2011 and Resolution dated May 8, 2012 of the Court
of Appeals in CA-GR. CV No. 88321 are REVERSED AND SET
ASIDE. The Decision dated October 17, 2006 of the Regional Trial
Court, Branch 271, Pasig City in Civil Case No. 90-54517
is REINSTATED and the Complaint in the said case is DISMISSED.
SO ORDERED.cralawlawlibrary
G.R. No. 181683, October 07, 2015
LORENZO SHIPPING CORPORATION, Petitioner, v. NATIONAL
POWER CORPORATION, Respondent.
G.R. No. 184568
NATIONAL POWER CORPORATION, Petitioner, v. LORENZO
SHIPPING CORPORATION, Respondent.
DECISION
LEONEN, J.:
These consolidated Petitions for Review on Certiorari1 are
offshoots of the Court of Appeals' disposition of CA-G.R. CV No.
76295. The Petition docketed as G.R. No. 181683 was filed by
Lorenzo Shipping Corporation (Lorenzo Shipping) while the
Petition docketed as G.R. No. 184568 was filed by National Power
Corporation.
In its September 14, 2007 Decision,2 the Court of Appeals reversed
and set aside the February 18, 2002 Decision of the Regional Trial
Court and entered another judgment ordering Lorenzo Shipping to
pay National Power Corporation the amount of P876,286.00 as
actual damages and P50,000.00 as attorney's fees and expenses of
litigation.3
In its February 12, 2008 Amended Decision,4 the Court of Appeals
amended its September 14, 2007 Decision to award National
Power Corporation the amount of P300,000.00 as temperate
damages in lieu of the original award of P876,286.00 as actual
damages.
In its September 17, 2008 Resolution,5 the Court of Appeals denied
National Power Corporation's Motion for Reconsideration.
The February 18, 2002 Decision6 of the Regional Trial Court
dismissed National Power Corporation's Complaint for damages
against Lorenzo Shipping.7
Lorenzo Shipping is the owner and operator of the commercial
vessel MV Lorcon Luzon.8 National Power Corporation is the owner
of Power Barge 104, "a non-propelled power plant barge."9
On March 20, 1993, Power Barge 104 was berthed and stationed at
the Makar Wharf in General Santos City when the MV Lorcon Luzon
"hit and rammed Power Barge 104."10
At the time of the incident, Captain Mariano Villarias (Captain
Villarias) served as the Master of the MV Lorcon Luzon. However,
the MV Lorcon Luzon was then being piloted by Captain Homer
Yape (Captain Yape), a Harbor Pilot from the General Santos City
pilotage district.11 As underscored by Lorenzo Shipping, the MV
Lorcon Luzon was under Captain Yape's pilotage as it was
mandatory to yield navigational control to the Harbor Pilot while
docking.12
Testifying before the Board of Marine Inquiry, Captain Villarias
recalled that while the MV Lorcon Luzon was under Captain Yape's
pilotage, he nevertheless "always"13 remained at the side of Captain
Yape. He likewise affirmed that he heard and knew of Captain
Yape's orders, "because I have to repeat his order."14
As the MV Lorcon Luzon was docking, Captain Yape ordered the
vessel to proceed "slow ahead," making it move at the speed of
about one (1) knot. As it moved closer to dock, Captain Yape gave
the order "dead slow ahead," making the vessel move even slower.
He then ordered the engine stopped.15
As the MV Lorcon Luzon moved "precariously close"16 to the wharf,
Captain Yape ordered the vessel to move backward, i.e., go "slow
astern," and subsequently "full astern." Despite his orders, the
engine failed to timely respond. Thus, Captain Yape ordered the
dropping of the anchor. Despite this, the MV Lorcon Luzon rammed
into Power Barge 104.17
Following this incident, Nelson Homena, Plant Manager of Power
Barge 104, filed a Marine Protest before the Board of Marine
Inquiry. Captain Villarias also filed his own Marine Protest. For his
part, Captain Yape filed a Marine Accident Report. The Board of
Marine Inquiry conducted joint hearings on the Marine Protests
and Captain Yape's report.18
To forestall the prescription of its cause of action for damages,
National Power Corporation filed before the Quezon City Regional
Trial Court a Complaint for Damages against Lorenzo Shipping.19 In
this Complaint, National Power Corporation recalled the damage
resulting from the ramming, as
follows:chanRoblesvirtualLawlibrary
4. Due to the force and impact of the ramming, the three (3) nylon
ropes of 4 inches [sic] diameter each securing the barge at the
Makar Wharf-Philippines [sic] Ports Authority Pier was
instantaneously ripped off and the take [-] off tower of the barge
swayed causing flash over on the 69 KV line tripping the line and
isolated General Santos City from the Mindanao Grid. Consequently,
the General Santos Power Plant, Power Barge 102, interconnected
with Power Barge 104, all tripped off causing total blackout in
General Santos City and its underlying areas;
5. Immediate investigation revealed that the ramming resulted to
severe damage to Ballast Tank No. 1 and metal deformation with
approximate area of two (2) sq. meters. The crack, 25 mm. [b]y 460
mm. [ojccurred two (2) meters above the crater line and another
one, 75 mm. by 310 mm. on the water line caused a leak of waste
oil into the sea . . .;
6. In addition to the physical damage caused to the Power Barge
104, plaintiff suffered generation losses as a result of the tripping
off of the line and the failure of Power Barge 104 to generate
electricity immediately after the accident[.]20
Lorenzo Shipping filed a Motion to Dismiss grounded on the
Regional Trial Court's alleged lack of jurisdiction over the subject
matter and National Power Corporation's failure to exhaust
administrative remedies. Lorenzo Shipping underscored that the
dispute was supposedly within the jurisdiction of the Board of
Marine Inquiry/Philippine Coast Guard.21 The Regional Trial Court
denied Lorenzo Shipping's Motion to Dismiss.22
On November 7, 1997, Lorenzo Shipping filed its Answer. It
emphasized that at the time of the incident, the MV Lorcon Luzon
was commandeered by an official Harbor Pilot to whom it was
"mandatory . . . to yield operational control";23 thus, any liability
should be attributed to the Harbor Pilot and not to the company. It
added that "Makar Wharf is a berthing place only for self-propelled
vessel [sic]."24 As Power Barge 104 was not a self-propelled vessel,
it "had no right to lash itself on the Maka[r] Wharf. . . . [and] it
assumed the risk of such ramming because [of] its improper
presence[.]"25 Lastly, Lorenzo Shipping pointed out that National
Power Corporation's action was barred by laches as four (4) years
had lapsed before it filed its Complaint.26
The Regional Trial Court issued the Decision27 dated February 18,
2002 absolving Lorenzo Shipping of liability. It concluded that
National Power Corporation failed to establish Lorenzo Shipping's
negligence. It underscored that while the ramming was found to
have been the result of the engine's stoppage, no malfunctioning
was recorded before and after the incident. The Regional Trial
Court further stated that Lorenzo Shipping was sued in its capacity
as the employer of Captain Villarias and that any liability it
incurred would have been only subsidiary. Nevertheless, as
Lorenzo Shipping supposedly exercised due diligence in its
selection and supervision of Captain Villarias, no liability could be
attributed to it.28
National Power Corporation appealed before the Court of Appeals.
The Court of Appeals rendered the Decision29 dated September 14,
2007 reversing and setting aside the February 18, 2002 Decision of
the Regional Trial Court and entering another judgment ordering
Lorenzo Shipping to pay National Power Corporation the amount of
P876,286.00 as actual damages and P50,000.00 as attorney's fees
and expenses of litigation.30
The Court of Appeals reasoned that while the MV Lorcon Luzon
was under compulsory pilotage, Captain Villarias, the vessel's
Master, remained to be its overall commander. It added that he was
remiss in his duties as he did nothing in the crucial moments when
Captain Yape's orders to go astern appeared to not have been
heeded.31 It cited Article 2180 of the Civil Code32 in that an
employer's liability is primary and not subsidiary. It further noted
that Lorenzo Shipping failed to show that it exercised due diligence
in the selection and supervision of Captain Villarias.33
Lorenzo Shipping filed a Motion for Reconsideration.
The Court of Appeals then issued the Amended Decision dated
February 12, 2008.34 Noting that the amount of actual damages was
not proven by National Power Corporation, it awarded National
Power Corporation the amount of P300,000.00 as temperate
damages in lieu of actual damages. The awards for attorney's fees
and litigation expenses were sustained.
National Power Corporation then filed a Motion for
Reconsideration, which the Court of Appeals denied in its
Resolution dated September 17, 2008.35
On March 31, 2008, Lorenzo Shipping filed the Petition for Review
on Certiorari36 docketed as G.R. No. 181683. It reiterated its
position that no liability could be attributed to it as the MV Lorcon
Luzon was under compulsory pilotage and that National Power
Corporation assumed risk when it berthed a non-propelled vessel
in the Makar Wharf.37 It added that even assuming that it was at
fault, the award of P3 00,000.00 as temperate damages was still
improper. It claimed that, from the text of Article 2224 of the Civil
Code,38 temperate damages can be awarded only in cases where
pecuniary loss may have been incurred, but whose exact amount,
through the nature of the injury suffered, e.g., injury to commercial
credit or business goodwill, cannot be ascertained. It argued that
National Power Corporation was well in a position to adduce proof
of the exact amount of damage it incurred, but failed to do so.39
On November 24, 2008, National Power Corporation filed its
Comment40 to Lorenzo Shipping's Petition. It maintained that it was
Lorenzo Shipping that must be held liable and that it was able to
show by "competent testimonial and documentary evidence"41 that
it must be compensated for actual damages in the amount of
P876,826.00. On April 7, 2009, Lorenzo Shipping filed its Reply.42
In the meantime, on November 18, 2008, National Power
Corporation filed its own Petition for Review on
Certiorari43 docketed as G.R. No. 184568, arguing how it had
supposedly proven by competent evidence that it was entitled to
actual damages in the amount of F876,826.00. Lorenzo Shipping
filed its Comment44 on February 2, 2009. National Power
Corporation filed its Reply45 on June 22, 2009.
In the Resolution46 dated February 9, 2009, this court consolidated
the Petitions docketed as G.R. Nos. 181683 and 184568.
For resolution are the following
issues:chanRoblesvirtualLawlibrary
First, whether Lorenzo Shipping Corporation is liable for the
damage sustained by Power Barge 104 when the MV Lorcon Luzon
rammed into it, considering that at the time of the ramming, the MV
Lorcon Luzon was under mandatory pilotage by Captain Yape; and
Second, assuming that liability is to be attributed to Lorenzo
Shipping, what damages, if any, may be awarded to National Power
Corporation.
I
It is not disputed that the MV Lorcon Luzon, a vessel owned and
operated by Lorenzo Shipping, rammed into Power Barge 104
while attempting to dock at the Makar Wharf. Likewise, it is not
disputed that when it rammed into Power Barge No. 104, the MV
Lorcon Luzon was being piloted by Captain Yape. What is in dispute
is whether Captain Yape's pilotage suffices to absolve Lorenzo
Shipping of liability.
A Master's designation as the commander of a vessel is long-
settled. This court's citation in Yu Con v. Ipil47 of General Review of
Legislation and Jurisprudence explains that "Master" and "Captain"
are synonymous terms:
"The name of captain or master is given, according to the kind of
vessel, to the person in charge of it.
"The first denomination is applied to those who govern vessels that
navigate the high seas or ships of large dimensions and importance,
although they be engaged in the coastwise trade.
"Masters are those who command smaller ships engaged
exclusively in the coastwise trade.
"For the purposes of maritime commerce, the words 'captain' and Q
'master' have the same meaning; both being the chiefs or
commanders of ships.48ChanRoblesVirtualawlibrary
Likewise, in Inter-Orient Maritime Enterprises, Inc. v. National Labor
Relations Commission:49
A master or captain, for purposes of maritime commerce, is one
who has command of a vessel. A captain commonly performs three
(3) distinct roles: (1) he is a general agent of the shipowner; (2) he
is also commander and technical director of the vessel; and (3) he
is a representative of the country under whose flag he navigates. Of
these roles, by far the most important is the role performed by the
captain as commander of the vessel; for such role (which, to our
mind, is analogous to that of "Chief Executive Officer" [CEO] of a
present-day corporate enterprise) has to do with the operation and
preservation of the vessel during its voyage and the protection of
the passengers (if any) and crew and cargo. In his role as general
agent of the shipowner, the captain has authority to sign bills of
lading, carry goods aboard and deal with the freight earned, agree
upon rates and decide whether to take cargo. The ship captain, as
agent of the shipowner, has legal authority to enter into contracts
with respect to the vessel and the trading of the vessel, subject to
applicable limitations established by statute, contract or
instructions and regulations of the shipowner. To the captain is
committed the governance, care and management of the vessel.
Clearly, the captain is vested with both management and fiduciary
functions.50 (Emphasis supplied, citations omitted)
This notwithstanding, there are recognized instances when control
of a vessel is yielded to a pilot. Section 8 of Philippine Ports
Authority (PPA) Administrative Order No. 03-85, otherwise known
as the Rules and Regulations Governing Pilotage Services, the
Conduct of Pilots and Pilotage Fees in Philippine
Ports,51 enumerates instances when vessels are subjected to
compulsory pilotage:

Sec. 8. Compulsory Pilotage Service — For entering a harbor and
anchoring thereat, or passing through rivers or straits within a
pilotage district, as well as docking and undocking at any
pier/wharf, or shifting from one berth or another, every vessel
engaged in coastwise and foreign trade shall be under compulsory
pilotage.
However, in the Ports of Manila and Cebu, and in such other ports
as may be allowed by this Authority, Ship Captains may pilot their
vessels engaged in coastwise trade provided they meet / comply
with the following minimum qualifications / requirements:
a) Must be properly licensed as a Harbor Pilot by the Philippine
Coast Guard for Manila, Cebu and other authorized ports;
b) Must have been a Master of an interisland vessel for at least
three (3) years prior to his application with the PPA;
c) Must be certified by a government physician as physically and
mentally fit.
Vessels maneuvered by a Special Harbor Pilot shall be exempt from
the payment of all pilotage fees.52ChanRoblesVirtualawlibrary
The second paragraph of Section 8 identifies an instance when
control of a vessel need not be yielded to a pilot. Section 9 further
enumerates exceptions to compulsory pilotage:
Sec. 9. Exemptions - In the following cases, pilotage service is not
compulsory:
a) Vessels engaged in coastwise trade undocking at all ports,
except at the ports of Manila, Cebu, Iloilo, Tacloban, Davao,
Zamboanga, Pulupandan, Masinloc, and San Fernando,
b) Government vessels,
c) Vessels of foreign governments entitled to courtesy,
d) Vessels that are authorized by BOT to engage in daily ferry
service plying between two places within a port or between
two ports,
e) Phil. Flag vessels engaged in coastwise trade that depart from
an anchorage,
f) Vessels calling at private ports whose owners have formally
waived the requirements of compulsory pilotage.53
Section 32(f) of PPA Administrative Order No. 03-85 specifies the
foremost responsibility of a Harbor Pilot, that is, the direction of
the vessel being piloted. In addition, Section 32 (f) spells out the
duration within which the Harbor Pilot is to fulfill this
responsibility. It likewise provides that the Master's failure to carry
out the Harbor Pilot's orders is a ground for absolving the Harbor
Pilot of liability:
Sec. 32. Duties and Responsibilities of the Pilots or Pilots'
Association. — The duties and responsibilities of the Harbor Pilot
shall be as follows:chanRoblesvirtualLawlibrary
....
f) A pilot shall be held responsible for the direction of a vessel
from the time he assumes his work as a pilot thereof until he
leaves it anchored or berthed safely; Provided, however, that
his responsibility shall cease at the moment the Master
neglects or refuses to carry out his order.54
Consistent with the yielding of control to a pilot, Section 11 of PPA
Administrative Order No. 03-85 makes the Harbor Pilot liable for
damage caused by his or her negligence or fault. The same
provision, however, emphasizes that "overall command" of the
vessel remains in the Master of the vessel:
Sec. 11. Control of Vessels and Liability for Damage. — On
compulsory pilotage grounds, the Harbor Pilot providing the
service to a vessel shall be responsible for the damage caused to a
vessel or to life and property at ports due to his negligence or fault.
He can be absolved from liability if the accident is caused by force
majeure or natural calamities provided he has exercised prudence
and extra diligence to prevent or minimize the damage.
The Master shall retain overall command of the vessel even on
pilotage grounds whereby he can countermand or overrule the
order or command of the Harbor Pilot on board. In such event, any
damage caused to a vessel or to life and property at ports by reason
of the fault or negligence of the Master shall be the responsibility
and liability of the registered owner of the vessel concerned
without prejudice to recourse against said Master.
Such liability of the owner or Master of the vessel or its pilots shall
be determined by competent authority in appropriate proceedings
in the light of the facts and circumstances of each particular
case.55ChanRoblesVirtualawlibrary
Accordingly, it is settled that Harbor Pilots are liable only to the
extent that they can perform their function through the officers and
crew of the piloted vessel.56 Where there is failure by the officers
and crew to adhere to their orders, Harbor Pilots cannot be held
liable.57 In Far Eastern Shipping Co. V. Court of Appeals,58 this court
explained the intertwined responsibilities of pilots and masters:
[W]here a compulsory pilot is in charge of a ship, the master being
required to permit him to navigate it, if the master observes that
the pilot is incompetent or physically incapable, then it is the duty
of the master to refuse to permit the pilot to act. But if no such
reasons are present, then the master is justified in relying upon the
pilot, but not blindly. Under the circumstances of this case, if a
situation arose where the master, exercising that reasonable
vigilance which the master of a ship should exercise, observed, or
should have observed, that the pilot was so navigating the vessel
that she was going, or was likely to go, into danger, and there was
in the exercise of reasonable care and vigilance an opportunity for
the master to intervene so as to save the ship from danger, the
master should have acted accordingly. The master of a vessel must
exercise a degree of vigilance commensurate with the
circumstances.59 (Citations omitted)
Thus, contrary to Lorenzo Shipping's assertion, the MV Lorcon
Luzon's having been piloted by Captain Yape at the time of the
ramming does not automatically absolve Lorenzo Shipping of
liability. Clearing it of liability requires a demonstration of how the
Master, Captain Villarias, conducted himself in those moments
when it became apparent that the MV Lorcon Luzon's engine had
stopped and Captain Yape's orders to go "slow astern" and "full
astern" were not being heeded.
II
As noted by the Court of Appeals, Captain Villarias was remiss in
his duties. In his testimony before the Board of Marine Inquiry,
Captain Villarias admitted that about six (6) minutes had passed
before he even realized that there was an engine failure, let alone
acted on this fact:
Significantly, Captain Mariano Villarias before the Board of Marine
 Inquiry testified as follows:chanRoblesvirtualLawlibrary
"Atty. Tapel: Now, during the time of that accident, Mr. Witness,
how did you know that the cause of the ramming on
Power Barge No. 104 was due to engine failure?
Capt There was no response upon the order or the harbor
Villarias: pilot from slow to full eastern [sic] engine.
Atty. Tepal: Do you want to tell this Honorable Board that before
the ramming incident there was an order from the
harbor pilot for slow eastern [sic] engine and there
was no response?
Capt Yes, there was an order.
Villarias:
Atty. Tepal: Where were you at that time, Mr. Witness?
Capt. I am always [at] the side of the harbor pilot.
Villarias:
Atty. Tepal: Have you heard the harbor pilot issuing the orders?
Capt. Yes, because I have to repeat his order.
Villarias:
Atty. Tepel Now, when there was no response[,] who is supposed
(sic): to respond to the order of the harbor pilot?
Capt. It was the engine department.
Vilalrias:
Atty Tapel Who in the engine department is supposed to respond
(sic): to the order of the harbor pilot?
Capt. The second engineer and the chief engineer. The
Villarias: engineer on duty.
Atty. Tepal: And because there was no response from the engine
department[,] you concluded that there was an engine
failure which caused the ramming of Napocor Power
Barge?
Capt. Almost six (6) minutes there is no response before I
Villarias: know that there was an engine failure."60
In the Reply it filed in G.R. No. 181683, Lorenzo Shipping attempts
to douse the significance of Captain Villarias' inaction for six (6)
minutes as follows:
The Court of Appeals held that Capt. Villarias was remiss in his
duties because he just stood besides [sic] the harbour pilot waiting
for a response from the engine department. He could have called
the attention of Capt. Yape on his miscalculations in the docking
maneuvers of the vessel.
But the Court of Appeals assumed that the unfolding circumstances
on the water that approached the wharf were in slow motion and
permitted the vessel's captain to have time to examine the situation
and deliberate on it, make a judgment that the pilot had given a
wrong command, wrest from him control of the vessel, and enable
the crew down in its belly, at the time tuned to the voice of the
pilot, to realize that the latter's authority had been superseded and
that the command had reverted to the captain. As it were, no
evidence was presented to show that the captain and the crew had
all the time they needed to arrest the momentum of the vessel to
which the pilot had directed it.61ChanRoblesVirtualawlibrary
We disagree.
In the first place, six (6) minutes cannot be characterized as so
quick and fleeting that it deprived Captain Villarias and his crew of
"the time they needed to arrest the momentum of the vessel."62 By
way of reference, an entire song of average length (or longer) could
have played in Captain Villarias' head within those six (6) minutes.
The vessel had been performing the tedious task of berthing and
had been moving so fast that it was about to collide with the docks
in the wharf. Given these circumstances, it was only reasonable for
Captain Villarias, precisely because he was the vessel's Master, to
remain vigilant, to support and supplement Captain Yape's orders,
and to take evasive and counter measures should Captain Yape's
attempts to safely berth prove to be ineffectual. The Court of
Appeals' observation is well-taken: "Even just a minute without any
response from the concerned department could have alarmed
him."63
Lorenzo Shipping counters the observations of the Court of Appeals
by attempting to paint a picture of absurdity. It describes the
confluence of events as needing to have been in "slow motion" if
the crew were to timely and properly react. It conjures images of
Captain Villarias "wrest[ing] from [Captain Yape] control of the
vessel"64 and the crew thrown into a confused frenzy as they had to
listen to Captain Villarias' voice.
This manner of arguing fails to impress. To reiterate, six (6)
minutes were more than enough time for Captain Villarias to have
done something to remedy the situation. It is not for us to
hypothesize on whether the measures he took would have been
effectual. It remains that for six minutes, he did nothing. As Master
of the MV Lorcon Luzon, he should have been on his toes, keen and
ready to make decisions in a split second, especially in an evidently
precarious situation. His failure to timely act is too glaring to
ignore.
Moreover, both Captain Villarias and Captain Yape must be
presumed to have been disciplined officers who knew fully well
how to conduct themselves in such a situation. There is no basis for
contemplating a scenario where the Pilot and the Master are
battling for control of the MV Lorcon Luzon.
So, too, the crew must be presumed to have been trained to follow
the Master's commands. It is ridiculous to think that merely
hearing Captain Villarias' voice in lieu of Captain Yape's would
throw the crew into paralyzed confusion. Besides, from Captain
Villarias' quoted testimony, the crew was already listening to both
his and Captain Yape's voices. He admitted that he repeated
Captain Yape's orders. The crew was, thus, properly disposed to
heed instructions coming from him. If at all, his failure to timely act
despite the crew's presumptive readiness to heed his command
only highlights his negligence.
III
Equally futile is Lorenzo Shipping's claim that National Power
Corporation must bear its own losses as it assumed the risk of
injury when it moored a non-propelled or stationary barge in the
Makar Wharf.
It is pointless to even consider this. Apart from Lorenzo Shipping's
own self-serving assertions, there is no basis for holding that
Power Barge 104's presence in the Makar Wharf was improper and
tantamount to an assumption of risk. Lorenzo Shipping could have
very easily adduced proof attesting to Makar Wharf's supposedly
being exclusive to self-propelled vessels. It did not. Nowhere in any
of its submissions to this court did Lorenzo Shipping annex a copy
of the appropriate regulation, if any, that restricts the use of Makar
Wharf to self-propelled vessels or absolutely prohibits National
Power Corporation from using it as a berthing place for a power
barge.
If at all, the MV Lorcon Luzon's ramming of a stationary object is
even more damaging to Lorenzo Shipping's cause. As explained
in Far Eastern Shipping:65
We start our discussion of the successive issues bearing in mind
the evidentiary rule in American jurisprudence that there is a
presumption of fault against a moving vessel that strikes a stationary
object such as a dock or navigational aid. In admiralty, this
presumption does more than merely require the ship to go forward
and produce some evidence on the presumptive matter. The
moving vessel must show that it was without fault or that the
collision was occasioned by the fault of the stationary object or was
the result of inevitable accident. It has been held that such vessel
must exhaust every reasonable possibility which the circumstances
admit and show that in each, they did all that reasonable care
required. In the absence of sufficient proof in rebuttal, the
presumption of fault attaches to a moving vessel which collides
with a fixed object and makes a prima facie case of fault against the
vessel. Logic and experience support this presumption:
The common sense behind the rule makes the burden a heavy one.
Such accidents simply do not occur in the ordinary course of things
unless the vessel has been mismanaged in some way. It is not
sufficient for the respondent to produce witnesses who testify that
as soon as the danger became apparent everything possible was
done to avoid an accident. The question remains, How then did the
collision occur? The answer must be either that, in spite of the
testimony of the witnesses, what was done was too little or too late
or, if not, then the vessel was at fault for being in a position in
which an unavoidable collision would occur.66 (Emphasis supplied,
citations omitted)
IV
We sustain the Court of Appeals' award to National Power
Corporation of P300,000.00 as temperate damages.
Article 2199 of the Civil Code spells out the basic requirement that
compensation by way of actual damages is awarded only to the
extent that pecuniary loss is proven:
Article 2199. Except as provided by law or by stipulation, one is
entitled to an adequate compensation only for such pecuniary loss
suffered by him as he has duly proved. Such compensation is
referred to as actual or compensatory damages.
The standard for proving pecuniary loss was explained in PNOC
Shipping and Transport Corp. v. Court of Appeals,67 as follows:
A party is entitled to adequate compensation only for such
pecuniary loss actually suffered and duly proved. Indeed, basic is
the rule that to recover actual damages, the amount of loss must
not only be capable of proof but must actually be proven with a
reasonable degree of certainty, premised upon competent proof or
best evidence obtainable of the actual amount thereof. The
claimant is duty-bound to point out specific facts that afford a basis
for measuring whatever compensatory damages are borne. A court
cannot merely rely on speculations, conjectures, or guesswork as to
the fact and amount of damages as well as hearsay or
uncorroborated testimony whose truth is suspect.68 (Citations
omitted)
National Power Corporation bewails the Court of Appeals'
observation that the basis of its claims was "not properly
receipted."69 It counters that it was able to show by "competent
testimonial and documentary evidence"70 that it must be
compensated for actual damages in the amount of P876,826.00. It
recalls these pieces of evidence:
a. Testimony of Mr. Nelson Homena, manager of
Power Barge 104 [who] testified on the damages
[sic] sustained by said barge as a result of the
ramming incident caused by the negligence of
M/V Lorcon Luzon.
b. The "Total Incidental Cost for Drydock and
Repair" prepared by the Philippine Shipyard and
Engineering Corporation ("PHILSECO") dated 14
October 1993 was presented which clearly
enumerated and itemized the actual damages
[sic] sustained by Power Barge 104 and repaired
by PHILSECO.
c. NPC Disbursement Voucher No. 093-121304 in
the amount of P6,775,839.02 covering a period
up to 14 January 1994 as proof of payment made
by [National Power Corporation] to PHILSECO
for drydocking repairs of Power Barge 104.71
However, Lorenzo Shipping pointed out fatal flaws in these pieces
of evidence. These flaws led the Court of Appeals to reconsider its
earlier award of actual damages to National Power Corporation.
Regarding the "Total Incidental Cost for Drydock and Repair,"
which was National Power Corporation's Exhibit "F" before the
Regional Trial Court, Lorenzo Shipping underscored that when the
Regional Trial Court ruled on National Power Corporation's Formal
Offer of Evidence, it denied the admission of Exhibit "F" for not
having been identified nor authenticated. It emphasized that no
witness came forward to attest to its authenticity and due
execution, let alone allowed himself or herself to be cross-
examined on these points.72
Regarding Nelson Homena's testimony, Lorenzo Shipping
emphasized that all he indicated was how he and a certain Mr. Neri
estimated the cost of damage to be at about P1,000,000.00.73
Regarding Disbursement Voucher No. 093-121304, Lorenzo
Shipping pointed out that while this attests to expenses paid to
PHILSECO, it was silent on the exact cost paid for the repair of
Power Barge 104.74
Nowhere in any of its submissions to this court—whether in its
Comment in G.R. No. 181683 or in its Petition and/or Reply in G.R.
No. 184568—did National Power Corporation rebut the flaws
noted by Lorenzo Shipping. Instead, it merely insisted on how
actual damages are awarded on the basis of the "best obtainable
evidence,"75 and how it has supposedly presented "competent
testimonial and documentary evidence"76 to prove its claims.
National Power Corporation's posturing fails to impress.
It is basic that any material presented as evidence will not be
considered unless duly admitted by the court before which it is
presented. Just as basic is that a private document offered as
authentic evidence shall not be admitted unless its due execution
and authenticity are established in the manner specified by Rule
132, Section 30 of the Revised Rules on Evidence:
Section 20. Proof of private document. - Before any private
document offered as authentic is received in evidence, its due
execution and authenticity must be proved
either:chanRoblesvirtualLawlibrary
(a) By anyone who saw the document executed or written; or
(b) By evidence of the genuineness of the signature or handwriting
of the maker.
Any other private document need only be identified as that which it
is claimed to be.
A bill of expenses, such as National Power Corporation's Exhibit
"F", is considered a private document as it does not fall under what
the Revised Rules on Evidence defines to be public
documents.77 Accordingly, for it to have been admitted by the
Regional Trial Court as authentic, Rule 132, Section 30 of the
Revised Rules on Evidence must have been complied with. National
Power Corporation failed in this respect. Thus, in the words of the
Regional Trial Court, it:
3. Denies the admission of Exhibit "F" and its submarkings for not
having been properly identified.78ChanRoblesVirtualawlibrary
It is of no consequence that the substance or contents of Exhibit "F"
are such that they specify an amount. It is of no consequence that it
is purportedly of such evidentiary weight that it could definitely
establish National Power Corporation's claims.
Admissibility of evidence and weight accorded to evidence are two
distinct affairs. Rule 128, Section 3 of the Revised Rules on
Evidence governs admissibility and provides that "[e]vidence is
admissible when it is relevant to the issue and is not excluded by
the law of these rules." When evidence has "such a relation to the
fact in issue as to induce belief in its existence or non-
existence,"79 it is said to be relevant. When evidence is not excluded
by law or by the Rules, it is said to be competent.
The weight accorded to evidence is properly considered only after
evidence has been admitted. To this end, courts evaluate evidence
in accordance with the rules stipulated by Rule 133 of the Revised
Rules on Evidence,80 consistent with basic precepts of rationality
and guided by judicially established standards. It is improper to
even speak of evidentiary weight when the piece of evidence in
question has not even been admitted.
Exhibit "F" was ruled to have been inadmissible for failing to
comply with Rule 132, Section 20 thus, it failed the standard of
competency. Consistent with this, reliance on National Power
Corporation's Exhibit "F" and its contents, so as to establish the
extent of National Power Corporation's pecuniary loss, is
misplaced. Not having been admitted, Exhibit "F" does not form
part of the body of evidence worthy of judicial consideration.
As National Power Corporation cannot rely on the "Total Incidental
Cost for Drydock and Repair," it is left to rely on the testimony of
Nelson Hpmena and on NPC Disbursement Voucher No. 093-
121304.
However, as pointed out by Lorenzo Shipping, these pieces of
evidence fall short of the standard required for proving pecuniary
loss, which shall be the basis for awarding actual damages. As
regards Nelson Homena's testimony, all he did was give an
estimate of P1,000,000.00. Certainly, a mere estimate does not
suffice as proof of actual pecuniary loss. As regards NPC
Disbursement Voucher No. 093-121304, all it attests to is a release
of funds in favor of PHILSECO in the total amount of P6,775,839.02,
covering no specific transaction but a period extending from
January 14, 1994.
V
Clearly, National Power Corporation failed to establish the precise
amount of pecuniary loss it suffered. Nevertheless, it remains that
Power Barge 104 sustained damage—which may be reckoned
financially—as a result of the MV Lorcon Luzon's ramming into it.
National Power Corporation suffered pecuniary loss, albeit its
precise extent or amount had not been established. Accordingly, we
sustain the Court of Appeals' conclusion that National Power
Corporation is entitled to temperate damages.
Articles 2224 and 2225 of the Civil Code govern temperate
damages:
Article 2224. Temperate or moderate damages, which are more
than nominal but less than compensatory damages, may be
recovered when the court finds that some pecuniary loss has been
suffered but its amount can not, from the nature of the case, be
provided with certainty.
Article 2225. Temperate damages must be reasonable under the
circumstances.
Banking on Article 2224's text, which references "the nature of the
case," Lorenzo Shipping asserts that temperate damages can be
awarded only in cases where pecuniary loss may have been
incurred, but whose exact amount, through the nature of the injury
suffered, e.g., injury to commercial credit or business goodwill,
cannot be ascertained. It argues that because the circumstances of
this case are such that National Power Corporation could have
pleaded and proved a specific—i.e., ascertained—amount of
pecuniary loss but failed to do so, temperate damages should not
be awarded.
Lorenzo Shipping is proposing an erroneous, narrow, and unduly
restrictive construction of Article 2224.
This case is not the first instance that this court was confronted
with the ostensibly limiting language of Article 2224. In Republic of
the Philippines v. Tuvera,81 this court already debunked the notion
that temperate damages are appropriate only in those cases in
which pecuniary loss cannot, "by its nature," be ascertained:
Temperate or moderate damages avail when "the court finds that
some pecuniary loss has been suffered but its amount can not from
the nature of the case, be proved with certainty." The textual
language might betray an intent that temperate damages do not
avail when the case, by its nature, is susceptible to proof of pecuniary
loss; and certainly the Republic could have proved pecuniary loss
herein. Still, jurisprudence applying Article 2224 is clear that
temperate damages may be awarded even in instances where
pecuniary loss could theoretically have been proved with certainty.
In a host of criminal cases, the Court has awarded temperate
damages to the heirs of the victim in cases where the amount of
actual damages was not proven due to the inadequacy of the
evidence presented by the prosecution. These cases include People
v. Oliano, People v. Suplito, People v. De la Tongga, People v. Briones,
and People v. Plazo. In Viron Transportation Co., Inc. v. Delos Santos,
a civil action for damages involving a vehicular collision, temperate
damages were awarded for the resulting damage sustained by a
cargo truck, after the plaintiff had failed to submit competent proof
of actual damages.82 (Citations omitted)
In resolving this case, we have had to sift through the parties'
competing claims as to who exactly is liable and to what extent.
Reduced to its fundamentals, however, this case remains to be
about damage sustained by property owned by National Power
Corporation when the MV Lorcon Luzon rammed into it. This
damage is susceptible to financial reckoning. Unfortunately for
National Power Corporation, it failed to establish the precise
amount of its pecuniary loss. This vice of precision
notwithstanding, it would be improper to completely turn a blind
eye to the loss suffered by National Power Corporation and to deny
it, as Lorenzo Shipping suggests, of any form of recompense. Under
these circumstances, we sustain the Court of Appeals' award of
temperate damages.

WHEREFORE, the consolidated Petitions are DENIED. The

Amended Decision dated February 12, 2008 and Resolution dated
September 17, 2008 of the Court of Appeals in CA-G.R. CV No.
76295 are AFFIRMED.

All monetary awards for damages shall earn interest at the legal
rate of 6% per annum from the date of the finality of this judgment
until fully paid.
SO ORDERED.chanro