Fabre vs CA

Facts:
Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They
used the bus principally in connection with a bus service for school children which they operated
in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him
out for two weeks, His job was to take school children to and from the St. Scholastica's College
in Malate, Manila.

On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF)
arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from
Manila to La Union and back in consideration of which private respondent paid petitioners the
amount of P3,000.00.

The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at
Carmen was under repair, sot hat petitioner Cabil, who was unfamiliar with the area (it being his
first trip to La Union), was forced to take a detour through the town of Baay in Lingayen,
Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway,
running on a south to east direction, which he described as "siete." The road was slippery
because it was raining, causing the bus, which was running at the speed of 50 kilometers per
hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the
road and rammed the fence of one Jesus Escano, then turned over and landed on its left side,
coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut
tree which it had hit fell on it and smashed its front portion.

Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor
of the bus and pinned down by a wooden seat which came down by a wooden seat which came
off after being unscrewed. It took three persons to safely remove her from this portion. She was
in great pain and could not move. The Lingayen police investigated the incident the next day,
November 3, 1984. On the basis of their finding they filed a criminal complaint against the
driver, Porfirio Cabil. The case was later filed with the Lingayen Regional Trial Court. Petitioners
Fabre paid Jesus Escano P1,500.00 for the damage to the latter's fence. On the basis of
Escano's affidavit of desistance the case against petitioners Fabre was dismissed.

Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro
Manila. As a result of the accident, she is now suffering from paraplegia and is permanently
paralyzed from the waist down.

In its decision dated April 17, 1989, the trial court found that:
No convincing evidence was shown that the minibus was properly checked for travel to a long
distance trip and that the driver was properly screened and tested before being admitted for
employment. Indeed, all the evidence presented have shown the negligent act of the defendants
which ultimately resulted to the accident subject of this case the Court hereby renders judgment
against defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles
2176 and 2180 of the Civil Code of the Philippines
Issue:
WHETHER OF NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY
PRIVATE RESPONDENTS.

Ruling:
Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption
that his employers, the Fabres, were themselves negligent in the selection and supervisions of
their employee.

Due diligence in selection of employees is not satisfied by finding that the applicant possessed a
professional driver's license. The employer should also examine the applicant for his
qualifications, experience and record of service. Due diligence in supervision, on the other
hand, requires the formulation of rules and regulations for the guidance of employees and
issuance of proper instructions as well as actual implementation and monitoring of consistent
compliance with the rules.

In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not
consider the fact that Cabil had been driving for school children only, from their homes to the St.
Scholastica's College in Metro Manila. They had hired him only after a two-week
apprenticeship. They had hired him only after a two-week apprenticeship. They had tested him
for certain matters, such as whether he could remember the names of the children he would be
taking to school, which were irrelevant to his qualification to drive on a long distance travel,
especially considering that the trip to La Union was his first. The existence of hiring procedures
and supervisory policies cannot be casually invoked to overturn the presumption of negligence
on the part of an employer.
PhilAmGen Insurance vs. Sweetlines
Facts:
It would appear that in or about March 1977, the vessel SS "VISHVA YASH" belonging to or
operated by the foreign common carrier, took on board at Baton Rouge, LA, two (2)
consignments of cargoes for shipment to Manila and later for transhipment to Davao City,
consisting of 600 bags Low Density Polyethylene 631 and another 6,400 bags Low Density
Polyethylene 647, both consigned to the order of Far East Bank and Trust Company of Manila,
with arrival notice to Tagum Plastics, Inc., Madaum, Tagum, Davao City. Said cargoes were
covered, respectively, by Bills of Lading Nos. 6 and 7 issued by the foreign common carrier
(Exhs. E and F). The necessary packing or Weight List (Exhs. A and B), as well as the
Commercial Invoices (Exhs. C and D) accompanied the shipment. The cargoes were likewise
insured by the Tagum Plastics Inc. with plaintiff Philippine American General Insurance Co.,
Inc., (Exh. G).

In the course of time, the said vessel arrived at Manila and discharged its cargoes in the Port of
Manila for transhipment to Davao City. For this purpose, the foreign carrier awaited and made
use of the services of the vessel called M/V "Sweet Love" owned and operated by defendant
interisland carrier.

Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These were
commingled with similar cargoes belonging to Evergreen Plantation and also Standfilco.

On May 15, 1977, the shipment(s) were discharged from the interisland carrier into the custody
of the consignee.

Therefore, of said shipment totalling 7,000 bags, originally contained in 175 pallets, only a total
of 5,820 bags were delivered to the consignee in good order condition, leaving a balance of
1,080 bags. Such loss from this particular shipment is what any or all defendants may be
answerable to.

As already stated, some bags were either shortlanded or were missing, and some of the 1,080
bags were torn, the contents thereof partly spilled or were fully/partially emptied, but, worse, the
contents thereof contaminated with foreign matters and therefore could no longer serve their
intended purpose. The position taken by the consignee was that even those bags which still had
some contents were considered as total losses as the remaining contents were contaminated
with foreign matters and therefore did not (sic) longer serve the intended purpose of the
material. Each bag was valued, taking into account the customs duties and other taxes paid as
well as charges and the conversion value then of a dollar to the peso, at P110.28 per bag.

Before trial, a compromise agreement was entered into between petitioners, as plaintiffs, and
defendants S.C.I. Line and F.E. Zuellig, upon the latter's payment of P532.65 in settlement of
the claim against them. Whereupon, the trial court in its order of August 12, 1981 granted
plaintiffs' motion to dismiss grounded on said amicable settlement and the case as to S.C.I. Line
and F.E. Zuellig was consequently "dismissed with prejudice and without pronouncement as to
costs." The trial court thereafter rendered judgment in favor of herein petitioners. Due to the
reversal on appeal by respondent court of the trial court's decision on the ground of prescription,
in effect dismissing the complaint of herein petitioners, and the denial of their motion for
reconsideration, petitioners filed the instant petition for review on certiorari

Issue:
Whether or not it was error for the Court of Appeals to reverse the appealed decision on the
supposed ground of prescription when SLI failed to adduce any evidence in support thereof and
that the bills of lading said to contain the shortened periods for filing a claim and for instituting a
court action against the carrier were never offered in evidence.

Ruling:
Respondent court correctly passed upon the matter of prescription, since that defense was so
considered and controverted by the parties. This issue may accordingly be taken cognizance of
by the court even if not inceptively raised as a defense so long as its existence is plainly
apparent on the face of relevant pleadings. In the case at bar, prescription as an affirmative
defense was seasonably raised by SLI in its answer, except that the bills of lading embodying
the same were not formally offered in evidence, thus reducing the bone of contention to whether
or not prescription can be maintained as such defense and, as in this case, consequently
upheld on the strength of mere references thereto.

As petitioners are suing upon SLI's contractual obligation under the contract of carriage as
contained in the bills of lading, such bills of lading can be categorized as actionable documents
which under the Rules must be properly pleaded either as causes of action or defenses, and the
genuineness and due execution of which are deemed admitted unless specifically denied under
oath by the adverse party. The rules on actionable documents cover and apply to both a cause
of action or defense based on said documents.

In the present case and under the aforestated assumption that the time limit involved is a
prescriptive period, respondent carrier duly raised prescription as an affirmative defense in its
answer setting forth paragraph 5 of the pertinent bills of lading which comprised the stipulation
thereon by parties, to wit:
5. Claims for shortage, damage, must be made at the time of delivery to consignee or agent, if
container shows exterior signs of damage or shortage. Claims for non-delivery, misdelivery, loss
or damage must be filed within 30 days from accrual. Suits arising from shortage, damage or
loss, non-delivery or misdelivery shall be instituted within 60 days from date of accrual of right of
action. Failure to file claims or institute judicial proceedings as herein provided constitutes
waiver of claim or right of action. In no case shall carrier be liable for any delay, non-delivery,
misdelivery, loss of damage to cargo while cargo is not in actual custody of carrier.

We find merit in respondent court's comments that petitioners failed to touch on the matter of
the non-presentation of the bills of lading in their brief and earlier on in the appellate
proceedings in this case, hence it is too late in the day to now allow the litigation to be
overturned on that score, for to do so would mean an over-indulgence in technicalities. Hence,
for the reasons already advanced, the non-inclusion of the controverted bills of lading in the
formal offer of evidence cannot, under the facts of this particular case, be considered a fatal
procedural lapse as would bar respondent carrier from raising the defense of prescription.
Petitioners' feigned ignorance of the provisions of the bills of lading, particularly on the time
limitations for filing a claim and for commencing a suit in court, as their excuse for
non-compliance therewith does not deserve serious attention.
Ang vs. American Steamship Agencies
Facts:
Yau Yue Commercial Bank Ltd. of Hongkong, referred to hereafter as Yau Yue agreed to sell
140 packages of galvanized steel durzinc sheets to one Herminio G. Teves (the date of said
agreement is not shown in the record here) for the sum of $32,458.26 (US).

Pursuant to said terms and arrangements, Yau Yue through Tokyo Boeki Ltd. of Tokyo, Japan,
shipped the articles at Yawata, Japan, on April 30, 1961 aboard the S.S. TENSAI MARU,
Manila, belonging to the Nissho Shipping Co., Ltd. of Japan, of which the American Steamship
Agencies, Inc. is the agent in the Philippines, under a shipping agreement, Bill of Lading No.
WM-2 dated April 30, 1961, consigned "to order of the shipper with Herminio G. Teves as the
party to be notified of the arrival of the 140 packages of galvanized steel durzinc sheets in
Manila.

The bill of lading was indorsed to the order of and delivered to Yau Yue by the shipper. Upon
receipt thereof, Yau Yue drew a demand draft together with the bill of lading against Herminio
G. Teves, through the Hongkong & Shanghai Bank.

When the articles arrived in Manila on or about May 9, 1961, Hongkong & Shanghai Bank
notified Teves, the "notify party" under the bill of lading, of the arrival of the goods and
requested payment of the demand draft representing the purchase price of the articles. Teves,
however, did not pay the demand draft, prompting the bank to make the corresponding protest.
The bank likewise returned the bill of lading and demand draft to Yau Yue which indorsed the
said bill of lading to Domingo Ang.

Meanwhile, despite his non-payment of the purchase price of the articles, Teves was able to
obtain a bank guaranty in favor of the American Steamship Agencies, Inc., as carrier's agent, to
the effect that he would surrender the original and negotiable bill of lading duly indorsed by Yau
Yue. On the strength of this guaranty, Teves succeeded in securing a "Permit To Deliver
Imported Articles" from the carrier's agent, which he presented to the Bureau of Customs which
in turn released to him the articles covered by the bill of lading.

Subsequently, Domingo Ang claimed for the articles from American Steamship Agencies, Inc.,
by presenting the indorsed bill of lading, but he was informed by the latter that it had delivered
the articles to Teves.

On October 30, 1963 Domingo Ang filed a complaint in the Court of First Instance of Manila
against the American Steamship Agencies, Inc., for having allegedly wrongfully delivered and/or
converted the goods covered by the bill of lading belonging to plaintiff Ang, to the damage and
prejudice of the latter.

On December 2, 1963, defendant filed a motion to dismiss upon the ground that plaintiff's cause
of action has prescribed under the Carriage of Goods by Sea Act (Commonwealth Act No. 65),
more particularly Section 3 (6), paragraph 4, which provides:
In any event, the carrier and the ship shall be discharged from all liability in respect to loss or
damage unless suit is brought within one year, after delivery of the goods or the date when the
goods should have been delivered.

It argued that the cargo should have been delivered to the person entitled to the delivery thereof
(meaning the plaintiff) on May 9, 1961, the date of the vessel's arrival in Manila, and that even
allowing a reasonable time (even one month) after such arrival within which to make delivery,
still, the action commenced on October 30, 1963 was filed beyond the prescribed period of one
year. By order dated December 21, 1963, copy of which was received by plaintiff on December
26, 1963, the lower court dismissed the action on the ground of prescription.

Issue:
Has plaintiff-appellant's cause of action prescribed under Section 3(6), paragraph 4 of the
Carriage of Goods by Sea Act?

Ruling:
As defined in the Civil Code and as applied to Section 3 (6) paragraph 4 of the Carriage of
Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by
the shipper of the goods because the same had perished, gone out of commerce, or
disappeared that their existence is unknown or they cannot be recovered. It does not include a
situation where there was indeed delivery — but delivery to the wrong person, or a misdelivery,
as alleged in the complaint in this case. From the allegations of the complaint, therefore, the
goods cannot be deemed "lost". They were delivered to Herminio G. Teves, so that there can
only be either delivery, if Teves really was entitled to receive them, or misdelivery, if he was not
so entitled. It is not for Us now to resolve whether or not delivery of the goods to Teves was
proper, that is, whether or not there was rightful delivery or misdelivery.

The point that matters here is that the situation is either delivery or misdelivery, but not
nondelivery. Thus, the goods were either rightly delivered or misdelivered, but they were not
lost. There being no loss or damage to the goods, the aforequoted provision of the Carriage of
Good by Sea Act stating that "In any event, the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within one year after delivery of the
goods or the date when the goods should have been delivered," does not apply. The reason is
not difficult to see. Said one-year period of limitation is designed to meet the exigencies of
maritime hazards. In a case where the goods shipped were neither last nor damaged in transit
but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the
situation is different, and the special need for the short period of limitation in cases of loss or
damage caused by maritime perils does not obtain. It follows that for suits predicated not upon
loss or damage but on alleged misdelivery (or conversion) of the goods, the applicable rule on
prescription is that found in the Civil Code, namely, either ten years for breach of a written
contract or four years for quasi-delict. (Arts. 1144[1], 1146, Civil Code) In either case, plaintiff's
cause of action has not vet prescribed, since his right of action would have accrued at the
earliest on May 9, 1961 when the ship arrived in Manila and he filed suit on October 30, 1963.
Mitsui vs. CA
Facts:
Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the Philippines by its
agent, Magsaysay Agencies. It entered into a contract of carriage through Meister Transport,
Inc., an international freight forwarder, with private respondent Lavine Loungewear
Manufacturing Corporation to transport goods of the latter from Manila to Le Havre, France.
Petitioner undertook to deliver the goods to France 28 days from initial loading. On July 24,
1991, petitioner's vessel loaded private respondent's container van for carriage at the said port
of origin.

However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with the result
that the shipment arrived in Le Havre only on November 14, 1991. The consignee allegedly paid
only half the value of the said goods on the ground that they did not arrive in France until the "off
season" in that country. The remaining half was allegedly charged to the account of private
respondent which in turn demanded payment from petitioner through its agent.

As petitioner denied private respondent's claim, the latter filed a case in the Regional Trial Court
on April 14, 1992. In the original complaint, private respondent impleaded as defendants Meister
Transport, Inc. and Magsaysay Agencies, Inc., the latter as agent of petitioner Mitsui O.S.K.
Lines Ltd. On May 20, 1993, it amended its complaint by impleading petitioner as defendant in
lieu of its agent. The parties to the case thus became private respondent as plaintiff, on one
side, and Meister Transport Inc. and petitioner Mitsui O.S.K. Lines Ltd. as represented by
Magsaysay Agencies, Inc., as defendants on the other. Petitioner filed a motion to dismiss
alleging that the claim against it had prescribed under the Carriage of Goods by Sea Act.

The Regional Trial Court, as aforesaid, denied petitioner's motion as well as its subsequent
motion for reconsideration. On petition for certiorari, the Court of Appeals sustained the trial
court's orders.

Issue:
whether private respondent's action is for "loss or damage" to goods shipped, within the
meaning of §3(6) of the Carriage of Goods by Sea Act (COGSA).

Ruling:
In Ang v. American Steamship Agencies, Inc., the question was whether an action for the value
of goods which had been delivered to a party other than the consignee is for "loss or damage"
within the meaning of §3(6) of the COGSA. It was held that there was no loss because the
goods had simply been misdelivered. "Loss" refers to the deterioration or disappearance of
goods. In the case at bar, there is neither deterioration nor disappearance nor destruction of
goods caused by the carrier's breach of contract. Whatever reduction there may have been in
the value of the goods is not due to their deterioration or disappearance because they had been
damaged in transit. We conclude by holding that as the suit below is not for "loss or damage" to
goods contemplated in §3(6), the question of prescription of action is governed not by the
COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period of ten years.
Fil Merchants vs. Alejandro
Facts:
On August 3, 1977, plaintiff Choa Tiek Seng filed a complaint, docketed as Civil Case No.
109911, against the petitioner before the then Court of First Instance of Manila for recovery of a
sum of money under the marine insurance policy on cargo. Mr. Choa alleged that the goods he
insured with the petitioner sustained loss and damage in the amount of P35,987.26. The vessel
SS Frotario which was owned and operated by private respondent Frota Oceanica Brasiliera,
(Frota) discharged the goods at the port of Manila on December 13, 1976. The said goods were
delivered to the arrastre operator E. Razon, Inc., on December 17, 1976 and on the same date
were received by the consignee-plaintiff.

On December 19, 1977, the petitioner filed its amended answer disclaiming liability, imputing
against the plaintiff the commission of fraud and counterclaiming for damages.

On January 9, 1978, the petitioner filed a third-party complaint against the carrier, private
respondent Frota and the arrastre contractor, E. Razon, Inc. for indemnity, subrogation, or
reimbursement in the event that it is held liable to the plaintiff.

Meanwhile, on August 10, 1977, Joseph Benzon Chua filed a similar complaint against the
petitioner which was docketed as Civil Case No. 110061, for recovery under the marine
insurance policy for cargo alleging that the goods insured with the petitioner sustained loss and
damage in the sum of P55,996.49.

The goods were delivered to the plaintiff-consignee on or about January 25-28, 1977.

On May 31, 1978, the petitioner filed its answer. On September 28, 1978, it filed an amended
third-party complaint against respondent carrier, the Australia-West Pacific Line
(Australia-West).

In both cases, the private respondents filed their respective answers and subsequently filed a
motion for preliminary hearing on their affirmative defense of prescription. The private
respondents alleged in their separate answers that the petitioner is already barred from filing a
claim because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed
within one year after delivery of the goods or the date when the goods should have been
delivered. On April 30, 1980, the respondent judge in Civil Case No. 109911, upheld respondent
Frota and dismissed the petitioner's third-party complaint. Likewise, on August 31, 1982, the
respondent judge in Civil Case No. 110061 dismissed the petitioner's third-party complaint
against respondent Australia-West on the ground that the same was filed beyond the
prescriptive period provide in Section 3 (6) of the Carriage of Goods by Sea Act of 1936.

Issue:
whether or not the one-year period within which to file a suit against the carrier and theship, in
case of damage or loss as provided for in the Carriage of Goods by Sea Act applies to the
insurer of the goods.
Ruling:
Clearly, the coverage of the Act includes the insurer of the goods. Otherwise, what the Act
intends to prohibit after the lapse of the one-year prescriptive period can be done indirectly by
the shipper or owner of the goods by simply filing a claim against the insurer even after the
lapse of one year. This would be the result if we follow the petitioner's argument that the insurer
can, at any time, proceed against the carrier and the ship since it is not bound by the time-bar
provision. In this situation, the one-year limitation will be practically useless. This could not have
been the intention of the law which has also for its purpose the protection of the carrier and the
ship from fraudulent claims by having "matters affecting transportation of goods by sea be
decided in as short a time as possible" and by avoiding incidents which would "unnecessarily
extend the period and permit delays in the settlement of questions affecting the transportation."

We likewise agree with the respondents that the third-party complaint of the petitioner cannot be
considered to have been filed upon the filing of the main action because although it can be said
that a third-party complaint is but ancilliary to the main action (Eastern Assurance and Surety
Corporation v. Cui 105 SCRA 622), it cannot abridge, enlarge, nor modify the substantive rights
of any litigant. It creates no substantive rights. Thus, unless there is some substantive basis for
the third-party Plaintiff's claim, he cannot utilized the filing of such action to acquire any right of
action against the third-party defendant. (See also Francisco, The Revised Rules of Court in the
Philippines, Vol. 1, 1973 Ed., p. 507). The petitioner can only rightfully file a third-party
complaint against the respondents if, in the first place, it can still validly maintain an action
against the latter.

In the case at bar, the petitioner's action has prescribed under the provisions of the Carriage of
Goods by Sea Act. Hence, whether it files a third-party complaint or chooses to maintain an
independent action against herein respondents is of no moment. Had the plaintiffs in the civil
cases below filed an action against the petitioner after the one-year prescriptive period, then the
latter could have successfully denied liability on the ground that by their own doing, the plaintiffs
had prevented the petitioner from being subrogated to their respective rights against the herein
respondents by filing a suit after the one-year prescriptive period.
Mayer Steel Pipe Corp. vs. CA
Facts:
In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted
petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes
and fittings. From August to October, 1983, Mayer shipped the pipes and fittings to Hongkong
as evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC-1020,
MSPC-1017 and MSPC-1022.

Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private
respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance
Corp. (Charter). The pipes and fittings covered by Invoice Nos. MSPC-1014, 1015 and 1025
with a total amount of US$212,772.09 were insured with respondent South Sea, while those
covered by Invoice Nos. 1020, 1017 and 1022 with a total amount of US$149,470.00 were
insured with respondent Charter.

Petitioners Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as
third-party inspector to examine whether the pipes and fittings are manufactured in accordance
with the specifications in the contract. Industrial Inspection certified all the pipes and fittings to
be in good order condition before they were loaded in the vessel. Nonetheless, when the goods
reached Hongkong, it was discovered that a substantial portion thereof was damaged.

Petitioners filed a claim against private respondents for indemnity under the insurance contract.
Respondent Charter paid petitioner Hongkong the amount of HK$64,904.75. Petitioners
demanded payment of the balance of HK$299,345.30 representing the cost of repair of the
damaged pipes. Private respondents refused to pay because the insurance surveyor's report
allegedly showed that the damage is a factory defect.

On April 17, 1986, petitioners filed an action against private respondents to recover the sum of
HK$299,345.30. For their defense, private respondents averred that they have no obligation to
pay the amount claimed by petitioners because the damage to the goods is due to factory
defects which are not covered by the insurance policies.

The trial court ruled in favor of petitioners. It found that the damage to the goods is not due to
manufacturing defects. It also noted that the insurance contracts executed by petitioner Mayer
and private respondents are "all risks" policies which insure against all causes of conceivable
loss or damage.

Private respondents elevated the case to respondent Court of Appeals. Respondent court
affirmed the finding of the trial court that the damage is not due to factory defect and that it was
covered by the "all risks" insurance policies issued by private respondents to petitioner Mayer.
However, it set aside the decision of the trial court and dismissed the complaint on the ground of
prescription. It held that the action is barred under Section 3(6) of the Carriage of Goods by Sea
Act since it was filed only on April 17, 1986, more than two years from the time the goods were
unloaded from the vessel.
Issue:
Whether or not respondent Court of Appeals erred in holding that petitioners' cause of action
had already prescribed on the mistaken application of the Carriage of Goods by Sea Act

Ruling:
Respondent court erred in applying Section 3(6) of the Carriage of Goods by Sea Act.

Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be
discharged from all liability for loss or damage to the goods if no suit is filed within one year after
delivery of the goods or the date when they should have been delivered. Under this provision,
only the carrier's liability is extinguished if no suit is brought within one year. But the liability of
the insurer is not extinguished because the insurer's liability is based not on the contract of
carriage but on the contract of insurance. A close reading of the law reveals that the Carriage of
Goods by Sea Act governs the relationship between the carrier on the one hand and the
shipper, the consignee and/or the insurer on the other hand. It defines the obligations of the
carrier under the contract of carriage. It does not, however, affect the relationship between the
shipper and the insurer. The latter case is governed by the Insurance Code.

The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the
insurer which filed a claim against the carrier for reimbursement of the amount it paid to the
shipper. In the case at bar, it was the shipper which filed a claim against the insurer. The basis
of the shipper's claim is the "all risks" insurance policies issued by private respondents to
petitioner Mayer.

The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the
shipper, the consignee or the insurer. When the court said in Filipino Merchants that Section
3(6) of the Carriage of Goods by Sea Act applies to the insurer, it meant that the insurer, like the
shipper, may no longer file a claim against the carrier beyond the one-year period provided in
the law. But it does not mean that the shipper may no longer file a claim against the insurer
because the basis of the insurer's liability is the insurance contract. An insurance contract is a
contract whereby one party, for a consideration known as the premium, agrees to indemnify
another for loss or damage which he may suffer from a specified peril. An "all risks" insurance
policy covers all kinds of loss other than those due to willful and fraudulent act of the insured.
Thus, when private respondents issued the "all risks" policies to petitioner Mayer, they bound
themselves to indemnify the latter in case of loss or damage to the goods insured. Such
obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code.
Dole Phils. vs. Maritime Company of the Phils.
Facts:
The cargo subject of the instant case was discharged in Dadiangas unto the custody of the
consignee on December 18, 1971. The corresponding claim for the damages sustained by the
cargo was filed by the plaintiff with the defendant vessel on May 4, 1972. On June 11, 1973 the
plaintiff filed a complaint in the Court of First Instance of Manila, docketed therein as Civil Case
No. 91043, embodying three (3) causes of action involving three (3) separate and different
shipments. The third cause of action therein involved the cargo now subject of this present
litigation; On December 11, 1974, Judge Serafin Cuevas issued an Order in Civil Case No.
91043 dismissing the first two causes of action in the aforesaid case with prejudice and without
pronouncement as to costs because the parties had settled or compromised the claims involved
therein. The third cause of action which covered the cargo subject of this case now was likewise
dismissed but without prejudice as it was not covered by the settlement. The dismissal of that
complaint containing the three causes of action was upon a joint motion to dismiss filed by the
parties. Because of the dismissal of the (complaint in Civil Case No. 91043 with respect to the
third cause of action without prejudice, plaintiff instituted this present complaint on January 6,
1975. To the complaint in the subsequent action Maritime filed an answer pleading inter alia the
affirmative defense of prescription under the provisions of the Carriage of Goods by Sea Act,
and following pre-trial, moved for a preliminary hearing on said defense. The Trial Court
granted the motion, scheduling the preliminary hearing on April 27, 1977. The record before the
Court does not show whether or not that hearing was held, but under date of May 6, 1977,
Maritime filed a formal motion to dismiss invoking once more the ground of prescription. The
motion was opposed by Dole and the Trial Court, after due consideration, resolved the matter
in favor of Maritime and dismissed the complaint Dole sought a reconsideration, which was
denied, and thereafter took the present appeal from the order of dismissal.

Issue:
whether or not Article 1155 of the Civil Code providing that the prescription of actions is
interrupted by the making of an extrajudicial written demand by the creditor is applicable to
actions brought under the Carriage of Goods by Sea Act which, in its Section 3, paragraph 6

Ruling:
Moreover, no different result would obtain even if the Court were to accept the proposition that a
written extrajudicial demand does toll prescription under the Carriage of Goods by Sea Act. The
demand in this instance would be the claim for damage-filed by Dole with Maritime on May 4,
1972. The effect of that demand would have been to renew the one- year prescriptive period
from the date of its making. Stated otherwise, under Dole's theory, when its claim was received
by Maritime, the one-year prescriptive period was interrupted — "tolled" would be the more
precise term — and began to run anew from May 4, 1972, affording Dole another period of one
(1) year counted from that date within which to institute action on its claim for damage.
Unfortunately, Dole let the new period lapse without filing action. It instituted Civil Case No.
91043 only on June 11, 1973, more than one month after that period has expired and its right of
action had prescribed.
Dole's contention that the prescriptive period "*** remained tolled as of May 4, 1972 *** (and
that) in legal contemplation *** (the) case (Civil Case No. 96353) was filed on January 6, 1975
*** well within the one-year prescriptive period in Sec. 3(6) of the Carriage of Goods by Sea
Act." 16 equates tolling with indefinite suspension. It is clearly fallacious and merits no
consideration.
Insurance Company of North America v. Asian Terminals, Inc.,
Facts:
On November 9, 2002, Macro-Lite Korea Corporation shipped to San Miguel Corporation,
through M/V "DIMI P" vessel, one hundred eighty-five (185) packages (231,000 sheets) of
electrolytic tin free steel, complete and in good order condition and covered by Bill of Lading No.
POBUPOHMAN20638. The shipment had a declared value of US$169,850.35 and was insured
with petitioner Insurance Company of North America against all risks under Marine Policy No.
MOPA-06310.

The carrying vessel arrived at the port of Manila on November 19, 2002, and when the shipment
was discharged therefrom, it was noted that seven (7) packages thereof were damaged and in
bad order. The shipment was then turned over to the custody of respondent Asian Terminals,
Inc. (ATI) on November 21, 2002 for storage and safekeeping pending its withdrawal by the
consignee's authorized customs broker, R.V. Marzan Brokerage Corp. (Marzan).

On November 22, 23 and 29, 2002, the subject shipment was withdrawn by Marzan from the
custody of respondent. On November 29, 2002, prior to the last withdrawal of the shipment, a
joint inspection of the said cargo was conducted per the Request for Bad Order Survey dated
November 29, 2002, and the examination report, which was written on the same request,
showed that an additional five (5) packages were found to be damaged and in bad order.

On January 6, 2003, the consignee, San Miguel Corporation, filed separate claims against
respondent and petitioner for the damage to 11,200 sheets of electrolytic tin free steel. The
petitioner, as insurer of the said cargo, paid the consignee the amount of ₱431,592.14 for the
damage caused to the shipment, as evidenced by the Subrogation Receipt dated January 8,
2004. Thereafter, petitioner, formally demanded reparation against respondent. As respondent
failed to satisfy its demand, petitioner filed an action for damages with the RTC of Makati City.

The trial court held:

In the case at bar, the records show that the shipment was delivered to the consignee on 22, 23
and 29 of November 2002. The plaintiff took almost a year to approve and pay the claim of its
assured, San Miguel, despite the fact that it had initially received the latter's claim as well as the
inspection report and survey report of McLarens as early as January 2003. The
assured/consignee had only until November of 2003 within which to file a suit against the
defendant. However, the instant case was filed only on September 7, 2005 or almost three (3)
years from the date the subject shipment was delivered to the consignee. The plaintiff, as
insurer of the shipment which has paid the claim of the insured, is subrogated to all the rights of
the said insured in relation to the reimbursement of such claim. As such, the plaintiff cannot
acquire better rights than that of the insured. Thus, the plaintiff has no one but itself to blame for
having acted lackadaisically on San Miguel's claim.

Issue:
whether or not the one-year prescriptive period for filing a suit under the COGSA applies to this
action for damages against respondent arrastre operator
Ruling:
Based on the Contract above, the consignee has a period of thirty (30) days from the date of
delivery of the package to the consignee within which to request a certificate of loss from the
arrastre operator. From the date of the request for a certificate of loss, the arrastre operator has
a period of fifteen (15) days within which to issue a certificate of non-delivery/loss either actually
or constructively. Moreover, from the date of issuance of a certificate of non-delivery/loss, the
consignee has fifteen (15) days within which to file a formal claim covering the loss, injury,
damage or non-delivery of such goods with all accompanying documentation against the
arrastre operator.

In other words, what the Court considered as the crucial factor in declaring the defendant
arrastre operator liable for the loss occasioned, in the Fireman's Fund case, was the fact that
defendant, by virtue of the consignee's request for a bad order examination, had been able
formally to verify the existence and extent of its liability within fifteen (15) days from the date of
discharge of the shipment from the carrying vessel -- i.e., within the same period stipulated
under the Management Contract for the consignee to file a formal claim. That a formal claim had
been filed by the consignee beyond the stipulated period of fifteen (15) days neither relieved
defendant of liability nor excused payment thereof, the purpose of a formal claim, as
contemplated in Consunji, having already been fully served and satisfied by the consignee's
timely request for, and the eventual result of, the bad order examination of the nylon
merchandise shipped.

Relating the doctrine of Fireman's Fund to the case at bar, the record shows that delivery to the
warehouse of consignee Monterey Farms Corporation of the 5,974 bags of soybean meal, had
been completed by respondent Razon (arrastre operator) on 9 July 1974. On that same day, a
bad order examination of the goods delivered was requested by the consignee and was, in fact,
conducted by respondent Razon's own inspector, in the presence of representatives of both the
Bureau of Customs and the consignee. The ensuing bad order examination report — what the
trial court considered a "certificate of loss" — confirmed that out of the 5,974 bags of soybean
meal loaded on board the M/S "Zamboanga" and shipped to Manila, 173 bags had been
damaged in transitu while an additional 111 bags had been damaged after the entire shipment
had been discharged from the vessel and placed in the custody of respondent Razon. Hence,
as early as 9 July 1974 (the date of last delivery to the consignee's warehouse), respondent
Razon had been able to verify and ascertain for itself not only the existence of its liability to the
consignee but, more significantly, the exact amount thereof - i.e., ₱5,746.61, representing the
value of 111 bags of soybean meal. We note further that such verification and ascertainment of
liability on the part of respondent Razon, had been accomplished "within thirty (30) days from
the date of delivery of last package to the consignee, broker or importer" as well as "within
fifteen (15) days from the date of issuance by the Contractor [respondent Razon] of a certificate
of loss, damage or injury or certificate of non-delivery" — the periods prescribed under Article
VI, Section 1 of the Management Contract here involved, within which a request for certificate of
loss and a formal claim, respectively, must be filed by the consignee or his agent. Evidently,
therefore, the rule laid down by the Court in Fireman's Fund finds appropriate application in the
case at bar.
In this case, the records show that the goods were deposited with the arrastre operator on
November 21, 2002. The goods were withdrawn from the arrastre operator on November 22, 23
and 29, 2002. Prior to the withdrawal on November 29, 2002, the broker of the importer,
Marzan, requested for a bad order survey in the presence of a Customs representative and
other parties concerned. The joint inspection of cargo was conducted and it was found that an
additional five (5) packages were found in bad order as evidenced by the document entitled
Request for Bad Order Survey dated November 29, 2002, which document also contained the
examination report, signed by the Custom’s representative, Supervisor/Superintendent,
consignee’s representative, and the ATI Inspector.

Thus, as early as November 29, 2002, the date of the last withdrawal of the goods from the
arrastre operator, respondent ATI was able to verify that five (5) packages of the shipment were
in bad order while in its custody. The certificate of non-delivery referred to in the Contract is
similar to or identical with the examination report on the request for bad order survey. Like in the
case of New Zealand Insurance Company Ltd. v. Navarro, the verification and ascertainment of
liability by respondent ATI had been accomplished within thirty (30) days from the date of
delivery of the package to the consignee and within fifteen (15) days from the date of issuance
by the Contractor (respondent ATI) of the examination report on the request for bad order
survey. Although the formal claim was filed beyond the 15-day period from the issuance of the
examination report on the request for bad order survey, the purpose of the time limitations for
the filing of claims had already been fully satisfied by the request of the consignee’s broker for a
bad order survey and by the examination report of the arrastre operator on the result thereof, as
the arrastre operator had become aware of and had verified the facts giving rise to its liability.
Hence, the arrastre operator suffered no prejudice by the lack of strict compliance with the
15-day limitation to file the formal complaint.
Benjamin Cua v. Wallen Philippines Shipping, Inc.
Facts:
On November 12, 1990, Cua filed a civil action for damages against Wallem and Advance
Shipping before the RTC of Manila. Cua sought the payment of P2,030,303.52 for damage to
218 tons and for a shortage of 50 tons of shipment of Brazilian Soyabean consigned to him, as
evidenced by Bill of Lading No. 10. He claimed that the loss was due to the respondents’ failure
to observe extraordinary diligence in carrying the cargo. Advance Shipping (a foreign
corporation) was the owner and manager of M/V Argo Trader that carried the cargo, while
Wallem was its local agent. In the meantime, Wallem filed its own motion to dismiss, raising the
sole ground of prescription. Section 3(6) of the Carriage of Goods by Sea Act (COGSA)
provides that "the carrier and the ship shall be discharged from all liability in respect of loss or
damage unless suit is brought within one year after delivery of the goods." Wallem alleged that
the goods were delivered to Cua on August 16, 1989, but the damages suit was instituted only
on November 12, 1990 – more than one year than the period allotted under the COGSA. Since
the action was filed beyond the one year prescriptive period, Wallem argued that Cua’s action
has been barred. After trial on the merits, the RTC issued its decision on December 28, 1995,
ordering the respondents jointly and severally liable to pay as damages to Cua. The CA found
the respondents’ claim of prescription meritorious after finding that the August 10, 1990 telex
message, extending the period to file an action, was neither attached to Cua’s opposition to
Wallem’s motion to dismiss, nor presented during trial. The CA ruled that there was no basis for
the RTC to conclude that the prescriptive period was extended by the parties’ agreement.
Hence, it set aside the RTC decision and dismissed Cua’s complaint.

Issue:
whether Cua’s claim for payment of damages against the respondents has prescribed.

Ruling:
The COGSA is the applicable law for all contracts for carriage of goods by sea to and from
Philippine ports in foreign trade; it is thus the law that the Court shall consider in the present
case since the cargo was transported from Brazil to the Philippines.Under Section 3(6) of the
COGSA, the carrier is discharged from liability for loss or damage to the cargo "unless the suit is
brought within one year after delivery of the goods or the date when the goods should have
been delivered." Jurisprudence, however, recognized the validity of an agreement between the
carrier and the shipper/consignee extending the one-year period to file a claim.

The vessel MV Argo Trader arrived in Manila on July 8, 1989; Cua’s complaint for damages was
filed before the RTC of Manila on November 12, 1990. Although the complaint was clearly filed
beyond the one-year period, Cua additionally alleged in his complaint (under paragraph 11) that
"the defendants x x x agreed to extend the time for filing of the action up to November 12,
1990."

A specific denial is made by specifying each material allegation of fact, the truth of which the
defendant does not admit and, whenever practicable, setting forth the substance of the matters
upon which he relies to support his denial. The purpose of requiring the defendant to make a
specific denial is to make him disclose the matters alleged in the complaint which he succinctly
intends to disprove at the trial, together with the matter which he relied upon to support the
denial.

A review of the pleadings submitted by the respondents discloses that they failed to specifically
deny Cua’s allegation of an agreement extending the period to file an action to November 12,
1990. Wallem’s motion to dismiss simply referred to the fact that Cua’s complaint was filed more
than one year from the arrival of the vessel, but it did not contain a denial of the extension.
Advance Shipping’s motion to dismiss, on the other hand, focused solely on its contention that
the action was premature for failure to first undergo arbitration. While the joint answer submitted
by the respondents denied Cua’s allegation of an extension, they made no further statement
other than a bare and unsupported contention that Cua’s "complaint is barred by prescription
and/or laches[.]" The respondents did not provide in their joint answer any factual basis for their
belief that the complaint had prescribed.

We cannot consider the respondents’ discussion on prescription in their Memorandum filed with
the RTC, since their arguments were based on Cua’s supposed failure to comply with Article
366 of the Code of Commerce, not Section 3(6) of the COGSA – the relevant and material
provision in this case. Article 366 of the Code of Commerce requires that a claim be made with
the carrier within 24 hours from the delivery of the cargo; the respondents alleged that they were
informed of the damage and shortage only on September 13, 1989, months after the vessel’s
arrival in Manila.

Since the COGSA is the applicable law, the respondents’ discussion to support their claim of
prescription under Article 366 of the Code of Commerce would, therefore, not constitute a
refutation of Cua’s allegation of extension. Given the respondents’ failure to specifically deny the
agreement on the extension of the period to file an action, the Court considers the extension of
the period as an admitted fact.

STATEMENT OF THE CASE

1. This case was filed by [the] plaintiff on 11 November 1990 within the extended period agreed
upon by the parties to file suit. (emphasis ours)

The above statement is a clear admission by the respondents that there was indeed an
agreement to extend the period to file the claim. In light of this admission, it would be
unnecessary for Cua to present a copy of the August 10, 1990 telex message to prove the
existence of the agreement. Thus, Cua timely filed a claim for the damage to and shortage of
the cargo.