THIRD DIVISION INSURANCE COMPANY OFNORTH AMERICA, Petitioner, G.R. No. 180784 Present: - versus CARPIO, * J.

, PERALTA, Acting Chairperson, ABAD, PEREZ, ** and MENDOZA, JJ.

ASIAN TERMINALS, INC., Respondent.

Promulgated: February 15, 2012 x-------------------------------------------------x

DECISION

PERALTA, J.: This is a petition for review on certiorari[1] of the Decision of the Regional Trial Court (RTC) of Makati City, Branch 138 (trial court) in Civil Case No. 05-809 and its Order dated December 4, 2007 on the ground that the trial court committed reversible error of law. The trial court dismissed petitioners complaint for actual damages on the ground of prescription under the Carriage of Goods by Sea Act (COGSA). The facts are as follows: On November 9, 2002, Macro-Lite Korea Corporation shipped to San Miguel Corporation, 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.[2] The shipment had a declared value of US$169,850.35[3] and was insured with petitioner Insurance Company of North America against all risks under Marine Policy No. MOPA-06310.[4] The carrying vessel arrived at the port of Manila on November 19, 2002, and when the shipment was discharged therefrom, it was noted that seven (7) packages thereof were damaged and in bad order. [5] The shipment was then turned over to the custody of respondent Asian Terminals, Inc. (ATI) on November 21, 2002 for storage and safekeeping pending its withdrawal by the consignee's authorized customs broker, R.V. Marzan Brokerage Corp. (Marzan). On November 22, 23 and 29, 2002, the subject shipment was withdrawn by Marzan from the custody of respondent. On November 29, 2002, prior to the last withdrawal of the shipment, a joint inspection of the said cargo was conducted per the Request for Bad Order Survey [6] dated November 29, 2002, and the examination report, which

was written on the same request, showed that an additional five (5) packages were found to be damaged and in bad order. On January 6, 2003, the consignee, San Miguel Corporation, filed separate claims [7] against respondent and petitioner for the damage to 11,200 sheets of electrolytic tin free steel. Petitioner engaged the services of an independent adjuster/surveyor, BA McLarens Phils., Inc., to conduct an investigation and evaluation on the claim and to prepare the necessary report.[8] BA McLarens Phils., Inc. submitted to petitioner an Survey Report[9] dated January 22, 2003 and another report[10] dated May 5, 2003 regarding the damaged shipment. It noted that out of the reported twelve (12) damaged skids, nine (9) of them were rejected and three (3) skids were accepted by the consignees representative as good order. BA McLarens Phils., Inc. evaluated the total cost of damage to the nine (9) rejected skids (11,200 sheets of electrolytic tin free steel) to be P431,592.14. The petitioner, as insurer of the said cargo, paid the consignee the amount of P431,592.14 for the damage caused to the shipment, as evidenced by the Subrogation Receipt dated January 8, 2004. Thereafter, petitioner, formally demanded reparation against respondent. As respondent failed to satisfy its demand, petitioner filed an action for damages with the RTC of Makati City. The trial court found, thus: The Court finds that the subject shipment indeed suffered additional damages. The Request for Bad Order Survey No. 56422 shows that prior to the turn over of the shipment from the custody of ATI to the consignee, aside from the seven (7) packages which were already damaged upon arrival at the port of Manila, five (5) more packages were found with "dent, cut and crumple" while in the custody of ATI. This document was issued by ATI and was jointly executed by the representatives of ATI, consignee and customs, and the Shed Supervisor. Thus, ATI is now estopped from claiming that there was no additional damage suffered by the shipment. It is, therefore, only logical to conclude that the damage was caused solely by the negligence of defendant ATI. This evidence of the plaintiff was refuted by the defendant by merely alleging that "the damage to the 5 Tin Plates is only in its external packaging. However, the fact remains that the consignee has rejected the same as total loss for not being suitable for their intended purpose. In addition, the photographs presented by the plaintiff show that the shipment also suffered severe dents and some packages were even critically crumpled. [11]

As to the extent of liability, ATI invoked the Contract for Cargo Handling Services executed between the Philippine Ports Authority and Marina Ports Services, Inc. (now Asian Terminals, Inc.). Under the said contract, ATI's liability for damage to cargoes in its custody is limited to P5,000.00 for each package, unless the value of the cargo shipment is otherwise specified or manifested or communicated in writing, together with the declared Bill of Lading value and supported by a certified packing list to the contractor by the interested party or parties before the discharge or lading unto vessel of the goods.

The trial court found that there was compliance by the shipper and consignee with the above requirement. The Bill of Lading, together with the corresponding invoice and packing list, was shown to ATI prior to the discharge of the goods from the vessel. Since the shipment was released from the custody of ATI, the trial court found that the same was declared for tax purposes as well as for the assessment of arrastre charges and other fees. For the purpose, the presentation of the invoice, packing list and other shipping documents to ATI for the proper assessment of the arrastre charges and other fees satisfied the condition of declaration of the actual invoices of the value of the goods to overcome the limitation of liability of the arrastre operator. [12] Further, the trial court found that there was a valid subrogation between the petitioner and the assured/consignee San Miguel Corporation. The respondent admitted the existence of Global Marine Policy No. MOPA06310 with San Miguel Corporation and Marine Risk Note No. 3445, [13] which showed that the cargo was indeed insured with petitioner. The trial court held that petitioners claim is compensable because the Subrogation Receipt, 16 which was admitted as to its existence by respondent, was sufficient to establish not only the relationship of the insurer and the assured, but also the amount paid to settle the insurance claim. [14] However, the trial court dismissed the complaint on the ground that the petitioners claim was already barred by the statute of limitations. It held that COGSA, embodied in Commonwealth Act (CA) No. 65, applies to this case, since the goods were shipped from a foreign port to the Philippines. The trial court stated that under the said law, particularly paragraph 4, Section 3 (6)[15] thereof, the shipper has the right to bring a suit within one year after the delivery of the goods or the date when the goods should have been delivered, in respect of loss or damage thereto. The trial court held:

In the case at bar, the records show that the shipment was delivered to the consignee on 22, 23 and 29 of November 2002. The plaintiff took almost a year to approve and pay the claim of its assured, San Miguel, despite the fact that it had initially received the latter's claim as well as the inspection report and survey report of McLarens as early as January 2003. The assured/consignee had only until November of 2003 within which to file a suit against the defendant. However, the instant case was filed only on September 7, 2005 or almost three (3) years from the date the subject shipment was delivered to the consignee. The plaintiff, as insurer of the shipment which has paid the claim of the insured, is subrogated to all the rights of the said insured in relation to the reimbursement of such claim. As such, the plaintiff cannot acquire better rights than that of the insured. Thus, the plaintiff has no one but itself to blame for having acted lackadaisically on San Miguel's claim. WHEREFORE, the complaint and counterclaim are hereby DISMISSED.[16]

Petitioners motion for reconsideration was denied by the trial court in the Order [17] dated December 4, 2007. Petitioner filed this petition under Rule 45 of the Rules of Court directly before this Court, alleging that it is raising a pure question of law: 3

THE TRIAL COURT COMMITTED A PURE AND SERIOUS ERROR OF LAW IN APPLYING THE ONEYEAR PRESCRIPTIVE PERIOD FOR FILING A SUIT UNDER THE CARRIAGE OF GOODS BY SEA ACT (COGSA) TO AN ARRASTRE OPERATOR.[18]

Petitioner states that while it is in full accord with the trial court in finding respondent liable for the damaged shipment, it submits that the trial courts dismissal of the complaint on the ground of prescription under the COGSA is legally erroneous. It contends that the one-year limitation period for bringing a suit in court under the COGSA is not applicable to this case, because the prescriptive period applies only to the carrier and the ship. It argues that respondent, which is engaged in warehousing, arrastre and stevedoring business, is not a carrier as defined by the COGSA, because it is not engaged in the business of transportation of goods by sea in international trade as a common carrier. Petitioner asserts that since the complaint was filed against respondent arrastre operator only, without impleading the carrier, the prescriptive period under the COGSA is not applicable to this case. Moreover, petitioner contends that the term carriage of goods in the COGSA covers the period from the time the goods are loaded to the vessel to the time they are discharged therefrom. It points out that it sued respondent only for the additional five (5) packages of the subject shipment that were found damaged while in respondents custody, long after the shipment was discharged from the vessel. The said damage was confirmed by the trial court and proved by the Request for Bad Order Survey No. 56422.[19] Petitioner prays that the decision of the trial court be reversed and set aside and a new judgment be promulgated granting its prayer for actual damages. The main issues are: (1) whether or not the one-year prescriptive period for filing a suit under the COGSA applies to this action for damages against respondent arrastre operator; and (2) whether or not petitioner is entitled to recover actual damages in the amount of P431,592.14 from respondent. To reiterate, petitioner came straight to this Court to appeal from the decision of the trial court under Rule 45 of the Rules of Court on the ground that it is raising only a question of law. Microsoft Corporation v. Maxicorp, Inc.[20] explains the difference between questions of law and questions of fact, thus: The distinction between questions of law and questions of fact is settled. A question of law exists when the doubt or difference centers on what the law is on a certain state of facts. A question of fact exists if the doubt centers on the truth or falsity of the alleged facts. Though this delineation seems simple, determining the true nature and extent of the distinction is sometimes problematic. For example, it is incorrect to presume that all cases where the facts are not in dispute automatically involve purely questions of law. There is a question of law if the issue raised is capable of being resolved without need of reviewing 4

the probative value of the evidence. The resolution of the issue must rest solely on what the law provides on the given set of circumstances. Once it is clear that the issue invites a review of the evidence presented, the question posed is one of fact. If the query requires a re-evaluation of the credibility of witnesses, or the existence or relevance of surrounding circumstances and their relation to each other, the issue in that query is factual. x x x[21]

In this case, although petitioner alleged that it is merely raising a question of law, that is, whether or not the prescriptive period under the COGSA applies to an action for damages against respondent arrastre operator, yet petitioner prays for the reversal of the decision of the trial court and that it be granted the relief sought, which is the award of actual damages in the amount of P431,592.14. For a question to be one of law, it must not involve an examination of the probative value of the evidence presented by the litigants or any of them. [22] However, to resolve the issue of whether or not petitioner is entitled to recover actual damages from respondent requires the Court to evaluate the evidence on record; hence, petitioner is also raising a question of fact.

Under Section 1, Rule 45, providing for appeals by certiorari before the Supreme Court, it is clearly enunciated that only questions of law may be set forth. [23] The Court may resolve questions of fact only when the case falls under the following exceptions:

(1) when the findings are grounded entirely on speculation, surmises, or conjectures; (2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when the findings are contrary to those of the trial court; (8) when the findings are conclusions without citation of specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondent; and (10) when the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on record. [24]

In this case, the fourth exception cited above applies, as the trial court rendered judgment based on a misapprehension of facts. We first resolve the issue on whether or not the one-year prescriptive period for filing a suit under the COGSA applies to respondent arrastre operator. The Carriage of Goods by Sea Act (COGSA), Public Act No. 521 of the 74 th US Congress, was accepted to be made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade by virtue of CA No. 65. Section 1 of CA No. 65 states:

Section 1. That the provisions of Public Act Numbered Five hundred and twenty-one of the Seventy-fourth Congress of the United States, approved on April sixteenth, nineteen hundred and thirtysix, be accepted, as it is hereby accepted to be made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade : Provided, That nothing in the Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application.

Section 1, Title I of CA No. 65 defines the relevant terms in Carriage of Goods by Sea, thus: Section 1. When used in this Act (a) The term "carrier" includes the owner or the charterer who enters into a contract of carriage with a shipper. (b) The term "contract of carriage" applies only to contracts of carriage covered by a bill of lading or any similar document of title, insofar as such document relates to the carriage of goods by sea, including any bill of lading or any similar document as aforesaid issued under or pursuant to a charter party from the moment at which such bill of lading or similar document of title regulates the relations between a carrier and a holder of the same. (c) The term "goods" includes goods, wares, merchandise, and articles of every kind whatsoever, except live animals and cargo which by the contract of carriage is stated as being carried on deck and is so carried. (d) The term "ship" means any vessel used for the carriage of goods by sea. (e) The term "carriage of goods" covers the period from the time when the goods are loaded to the time when they are discharged from the ship.[25]

It is noted that the term carriage of goods covers the period from the time when the goods are loaded to the time when they are discharged from the ship; thus, it can be inferred that the period of time when the goods have been discharged from the ship and given to the custody of the arrastre operator is not covered by the COGSA. The prescriptive period for filing an action for the loss or damage of the goods under the COGSA is found in paragraph (6), Section 3, thus: 6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or his agent at the port of discharge before or at the time of the removal of the goods into the custody of the person entitled to delivery thereof under the contract of carriage, such removal shall be prima facie evidence of the delivery by the carrier of the goods as described in the bill of lading. If the loss or damage is not apparent, the notice must be given within three days of the delivery.

Said notice of loss or damage maybe endorsed upon the receipt for the goods given by the person taking delivery thereof. The notice in writing need not be given if the state of the goods has at the time of their receipt been the subject of joint survey or inspection.

In any event the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered : Provided, That if a notice of loss or damage, either apparent or concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered.[26]

From the provision above, the carrier and the ship may put up the defense of prescription if the action for damages is not brought within one year after the delivery of the goods or the date when the goods should have been delivered. It has been held that not only the shipper, but also the consignee or legal holder of the bill may invoke the prescriptive period.[27] However, the COGSA does not mention that an arrastre operator may invoke the prescriptive period of one year; hence, it does not cover the arrastre operator. Respondent arrastre operators responsibility and liability for losses and damages are set forth in Section 7.01 of the Contract for Cargo Handling Services executed between the Philippine Ports Authority and Marina Ports Services, Inc. (now Asian Terminals, Inc.), thus: Section 7.01 Responsibility and Liability for Losses and Damages; Exceptions - The CONTRACTOR shall, at its own expense, handle all merchandise in all work undertaken by it hereunder, diligently and in a skillful, workman-like and efficient manner. The CONTRACTOR shall be solely responsible as an independent contractor, and hereby agrees to accept liability and to pay to the shipping company, consignees, consignors or other interested party or parties for the loss, damage or non-delivery of cargoes in its custody and control to the extent of the actual invoice value of each package which in no case shall be more than FIVE THOUSAND PESOS (P5,000.00) each, unless the value of the cargo shipment is otherwise specified or manifested or communicated in writing together with the declared Bill of Lading value and supported by a certified packing list to the CONTRACTOR by the interested party or parties before the discharge or loading unto vessel of the goods . This amount of Five Thousand Pesos (P5,000.00) per package may be reviewed and adjusted by the AUTHORITY from time to time. The CONTRACTOR shall not be responsible for the condition or the contents of any package received, nor for the weight nor for any loss, injury or damage to the said cargo before or while the goods are being received or remains in the piers, sheds, warehouses or facility, if the loss, injury or damage is caused by force majeure or other causes beyond the CONTRACTOR's control or capacity to prevent or remedy; PROVIDED, that a formal claim together with the necessary copies of Bill of Lading, Invoice, Certified Packing List and Computation arrived at covering the loss, injury or damage or non-delivery of such goods shall have been filed with the CONTRACTOR within fifteen (15) days from day of issuance by the CONTRACTOR of a certificate of non-delivery;PROVIDED, however, that if said CONTRACTOR fails to issue such certification within fifteen (15) days from receipt of a written request by the shipper/consignee or his duly authorized representative or any interested party, said certification shall be deemed to have been issued, and thereafter, the fifteen (15) day period within which to file the claim commences;PROVIDED, finally, that the request for certification of loss shall be made within thirty (30) days from the date of delivery of the package to the consignee .[28]

Based on the Contract above, the consignee has a period of thirty (30) days from the date of delivery of the package to the consignee within which to request a certificate of loss from the arrastre operator. From the date of the request for a certificate of loss, the arrastre operator has a period of fifteen (15) days within which to issue a certificate of non-delivery/loss either actually or constructively. Moreover, from the date of issuance of a certificate of non7

delivery/loss, the consignee has fifteen (15) days within which to file a formal claim covering the loss, injury, damage or non-delivery of such goods with all accompanying documentation against the arrastre operator. Petitioner clarified that it sued respondent only for the additional five (5) packages of the subject shipment that were found damaged while in respondents custody, which fact of damage was sustained by the trial court and proved by the Request for Bad Order Survey No. 56422.[29] Petitioner pointed out the importance of the Request for Bad Order Survey by citing New Zealand Insurance Company Limited v. Navarro.[30] In the said case, the Court ruled that the request for, and the result of, the bad order examination, which were filed and done within fifteen days from the haulage of the goods from the vessel, served the purpose of a claim, which is to afford the carrier or depositary reasonable opportunity and facilities to check the validity of the claims while facts are still fresh in the minds of the persons who took part in the transaction and documents are still available. Hence, even if the consignee therein filed a formal claim beyond the stipulated period of 15 days, the arrastre operator was not relieved of liability as the purpose of a formal claim had already been satisfied by the consignees timely request for the bad order examination of the goods shipped and the result of the said bad order examination. To elaborate, New Zealand Insurance Company, Ltd. v. Navarro held: We took special note of the above pronouncement six (6) years later in Firemans Fund Insurance Co. v. Manila Port Service Co., et al . There, fifteen (15) cases of nylon merchandise had been discharged from the carrying vessel and received by defendant Manila Port Service Co., the arrastre operator, on 7 July 1961. Out of those fifteen (15) cases, however, only twelve (12) had been delivered to the consignee in good condition. Consequently, on 20 July 1961, the consignee's broker requested a bad order examination of the shipment, which was later certified by defendant's own inspector to be short of three (3) cases. On 15 August 1961, a formal claim for indemnity was then filed by the consignee, who was later replaced in the action by plaintiff Fireman's Fund Insurance Co., the insurer of the goods. Defendant, however, refused to honor the claim, arguing that the same had not been filed within fifteen (15) days from the date of discharge of the shipment from the carrying vessel, as required under the arrastre Management Contract then in force between itself and the Bureau of Customs. The trial court upheld this argument and hence dismissed the complaint. On appeal by the consignee, this Court, speaking through Mr. Justice J.B.L. Reyes, reversed the trial court and found the defendant arrastre operator liable for the value of the lost cargo, explaining as follows: However, the trial court has overlooked the significance of the request for, and the result of, the bad order examination, which were filed and done within fifteen days from the haulage of the goods from the vessel. Said request and result, in effect, served the purpose of a claim , which is to afford the carrier or depositary reasonable opportunity and facilities to check the validity of the claims while facts are still fresh in the minds of the persons who took part in the transaction and documents are still available. (Consunji vs. Manila Port Service, L-15551, 29 November 1960) Indeed, the examination undertaken by the defendant's own inspector not only gave the defendant an opportunity to check the goods but is itself a verification of its own liability x x x. 8

In other words, what the Court considered as the crucial factor in declaring the defendant arrastre operator liable for the loss occasioned, in the Fireman's Fund case, was the fact that defendant, by virtue of the consignee's request for a bad order examination, had been able formally to verify the existence and extent of its liability within fifteen (15) days from the date of discharge of the shipment from the carrying vessel -- i.e., within the same period stipulated under the Management Contract for the consignee to file a formal claim . That a formal claim had been filed by the consignee beyond the stipulated period of fifteen (15) days neither relieved defendant of liability nor excused payment thereof, the purpose of a formal claim, as contemplated in Consunji, having already been fully served and satisfied by the consignee's timely request for, and the eventual result of, the bad order examination of the nylon merchandise shipped. Relating the doctrine of Fireman's Fund to the case at bar, the record shows that delivery to the warehouse of consignee Monterey Farms Corporation of the 5,974 bags of soybean meal, had been completed by respondent Razon (arrastre operator) on 9 July 1974. On that same day, a bad order examination of the goods delivered was requested by the consignee and was, in fact, conducted by respondent Razon's own inspector, in the presence of representatives of both the Bureau of Customs and the consignee. The ensuing bad order examination report what the trial court considered a "certificate of loss confirmed that out of the 5,974 bags of soybean meal loaded on board the M/S "Zamboanga" and shipped to Manila, 173 bags had been damaged in transitu while an additional 111 bags had been damaged after the entire shipment had been discharged from the vessel and placed in the custody of respondent Razon. Hence, as early as 9 July 1974 (the date of last delivery to the consignee's warehouse), respondent Razon had been able to verify and ascertain for itself not only the existence of its liability to the consignee but, more significantly, the exact amount thereof i.e., P5,746.61, representing the value of 111 bags of soybean meal. We note further that such verification and ascertainment of liability on the part of respondent Razon, had been accomplished "within thirty (30) days from the date of delivery of last package to the consignee, broker or importer" as well as "within fifteen (15) days from the date of issuance by the Contractor [respondent Razon] of a certificate of loss, damage or injury or certificate of non-delivery" the periods prescribed under Article VI, Section 1 of the Management Contract here involved, within which a request for certificate of loss and a formal claim, respectively, must be filed by the consignee or his agent. Evidently, therefore, the rule laid down by the Court in Fireman's Fundfinds appropriate application in the case at bar.[31]

In this case, the records show that the goods were deposited with the arrastre operator on November 21, 2002. The goods were withdrawn from the arrastre operator on November 22, 23 and 29, 2002. Prior to the withdrawal on November 29, 2002, the broker of the importer, Marzan, requested for a bad order survey in the presence of a Customs representative and other parties concerned. The joint inspection of cargo was conducted and it was found that an additional five (5) packages were found in bad order as evidenced by the document entitled Request for Bad Order Survey[32] dated November 29, 2002, which document also contained the examination report, signed by the Customs representative, Supervisor/Superintendent, consignees representative, 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.[33] 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 9

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 consignees 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.[34] Hence, the arrastre operator suffered no prejudice by the lack of strict compliance with the 15-day limitation to file the formal complaint.[35] The next factual issue is whether or not petitioner is entitled to actual damages in the amount of P431,592.14. The payment of the said amount by petitioner to the assured/consignee was based on the Evaluation Report[36] of BA McLarens Phils., Inc., thus: xxxx CIRCUMSTANCES OF LOSS As reported, the shipment consisting of 185 packages (344.982 MT) Electrolytic Tin Free Steel, JISG 3315SPTFS, MRT-4CA, Matte Finish arrived Manila via Ocean Vessel, M/V DIMI P V-075 on November 9, 2002 and subsequently docked alongside Pier No. 9, South Harbor, Manila. The cargo of Electrolyic Tin Free Steel was discharged ex-vessel complete with seven (7) skids noted in bad order condition by the vessel[s] representative. These skids were identified as nos. 2HD804211, 2HD804460, SHD804251, SHD803784, 2HD803763, 2HD803765 and 2HD803783 and covered with Bad Order Tally Receipts No. 3709, 3707, 3703 and 3704. Thereafter, the same were stored inside the warehouse of Pier No. 9, South Harbor, Manila, pending delivery to the consignees warehouse. On November 22, 23 and 29, 2002, the subject cargo was withdrawn from the Pier by the consignee authorized broker, R. V. Marzan Brokerage Corp. and the same was delivered to the consignees final warehouse located at Silangan, Canlubang, Laguna complete with twelve (12) skids in bad order condition. VISUAL INSPECTION We conducted an ocular inspection on the reported damaged Electrolytic Tin Free Steel, Matte Finish at the consignees warehouse located at Brgy. Silangan, Canlubang, Laguna and noted that out of the reported twelve (12) damaged skids, nine (9) of them were rejected and three (3) skids were accepted by the consignees representative as complete and without exceptions. xxxx EVALUATION OF INDEMNITY We evaluated the loss/damage sustained by the subject shipments and arrived as follows:

PRODUCT NOS. PER 2HD803763 2HD803783 2HD803784 2HD804460

PRODUCTS NAMED Electrolytic Tin Free Steel JISG3315 -do-do-do-

NO. OF SHEETS 1,200 1,200 1,200 1,400

NET WT. PACKING LIST 1,908 1,908 1,908 1,698 10

2HD803765 2HD804522 2HD804461 2HD804540 2HD804549 9 SKIDS

-do-do-do-do-doTOTAL

1,200 1,200 1,400 1,200 1,200 11,200

1,908 1,987 1,698 1,987 1,987 16,989 kgs. P478,959.88

P9,878,547.58 ------------------ = 42.7643 x 11,200 231,000 Less: Deductible 0.50% based on sum insured Total Add: Surveyors Fee Sub-Total

49,392.74 P429,567.14 2,025.00 P431,592.14

Note: Above evaluation is Assureds tentative liability as the salvage proceeds on the damaged stocks has yet to be determined.

RECOVERY ASPECT Prospect of recovery would be feasible against the shipping company and the Arrastre operator considering the copies of Bad Order Tally Receipts and Bad Order Certificate issued by the subject parties.[37]

To clarify, based on the Evaluation Report, seven (7) skids were damaged upon arrival of the vessel per the Bad Order Cargo Receipts[38] issued by the shipping company, and an additional five (5) skids were damaged in the custody of the arrastre operator per the Bad Order Certificate/Examination Report [39] issued by the arrastre contractor. The Evaluation Report states that out of the reported twelve damaged skids, only nine were rejected, and three were accepted as good order by the consignees representative. Out of the nine skids that were rejected , five skids were damaged upon arrival of the vessel as shown by the product numbers in the Evaluation Report, which product numbers matched those in the Bad Order Cargo Receipts[40] issued by the shipping company. It can then be safely inferred that the four remaining rejected skids were damaged in the custody of the arrastre operator , as the Bad Order Certificate/Examination Report did not indicate the product numbers thereof. Hence, it should be pointed out that the Evaluation Report shows that the claim for actual damages in the amount of P431,592.14 covers five (5) [41] out of the seven (7) skids that were found to be damaged upon arrival of the vessel and covered by Bad Order Cargo Receipt Nos. 3704, 3706, 3707 and 3709,[42] which claim should have been filed with the shipping company. Petitioner must have realized that the claim for the said five (5) skids was already barred under COGSA; hence, petitioner filed the claim for actual damages only against respondent arrastre operator. As regards the four (4) skids that were damaged in the custody of the arrastre operator, petitioner is still entitled to recover from respondent. The Court has ruled that the Request for Bad Order Survey and the examination report on the said request satisfied the purpose of a formal claim, as respondent was made aware of and was able to verify that five (5) skids were damaged or in bad order while in its custody before the last withdrawal of the shipment on November 29, 2002. Hence, even if the formal claim was filed beyond the 15-day period stipulated in the Contract, respondent was 11

not prejudiced thereby, since it already knew of the number of skids damaged in its possession per the examination report on the request for bad order survey. Remand of the case to the trial court for the determination of the liability of respondent to petitioner is not necessary as the Court can resolve the same based on the records before it. [43] The Court notes that petitioner, who filed this action for damages for the five (5) skids that were damaged while in the custody of respondent, was not forthright in its claim, as it knew that the damages it sought in the amount of P431,592.14, which was based on the Evaluation Report of its adjuster/surveyor, BA McLarens Phils., Inc., covered nine (9) skids. Based on the same Evaluation Report, only four of the nine skids were damaged in the custody of respondent . Petitioner should have been straightforward about its exact claim, which is borne out by the evidence on record, as petitioner can be granted only the amount of damages that is due to it. Based on the Evaluation Report[44] of BA McLarens Phils., Inc., dated May 5, 2003, the four (4) skids damaged while in the custody of the arrastre operator and the amount of actual damages therefore are as follows:

PRODUCT NOS. 2HD804522

PRODUCTS NAMED

NO. OF SHEETS

Electrolytic Tin Free 1,200 Steel JISG3315 2HD804461 -do1,400 1,698 2HD804540 -do1,200 1,987 2HD804549 -do1,200 1,987 ---------------------------------------------------------------------------------------------------------4 SKIDS TOTAL 5,000 P9,878,547.58 (Insured value)[45] P213,821.50 -----------------= 42.7643 x 5,000 231,000 (Total number of sheets) Less: Deductible 0.50% based on sum insured[46] 49,392.74 Total P164,428.76

NET WT. PER PACKING LIST 1,987

In view of the foregoing, petitioner is entitled to actual damages in the amount of P164,428.76 for the four (4) skids damaged while in the custody of respondent. WHEREFORE, the petition is GRANTED. The Decision of the Regional Trial Court of Makati City, Branch 138, dated October 17, 2006, in Civil Case No. 05-809, and its Order dated December 4, 2007, are hereby REVERSED and SET ASIDE. Respondent Asian Terminals, Inc. is ORDERED to pay petitioner Insurance Company of North America actual damages in the amount of One Hundred Sixty-Four Thousand Four Hundred Twenty-Eight Pesos and Seventy-Six Centavos (P164,428.76). Twelve percent (12%) interest per annum shall be imposed on the amount of actual damages from the date the award becomes final and executory until its full satisfaction. Costs against petitioner. SO ORDERED. 12

THIRD DIVISION G.R. No. 171591 25 June 2012

ACE NAVIGATION CO., INC., petitioner, vs. FGU INSURANCE CORPORATION and PIONEER INSURANCE AND SURETY CORPORATION, Respondents. DECISION PERLAS-BERNABE, J.: This is an appeal under Rule 45 of the Rules of Court seeking to reverse the June 22, 2004 Decision 1 and February 17, 2006 Resolution2 of the Court of Appeals (CA) ordering petitioner Ace Navigation Co., Inc., jointly and severally with Cardia Limited, to pay respondents FGU Insurance Corp. and Pioneer Insurance and Surety Corp. the sum of P213,518.20 plus interest at the rate of six percentum (6%) from the filing of the complaint until paid. The Facts On July 19, 1990, Cardia Limited (CARDIA) shipped on board the vessel M/V Pakarti Tiga at Shanghai Port China, 8,260 metric tons or 165,200 bags of Grey Portland Cement to be discharged at the Port of Manila and delivered to its consignee, Heindrich Trading Corp. (HEINDRICH). The subject shipment was insured with respondents, FGU Insurance Corp. (FGU) and Pioneer Insurance and Surety Corp. (PIONEER), against all risks under Marine Open Policy No. 062890275 for the amount of P18,048,421.00. 3 The subject vessel is owned by P.T. Pakarti Tata (PAKARTI) which it chartered to Shinwa Kaiun Kaisha Ltd. (SHINWA). 4 Representing itself as owner of the vessel, SHINWA entered into a charter party contract with Sky International, Inc. (SKY), an agent of Kee Yeh Maritime Co. (KEE YEH), 5 which further chartered it to Regency Express Lines S.A. (REGENCY). Thus, it was REGENCY that directly dealt with consignee HEINDRICH, and accordingly, issued Clean Bill of Lading No. SM-1. 6 On July 23, 1990, the vessel arrived at the Port of Manila and the shipment was discharged. However, upon inspection of HEINDRICH and petitioner Ace Navigation Co., Inc. (ACENAV), agent of CARDIA, it was found that out of the 165,200 bags of cement, 43,905 bags were in bad order and condition. Unable to collect the sustained damages in the amount of P1,423,454.60 from the shipper, CARDIA, and the charterer, REGENCY, the respondents, as co-insurers of the cargo, each paid the consignee, HEINDRICH, the amounts of P427,036.40 and P284,690.94, respectively, 7 and consequently became subrogated to all the rights and causes of action accruing to HEINDRICH. Thus, on August 8, 1991, respondents filed a complaint for damages against the following defendants: "REGENCY EXPRESS LINES, S.A./ UNKNOWN CHARTERER OF THE VESSEL 'PAKARTI TIGA'/ UNKNOWN OWNER and/or DEMIFE (sic) CHARTERER OF THE VESSEL 'PAKARTI TIGA', SKY INTERNATIONAL, INC. and/or ACE NAVIGATION COMPANY, INC." 8 which was docketed as Civil Case No. 90-2016. In their answer with counterclaim and cross-claim, PAKARTI and SHINWA alleged that the suits against them cannot prosper because they were not named as parties in the bill of lading. 9 Similarly, ACENAV claimed that, not being privy to the bill of lading, it was not a real party-in-interest from whom the respondents can demand compensation. It further denied being the local ship agent of the vessel or REGENCY and claimed to be the agent of the shipper, CARDIA. 10

13

For its part, SKY denied having acted as agent of the charterer, KEE YEH, which chartered the vessel from SHINWA, which originally chartered the vessel from PAKARTI. SKY also averred that it cannot be sued as an agent without impleading its alleged principal, KEE YEH. 11 On September 30, 1991, HEINDRICH filed a similar complaint against the same parties and Commercial Union Assurance Co. (COMMERCIAL), docketed as Civil Case No. 91-2415, which was later consolidated with Civil Case No. 91-2016. However, the suit against COMMERCIAL was subsequently dismissed on joint motion by the respondents and COMMERCIAL. 12 Proceedings Before the RTC and the CA In its November 26, 2001 Decision, 13 the RTC dismissed the complaint, the fallo of which reads: WHEREFORE, premises considered, plaintiffs complaint is DISMISSED. Defendants counter -claim against the plaintiffs are likewise dismissed, it appearing that plaintiff[s] did not act in evident bad faith in filing the present complaint against them. Defendant Pakarti and Shinwas cross-claims against their co-defendants are likewise dismissed for lack of sufficient evidence. No costs. SO ORDERED. Dissatisfied, the respondents appealed to the CA which, in its assailed June 22, 2004 Decision, 14 found PAKARTI, SHINWA, KEE YEH and its agent, SKY, solidarily liable for 70% of the respondents' claim, with the remaining 30% to be shouldered solidarily by CARDIA and its agent, ACENAV, thus: WHEREFORE, premises considered, the Decision dated November 26, 2001 is hereby MODIFIED in the sense that: a) defendant-appellees P.T. Pakarti Tata, Shinwa Kaiun Kaisha, Ltd., Kee Yeh Maritime Co., Ltd. and the latters agent Sky International, Inc. are hereby declared jointly and severally liable, and are DIRECTED to pay FGU Insurance Corporation the amount of Two Hundred Ninety Eight Thousand Nine Hundred Twenty Five and 45/100 (P298,925.45) Pesos and Pioneer Insurance and Surety Corp. the sum of One Hundred Ninety Nine Thousand Two Hundred Eighty Three and 66/100 (P199,283.66) Pesos representing Seventy (70%) percentum of their respective claims as actual damages plus interest at the rate of six (6%) percentum from the date of the filing of the complaint; and b) defendant Cardia Ltd. and defendant-appellee Ace Navigation Co., Inc. are DECLARED jointly and severally liable and are hereby DIRECTED to pay FGU Insurance Corporation One Hundred Twenty Eight Thousand One Hundred Ten and 92/100 (P128,110.92) Pesos and Pioneer Insurance and Surety Corp. Eighty Five Thousand Four Hundred Seven and 28/100 (P85,407.28) Pesos representing thirty (30%) percentum of their respective claims as actual damages, plus interest at the rate of six (6%) percentum from the date of the filing of the complaint. SO ORDERED. Finding that the parties entered into a time charter party, not a demise or bareboat charter where the owner completely and exclusively relinquishes possession, command and navigation to the charterer, the CA held PAKARTI, SHINWA, KEE YEH and its agent, SKY, solidarily liable for 70% of the damages sustained by the cargo. This solidarity liability was borne by their failure to prove that they exercised extraordinary diligence in the vigilance over the bags of cement entrusted to 14

them for transport. On the other hand, the CA passed on the remaining 30% of the amount claimed to the shipper, CARDIA, and its agent, ACENAV, upon a finding that the damage was partly due to the cargo's inferior packing. With respect to REGENCY, the CA affirmed the findings of the RTC that it did not acquire jurisdiction over its person for defective service of summons. PAKARTI's, SHINWA's, SKY's and ACENAV's respective motions for reconsideration were subsequently denied in the CA's assailed February 17, 2006 Resolution. Issues Before the Court PAKARTI, SHINWA, SKY and ACENAV filed separate petitions for review on certiorari before the Court, docketed as G.R. Nos. 171591, 171614, and 171663, which were ordered consolidated in the Courts Resolution dated July 31, 2006. 15 On April 21, 2006, SKY manifested 16 that it will no longer pursue its petition in G.R. No. 171614 and has preferred to await the resolution in G.R. No. 171663 filed by PAKARTI and SHINWA. Accordingly, an entry of judgment 17 against it was made on August 18, 2006. Likewise, on November 29, 2007, PAKARTI and SHINWA moved 18 for the withdrawal of their petitions for lack of interest, which the Court granted in its January 21, 2008 Resolution. 19 The corresponding entry of judgment 20 against them was made on March 17, 2008. Thus, only the petition of ACENAV remained for the Court's resolution, with the lone issue of whether or not it may be held liable to the respondents for 30% of their claim. Maintaining that it was not a party to the bill of lading, ACENAV asserts that it cannot be held liable for the damages sought to be collected by the respondents. It also alleged that since its principal, CARDIA, was not impleaded as a partydefendant/respondent in the instant suit, no liability can therefore attach to it as a mere agent. Moreover, there is dearth of evidence showing that it was responsible for the supposed defective packing of the goods upon which the award was based. The Court's Ruling A bill of lading is defined as "an instrument in writing, signed by a carrier or his agent, describing the freight so as to identify it, stating the name of the consignor, the terms of the contract for carriage, and agreeing or directing that the freight to be delivered to the order or assigns of a specified person at a specified place." 21 It operates both as a receipt and as a contract. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks and condition, quality, and value. As a contract, it names the contracting parties, which include the consignee, fixes the route, destination, and freight rates or charges, and stipulates the rights and obligations assumed by the parties. 22 As such, it shall only be binding upon the parties who make them, their assigns and heirs. 23 In this case, the original parties to the bill of lading are: (a) the shipper CARDIA; (b) the carrier PAKARTI; and (c) the consignee HEINDRICH. However, by virtue of their relationship with PAKARTI under separate charter arrangements, SHINWA, KEE YEH and its agent SKY likewise became parties to the bill of lading. In the same vein, ACENAV, as admitted agent of CARDIA, also became a party to the said contract of carriage. The respondents, however, maintain 24 that ACENAV is a ship agent and not a mere agent of CARDIA, as found by both the CA 25 and the RTC. 26 The Court disagrees. 15

Article 586 of the Code of Commerce provides: ART. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested therein. By ship agent is understood the person entrusted with the provisioning of a vessel, or who represents her in the port in which she may be found. (Emphasis supplied) Records show that the obligation of ACENAV was limited to informing the consignee HEINDRICH of the arrival of the vessel in order for the latter to immediately take possession of the goods. No evidence was offered to establish that ACENAV had a hand in the provisioning of the vessel or that it represented the carrier, its charterers, or the vessel at any time during the unloading of the goods. Clearly, ACENAV's participation was simply to assume responsibility over the cargo when they were unloaded from the vessel. Hence, no reversible error was committed by the courts a quo in holding that ACENAV was not a ship agent within the meaning and context of Article 586 of the Code of Commerce, but a mere agent of CARDIA, the shipper. On this score, Article 1868 of the Civil Code states: ART. 1868. 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. Corollarily, Article 1897 of the same Code provides that an agent is not personally liable to the party with whom he contracts, unless he expressly binds himself or exceeds the limits of his authority without giving such party sufficient notice of his powers. Both exceptions do not obtain in this case. Records are bereft of any showing that ACENAV exceeded its authority in the discharge of its duties as a mere agent of CARDIA. Neither was it alleged, much less proved, that ACENAV's limited obligation as agent of the shipper, CARDIA, was not known to HEINDRICH. Furthermore, since CARDIA was not impleaded as a party in the instant suit, the liability attributed upon it by the CA 27 on the basis of its finding that the damage sustained by the cargo was due to improper packing cannot be borne by ACENAV. As mere agent, ACENAV cannot be made responsible or held accountable for the damage supposedly caused by its principal. 28 Accordingly, the Court finds that theCA erred in ordering ACENAV jointly and severally liable with CARDIA to pay 30o/o of the respondents' claim. WHEREFORE, the assailed Decision and Resolution of the Court of Appeals are hereby REVERSED.1awp++i1 The complaint against petitioner Ace Navigation Co., Inc. is hereby DISMISSED. SO ORDERED.

16

THIRD DIVISION G.R. No. 160088 July 13, 2011

AGUSTIN P. DELA TORRE, Petitioner, vs. THE HONORABLE COURT OF APPEALS, CRISOSTOMO G. CONCEPCION, RAMON "BOY" LARRAZABAL, PHILIPPINE TRIGON SHIPYARD CORPORATION, and ROLAND G. DELA TORRE, Respondents. x - - - - - - - - - - - - - - - - - - - - - - -x G.R. No. 160565 PHILIPPINE TRIGON SHIPYARD CORPORATION and ROLAND G. DELA TORRE, Petitioners, vs. CRISOSTOMO G. CONCEPCION, AGUSTIN DELA TORRE and RAMON "BOY" LARRAZABAL, Respondents. DECISION MENDOZA, J.: These consolidated petitions1 for review on certiorari seek to reverse and set aside the September 30, 2002 Decision2 and September 18, 2003 Resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 36035, affirming in toto the July 10, 1991 Decision4 of the Regional Trial Court, Branch 60, Angeles City (RTC). The RTC Decision in Civil Case No. 4609, an action for Sum of Money and Damages, ordered the defendants, jointly and severally, to pay various damages to the plaintiff. The Facts: Respondent Crisostomo G. Concepcion (Concepcion) owned LCT-Josephine, a vessel registered with the Philippine Coast Guard. On February 1, 1984, Concepcion entered into a "Preliminary Agreement"5 with Roland de la Torre (Roland) for the dry-docking and repairs of the said vessel as well as for its charter afterwards.6 Under this agreement, Concepcion agreed that after the dry-docking and repair of LCT-Josephine, it "should" be chartered for P 10,000.00 per month with the following conditions: 1. The CHARTERER will be the one to pay the insurance premium of the vessel 2. The vessel will be used once every three (3) months for a maximum period of two (2) weeks 3. The SECOND PARTY (referring to Concepcion) agreed that LCT-Josephine should be used by the FIRST PARTY (referring to Roland) for the maximum period of two (2) years 4. The FIRST PARTY (Roland) will take charge[x] of maintenance cost of the said vessel. [Underscoring Supplied] On June 20, 1984, Concepcion and the Philippine Trigon Shipyard Corporation7 (PTSC), represented by Roland, entered into a "Contract of Agreement,"8 wherein the latter would charter LCT-Josephine retroactive to May 1, 1984, under the following conditions:

17

a. Chartered amount of the vessel P 20,000.00 per month effective May 1, 1984; j. The owner (Concepcion) shall pay 50% downpayment for the dry-docking and repair of the vessel and the balance shall be paid every month in the amount of P 10,000.00, to be deducted from the rental amount of the vessel; k. In the event that a THIRD PARTY is interested to purchase the said vessel, the SECOND PARTY (PTSC/ Roland) has the option for first priority to purchase the vessel. If the SECOND PARTY (PTSC/Roland) refuses the offer of the FIRST PARTY (Concepcion), shall give the SECOND PARTY (PTSC/Roland) enough time to turn over the vessel so as not to disrupt previous commitments; l. That the SECOND PARTY (PTSC/Roland) has the option to terminate the contract in the event of the SECOND PARTY (PTSC/Roland) decide to stop operating; m. The SECOND PARTY (PTSC/Roland) shall give 90 days notice of such termination of contract; n. Next x x year of dry-docking and repair of vessel shall be shouldered by the SECOND PARTY (PTSC/Roland); (Underscoring Supplied] On August 1, 1984, PTSC/Roland sub-chartered LCT-Josephine to Trigon Shipping Lines (TSL), a single proprietorship owned by Rolands father, Agustin de la Torre (Agustin).9 The following are the terms and conditions of that "Contract of Agreement:"10 a. Chartered amount of the vessel P 30,000.00 per month effective August, 1984; b. Downpayment of the 50% upon signing of the contract and the balance every end of the month; c. Any cost for the additional equipment to be installed on the vessel will be borne by the FIRST PARTY (PTSC/ Roland) and the cost of the equipment will be deductible from the monthly rental of the vessel; d. In the event the vessel is grounded or other [force majeure] that will make the vessel non-opera[xx]ble, the rental of the vessel shall be suspended from the start until the vessel will be considered operational; e. The cost for the dry-docking and/or repair of vessel shall not exceed P 200,000.00, any excess shall be borne by the SECOND PARTY (TSL/Agustin); f. The SECOND PARTY (TSL/Agustin) undertakes to shoulder the maintenance cost for the duration of the usage; g. All cost for the necessary repair of the vessel shall be on the account of the SECOND PARTY (TSL/Agustin); h. That the SECOND PARTY (TSL/Agustin) has the option to terminate the contract in the event the SECOND PARTY (TSL/Agustin) decides to stop operating; j. The FIRST PARTY (PTSC/Roland) will terminate the services of all vessels crew and the SECOND PARTY (TSL/Agustin) shall have the right to replace and rehire the crew of the vessel. k. Insurance premium of the vessel will be divided equally between the FIRST PARTY (PTSC/Rolando) and the SECOND PARTY (TSL/ Agustin). [Underscoring supplied]

18

On November 22, 1984, TSL, this time represented by Roland per Agustins Special Power of Attorney, 11 sub-chartered LCT-Josephine to Ramon Larrazabal (Larrazabal) for the transport of cargo consisting of sand and gravel to Leyte. The following were agreed upon in that contract,12 to wit: 1. That the FIRST PARTY (TSL by Roland) agreed that LCT-Josephine shall be used by the SECOND PARTY (Larrazabal) for and in consideration on the sum of FIVE THOUSAND FIVE HUNDRED (P 5,500.00) PESOS, Philippine currency per day charter with the following terms and conditions. 2. That the CHARTERER should pay P 2,000.00 as standby pay even that will made (sic) the vessel nonopera[xx]ble cause[d] by natur[al] circumstances. 3. That the CHARTERER will supply the consumed crude oil and lube oil per charter day. 4. That the SECOND PARTY (Larrazabal) is the one responsible to supervise in loading and unloading of cargo load on the vessel. 5. That the SECOND PARTY (Larrazabal) shall give one week notice for such termination of contract. 6. TERMS OF PAYMENTS that the SECOND PARTY (Larrazabal) agreed to pay 15 days in advance and the balance should be paid weekly. [Underscoring Supplied] On November 23, 1984, the LCT-Josephine with its cargo of sand and gravel arrived at Philpos, Isabel, Leyte. The vessel was beached near the NDC Wharf. With the vessels ramp already lowered, the unloading of the vessels cargo began with the use of Larrazabals payloader. While the payloader was on the deck of the LCT -Josephine scooping a load of the cargo, the vessels ramp started to move downward, the vessel tilted and sea water rushed in. Shortly thereafter, LCT Josephine sank.13 Concepcion demanded that PTSC/ Roland refloat LCT-Josephine. The latter assured Concepcion that negotiations were underway for the refloating of his vessel.14 Unfortunately, this did not materialize. For this reason, Concepcion was constrained to institute a complaint for "Sum of Money and Damages" against PTSC and Roland before the RTC. PTSC and Roland filed their answer together with a third-party complaint against Agustin. Agustin, in turn, filed his answer plus a fourth-party complaint against Larrazabal. The latter filed his answer and counterclaim but was subsequently declared in default by the RTC.15 Eventually, the fourth-party complaint against Larrazabal was dismissed when the RTC rendered its decision in favor of Concepcion on July 10, 1991. 16 In said RTC decision, the following observations were written: The testimonies of Roland de la Torre and Hubart Sungayan quoted above, show: (1) that the payloader was used to unload the cargo of sand and gravel; (2) that the payloader had to go inside the vessel and scoop up a load; (3) that the ramp according to Roland de la Torre, "was not properly put into peak (sic) such that the front line will touch the bottom, particularly will touch the sea x x x"; (4) that "the tires (of the payloader) will be submerged to (sic) the sea"; (5) that according to Sungayan "the ramp of the vessel was moving down"; (6) that the payloader had to be maneuvered by its operator who dumped the load at the side of the vessel; (7) that the dumping of the load changed the stability of the vessel and tilted it to the starboard side; and (8) that the tilting caused the sliding of the cargo toward that side and opened the manhole through which seawater rushed in.17 Hubart Sungayan, who was the chiefmate of LCT-Josephine and under the employ of TSL/Agustin, also admitted at the trial that it was TSL/Agustin, through its crew, who was in-charge of LCT-Josephines operations although the responsibility of loading and unloading the cargo was under Larrazabal. Thus, the RTC declared that the "efficient cause of the sinking of the LCT-JOSEPHINE was the improper lowering or positioning of the ramp," which was well within the charge or responsibility of the captain and crew of the vessel.18 The fallo of the RTC Decision reads: 19

WHEREFORE, in view of all the foregoing, judgment is hereby rendered as follows: 1. The defendants, Philippine Trigon Shipping Corporation and Roland de la Torre, and the third-party defendant, Agustin de la Torre, shall pay the plaintiff, jointly and severally, the sum of EIGHT HUNDRED FORTYONE THOUSAND THREE HUNDRED EIGHTY SIX PESOS AND EIGHTY SIX CENTAVOS (P841,386.86) as the value of the LCT JOSEPHINE with interest thereon at the legal rate of 6% per annum from the date of demand, that is from March 14, 1985, the date when counsel for the defendant Philippine Trigon Shipyard Corporation answered the demand of the plaintiff, until fully paid; 2. The defendants, Philippine Trigon Shipyard Corporation and Roland de la Torre, shall pay to the plaintiff the sum of NINETY THOUSAND PESOS (P 90,000.00) as unpaid rentals for the period from May 1, 1984, to November, 1984, and the sum of ONE HUNDRED SEVENTY THOUSAND PESOS (P 170,000.00) as lost rentals from December, 1984, to April 30, 1986, with interest on both amounts at the rate of 6% per annum also from demand on March 14, 1985, until fully paid; 3. The defendants and the third-party defendant shall likewise pay to the plaintiff jointly and severally the sum of TWENTY-FIVE THOUSAND PESOS (P 25,000.00) as professional fee of plaintiffs counsel plus FIVE HUNDRED PESOS (P 500.00) per appearance of said counsel in connection with actual trial of this case, the number of such appearances to be determined from the records of this case; 4. The defendants counterclaim for the unpaid balance of plaintiffs obligation for the dry -docking and repair of the vessel LCT JOSEPHINE in the amount of TWENTY-FOUR THOUSAND THREE HUNDRED FOUR PESOS AND THIRTY-FIVE CENTAVOS (P 24,304.35), being valid, shall be deducted from the unpaid rentals, with interest on the said unpaid balance at the rate of 6% per annum from the date of the filing of the counter-claim on March 31, 1986; 5. The counter-claim of the defendants in all other respects, for lack of merit, is hereby DISMISSED; 6. The fourth-party complaint against the fourth-party defendant, Ramon Larrazabal, being without basis, is likewise DISMISSED; and 7. The defendants and third-party defendant shall pay the costs. SO ORDERED.19 Agustin, PTSC and Roland went to the CA on appeal. The appellate court, in agreement with the findings of the RTC, affirmed its decision in toto. Still not in conformity with the CA findings against them, Agustin, PTSC and Roland came to this Court through these petitions for review. In G.R. No. 160088, petitioner Agustin raises the following issues: AGUSTINS STATEMENT OF THE ISSUES I THE COURT OF APPEALS ERRED IN HOLDING THAT THE PROXIMATE CAUSE OF THE SINKING OF LCT JOSEPHINE IS THE NEGLIGENCE OF THE PETITIONER (Agustin) AND THE RESPONDENTS TRIGON (PTSC) AND DE LA TORRE (Roland). II 20

THE COURT OF APPEALS ERRED IN NOT HOLDING RESPONDENT RAMON LARRAZABAL AS SOLELY LIABLE FOR THE LOSS AND SINKING OF LCT JOSEPHINE. III THE TRIAL COURT AND THE COURT OF APPEALS GRAVELY ERRED IN TAKING JUDICIAL NOTICE OF THE CHARACTERISTICS OF THE LCT JOSEPHINE AND PAYLOADER WITHOUT INFORMING THE PARTIES OF THEIR INTENTION. IV THE COURT OF APPEALS ERRED IN HOLDING PETITIONER DIRECTLY AND SOLIDARILY LIABLE WITH THE RESPONDENTS TRIGON AND DE LA TORRE DESPITE THE FACT THAT SUCH KIND OF LIABILITY IS NOT DULY ALLEGED IN THE COMPLAINT OF RESPONDENT CONCEPCION AND NOT ONE OF THE ISSUES TRIED BY THE PARTIES. V THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER IS LIABLE BASED ON CULPA CONTRACTUAL. VI THE COURT OF APPEALS ERRED IN NOT EXCULPATING PETITIONER FROM LIABILITY BASED ON THE LIMITED LIABILITY RULE. VII THE COURT OF APPEALS ERRED IN NOT APPLYING THE PROVISIONS OF THE CODE OF COMMERCE ON THE LIABILITY OF THE SHIP CAPTAIN.20 On the other hand, in G.R. No. 160565, PTSC and Roland submit the following issues: PTSC and ROLANDS STATEMENT OF THE ISSUES I. DID THE HONORABLE COURT OF APPEALS ERRxx IN APPLYING THE PROVISIONS OF THE CIVIL CODE OF THE PHILIPPINES PARTICULARLY ON CONTRACTS, LEASE, QUASI-DELICT AND DAMAGES INSTEAD OF THE PROVISIONS OF THE CODE OF COMMERCE ON MARITIME COMMERCE IN ADJUDGING PETITIONERS LIABLE TO PRIVATE RESPONDENT CONCEPCION. II. DID THE HONORABLE COURT OF APPEALS ERRxx IN UPHOLDING THE FINDINGS OF FACT OF THE TRIAL COURT. III. DID THE HONORABLE COURT OF APPEALS COMMITxx GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR IN EXCESS OF ITS JURISDICTION IN APPRECIATING THE FACTS OF THE CASE. 21

IV. DID THE HONORABLE COURT OF APPEALS, IN ADJUDGING PETITIONERS JOINTLY AND SEVERALLY LIABLE WITH RESPONDENT AGUSTIN DE LA TORRE, ERRxx WHEN IT MADE FINDINGS OF FACT AND CONCLUSIONS OF LAW WHICH ARE BEYOND THE ISSUES SET FORTH AND CONTEMPLATED IN THE ORIGINAL PLEADINGS OF THE PARTIES.21 From the foregoing, the issues raised in the two petitions can be categorized as: (1) those referring to the factual milieu of the case; (2) those concerning the applicability of the Code of Commerce, more specifically, the Limited Liability Rule; and (3) the question on the solidary liability of the petitioners. As regards the issues requiring a review of the factual findings of the trial court, the Court finds no compelling reason to deviate from the rule that findings of fact of a trial judge, especially when affirmed by the appellate court, are binding before this Court.22 The CA, in reviewing the findings of the RTC, made these observations: We are not persuaded that the trial Court finding should be set aside. The Court a quo sifted through the records and arrived at the fact that clearly, there was improper lowering or positioning of the ramp, which was not at "peak," according to de la Torre and "moving down" according to Sungayan when the payloader entered and scooped up a load of sand and gravel. Because of this, the payloader was in danger of being lost (submerged) and caused Larrazabal to order the operator to go back into the vessel, according to de la Torres version, or back off to the shore, per Sungayan. Whichever it was, the fact remains that the ramp was unsteady (moving) and compelled action to save the payloader from submerging, especially because of the conformation of the sea and the shore. x x x. xxx The contract executed on June 20, 1984, between plaintiff-appellee and defendants-appellants showed that the services of the crew of the owner of the vessel were terminated. This allowed the charterer, defendants-appellants, to employ their own. The sub-charter contract between defendants-appellants Philippine Trigon Shipyard Corp. and third-party defendant-appellant Trigon Shipping Lines showed similar provision where the crew of Philippine Trigon had to be terminated or rehired by Trigon Shipping Lines. As to the agreement with fourth-party Larrazabal, it is silent on who would hire the crew of the vessel. Clearly, the crew manning the vessel when it sunk belonged to third-party defendantappellant. Hubart Sungayan, the acting Chief Mate, testified that he was hired by Agustin de la Torre, who in turn admitted to hiring the crew. The actions of fourth-party defendant, Larrazabal and his payloader operator did not include the operation of docking where the problem arose.23[Underscoring supplied] Similarly, the Court has examined the records at hand and completely agree with the CA that the factual findings of the RTC are in order. With respect to petitioners position that the Limited Liability Rule under the Code of Commerce should be applied to them, the argument is misplaced. The said rule has been explained to be that of the real and hypothecary doctrine in maritime law where the shipowner or ship agents liability is held as merely co-extensive with his interest in the vessel such that a total loss thereof results in its extinction.24 In this jurisdiction, this rule is provided in three articles of the Code of Commerce. These are: 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. ---

22

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. Article 837 specifically applies to cases involving collision which is a necessary consequence of the right to abandon the vessel given to the shipowner or ship agent under the first provision Article 587. Similarly, Article 590 is a reiteration of Article 587, only this time the situation is that the vessel is co-owned by several persons.25Obviously, the forerunner of the Limited Liability Rule under the Code of Commerce is Article 587. Now, the latter is quite clear on which indemnities may be confined or restricted to the value of the vessel pursuant to the said Rule, and these are 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." Thus, what is contemplated is the liability to third persons who may have dealt with the shipowner, the agent or even the charterer in case of demise or bareboat charter. The only person who could avail of this is the shipowner, Concepcion. He is the very person whom the Limited Liability Rule has been conceived to protect. The petitioners cannot invoke this as a defense. In Yangco v. Laserna,26 this Court, through Justice Moran, wrote: The policy which the rule is designed to promote is the encouragement of shipbuilding and investment in maritime commerce. x x x. Grotius, in his law of War and Peace, says that men would be deterred from investing in ships if they thereby incurred the apprehension of being rendered liable to an indefinite amount by the acts of the master, x x x.27 Later, in the case of Monarch Insurance Co., Inc. v. CA, 28 this Court, this time through Justice Sabino R. De Leon, Jr., again explained: No vessel, no liability, expresses in a nutshell the limited liability rule. The shipowners or agents liability is merely coextensive with his interest in the vessel such that a total loss thereof results in its extinction. The total destruction of the vessel extinguishes maritime liens because there is no longer any res to which it can attach. This doctrine is based on the real and hypothecary nature of maritime law which has 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. 29 In view of the foregoing, Concepcion as the real shipowner is the one who is supposed to be supported and encouraged to pursue maritime commerce. Thus, it would be absurd to apply the Limited Liability Rule against him who, in the first place, should be the one benefitting from the said rule. In distinguishing the rights between the charterer and the shipowner, the case of Yueng Sheng Exchange and Trading Co. v. Urrutia & Co. 30 is most enlightening. In that case, no less than Chief Justice Arellano wrote:

23

The whole ground of this assignment of errors rests on the proposition advanced by the appellant company that the charterer of a vessel, under the conditions stipulated in the charter party in question, is the owner pro hac vice of the ship and takes upon himself the responsibilities of the owner. xxx If G. Urrutia & Co., by virtue of the above-mentioned contract, became the agents of the Cebu, then they must respond for the damages claimed, because the owner and the agent are civilly responsible for the acts of the captain. But G. Urrutia & Co. could not in any way exercise the powers or rights of an agent. They could not represent the ownership of the vessel, nor could they, in their own name and in such capacity, take judicial or extrajudicial steps in all that relates to commerce; thus if the Cebu were attached, they would have no legal capacity to proceed to secure its release; speaking generally, not even the fines could or ought to be paid by them, unless such fines were occasioned by their orders. x x x. The contract executed by Smith, Bell & Co., as agents for the Cebu, and G. Urrutia & Co., as charterers of the vessel, did not put the latter in the place of the former, nor make them agents of the owner or owners of the vessel. With relation to those agents, they retained opposing rights derived from the charter party of the vessel, and at no time could they be regarded by the third parties, or by the authorities, or by the courts, as being in the place of the owners or the agents in matters relating to the responsibilities pertaining to the ownership and possession of the vessel. x x x. 31 In Yueng Sheng, it was further stressed that the charterer does not completely and absolutely step into the shoes of the shipowner or even the ship agent because there remains conflicting rights between the former and the real shipowner as derived from their charter agreement. The Court again quotes Chief Justice Arellano: Their (the charterers) possession was, therefore, the uncertain title of lease, not a possession of the owner, such as is that of the agent, who is fully subrogated to the place of the owner in regard to the dominion, possession, free administration, and navigation of the vessel.32 Therefore, even if the contract is for a bareboat or demise charter where possession, free administration and even navigation are temporarily surrendered to the charterer, dominion over the vessel remains with the shipowner. Ergo, the charterer or the sub-charterer, whose rights cannot rise above that of the former, can never set up the Limited Liability Rule against the very owner of the vessel. Borrowing the words of Chief Justice Artemio V. Panganiban, "Indeed, where the reason for the rule ceases, the rule itself does not apply."33 The Court now comes to the issue of the liability of the charterer and the sub-charterer. In the present case, the charterer and the sub-charterer through their respective contracts of agreement/charter parties, obtained the use and service of the entire LCT-Josephine. The vessel was likewise manned by the charterer and later by the sub-charterers people. With the complete and exclusive relinquishment of possession, command and navigation of the vessel, the charterer and later the sub-charterer became the vessels owner pro hac vice. Now, and in the absence of any showing that the vessel or any part thereof was commercially offered for use to the public, the above agreements/charter parties are that of a private carriage where the rights of the contracting parties are primarily defined and governed by the stipulations in their contract.34 Although certain statutory rights and obligations of charter parties are found in the Code of Commerce, these provisions as correctly pointed out by the RTC, are not applicable in the present case. Indeed, none of the provisions found in the Code of Commerce deals with the specific rights and obligations between the real shipowner and the charterer obtaining in this case. Necessarily, the Court looks to the New Civil Code to supply the deficiency. 35 Thus, the RTC and the CA were both correct in applying the statutory provisions of the New Civil Code in order to define the respective rights and obligations of the opposing parties. 24

Thus, Roland, who, in his personal capacity, entered into the Preliminary Agreement with Concepcion for the drydocking and repair of LCT-Josephine, is liable under Article 118936 of the New Civil Code. There is no denying that the vessel was not returned to Concepcion after the repairs because of the provision in the Preliminary Agreement that the same "should" be used by Roland for the first two years. Before the vessel could be returned, it was lost due to the negligence of Agustin to whom Roland chose to sub-charter or sublet the vessel. PTSC is liable to Concepcion under Articles 166537 and 166738 of the New Civil Code. As the charterer or lessee under the Contract of Agreement dated June 20, 1984, PTSC was contract-bound to return the thing leased and it was liable for the deterioration or loss of the same. Agustin, on the other hand, who was the sub-charterer or sub-lessee of LCT-Josephine, is liable under Article 1651 of the New Civil Code.39 Although he was never privy to the contract between PTSC and Concepcion, he remained bound to preserve the chartered vessel for the latter. Despite his non-inclusion in the complaint of Concepcion, it was deemed amended so as to include him because, despite or in the absence of that formality of amending the complaint to include him, he still had his day in court40 as he was in fact impleaded as a third-party defendant by his own son, Roland the very same person who represented him in the Contract of Agreement with Larrazabal. 1avvphi1 (S)ince the purpose of formally impleading a party is to assure him a day in court, once the protective mantle of due process of law has in fact been accorded a litigant, whatever the imperfection in form, the real litigant may be held liable as a party.41 In any case, all three petitioners are liable under Article 1170 of the New Civil Code. 42 The necessity of insuring the LCTJosephine, regardless of who will share in the payment of the premium, is very clear under the Preliminary Agreement and the subsequent Contracts of Agreement dated June 20, 1984 and August 1, 1984, respectively. The August 17, 1984 letter of Concepcions representative, Rogelio L. Martinez, addressed to Roland in his capacity as the president of PTSC inquiring about the insurance of the LCT-Josephine as well as reiterating the importance of insuring the said vessel is quite telling. August 17, 1984 Mr. Roland de la Torre President Phil. Trigon Shipyard Corp. Cebu City Dear Sir: In connection with your chartering of LCT JOSEPHINE effect[ive] May 1, 1984, I wish to inquire regarding the insurance of said vessel to wit: 1. Name of Insurance Company 2. Policy No. 3. Amount of Premiums 4. Duration of coverage already paid Please send a Xerox copy of policy to the undersigned as soon as possible. In no case shall LCT JOSEPHINE sail without any insurance coverage. 25

Hoping for your (prompt) action on this regard. Truly yours, (sgd)ROGELIO L. MARTINEZ Owners representative43 Clearly, the petitioners, to whom the possession of LCT Josephine had been entrusted as early as the time when it was dry-docked for repairs, were obliged to insure the same. Unfortunately, they failed to do so in clear contravention of their respective agreements. Certainly, they should now all answer for the loss of the vessel. WHEREFORE, the petitions are DENIED. SO ORDERED.

26

Republic of the Philippines Supreme Court Manila SECOND DIVISION UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC., Petitioner, G.R. No. 166250 Present: CARPIO, J., Chairperson, NACHURA, PERALTA, ABAD, and MENDOZA, JJ. Promulgated: July 26, 2010 x------------------------------------------------------------------------------------x

- versus -

COURT OF APPEALS and PIONEER INSURANCE AND SURETY CORPORATION, Respondents.

DECISION

NACHURA, J.:

For review is the Court of Appeals (CA) Decision[1] dated April 29, 2004 and Resolution[2] dated November 26, 2004. The assailed Decision affirmed the Regional Trial Court (RTC) decision [3] dated February 22, 2001; while the assailed Resolution denied petitioner Unsworth Transport International (Philippines), Inc., American President Lines, Ltd. (APL), and Unsworth Transport International, Inc.s (UTIs) motion for reconsideration.

27

The facts of the case are:

On August 31, 1992, the shipper Sylvex Purchasing Corporation delivered to UTI a shipment of 27 drums of various raw materials for pharmaceutical manufacturing, consisting of: 1) 3 drums (of) extracts, flavoring liquid, flammable liquid x x x banana flavoring; 2) 2 drums (of) flammable liquids x x x turpentine oil; 2 pallets. STC: 40 bags dried yeast; and 3) 20 drums (of) Vitabs: Vitamin B Complex Extract. [4] UTI issued Bill of Lading No. C320/C15991-2,[5] covering the aforesaid shipment. The subject shipment was insured with private respondent Pioneer Insurance and Surety Corporation in favor of Unilab against all risks in the amount of P1,779,664.77 under and by virtue of Marine Risk Note Number MC RM UL 0627 92[6] and Open Cargo Policy No. HO-022-RIU.[7]

On the same day that the bill of lading was issued, the shipment was loaded in a sealed 1x40 container van, with no. APLU-982012, boarded on APLs vessel M/V Pres. Jackson, Voyage 42, and transshipped to APLs M/V Pres. Taft[8] for delivery to petitioner in favor of the consignee United Laboratories, Inc. (Unilab).

On September 30, 1992, the shipment arrived at the port of Manila. On October 6, 1992, petitioner received the said shipment in its warehouse after it stamped the Permit to Deliver Imported Goods[9] procured by the Champs Customs Brokerage.[10] Three days thereafter, or on October 9, 1992, Oceanica Cargo Marine Surveyors Corporation (OCMSC) conducted a stripping survey of the shipment located in petitioners warehouse. The survey results stated:

2-pallets STC 40 bags Dried Yeast, both in good order condition and properly sealed

19- steel drums STC Vitamin B Complex Extract, all in good order condition and properly sealed

1-steel drum STC Vitamin B Complex Extra[ct] with cut/hole on side, with approx. spilling of 1%
[11]

On October 15, 1992, the arrastre Jardine Davies Transport Services, Inc. (Jardine) issued Gate Pass No. 7614
[12]

which stated that 22 drums[13] Raw Materials for Pharmaceutical Mfg. were loaded on a truck with Plate No.

PCK-434 facilitated by Champs for delivery to Unilabs warehouse. The materials were noted to be complete and in good 28

order in the gate pass.[14] On the same day, the shipment arrived in Unilabs warehouse and was immediately surveyed by an independent surveyor, J.G. Bernas Adjusters & Surveyors, Inc. (J.G. Bernas). The Report stated:

1-p/bag torn on side contents partly spilled 1-s/drum #7 punctured and retaped on bottom side content lacking 5-drums shortship/short delivery[15]

On October 23 and 28, 1992, the same independent surveyor conducted final inspection surveys which yielded the same results. Consequently, Unilabs quality control representative rejected one paper bag containing dried yeast and one steel drum containing Vitamin B Complex as unfit for the intended purpose.[16] On November 7, 1992, Unilab filed a formal claim [17] for the damage against private respondent and UTI. On November 20, 1992, UTI denied liability on the basis of the gate pass issued by Jardine that the goods were in complete and good condition; while private respondent paid the claimed amount on March 23, 1993. By virtue of the Loss and Subrogation Receipt[18] issued by Unilab in favor of private respondent, the latter filed a complaint for Damages against APL, UTI and petitioner with the RTC of Makati. [19]The case was docketed as Civil Case No. 93-3473 and was raffled to Branch 134.

After the termination of the pre-trial conference, trial on the merits ensued. On February 22, 2001, the RTC decided in favor of private respondent and against APL, UTI and petitioner, the dispositive portion of which reads:

WHEREFORE, judgment is hereby rendered in favor of plaintif PIONEER INSURANCE & SURETY CORPORATION and against the defendants AMERICAN PRESIDENT LINES and UNSWORTH TRANSPORT INTERNATIONAL (PHILS.), INC. (now known as JUGRO TRANSPORT INTL., PHILS.), ordering the latt er to pay, jointly and severally, the former the following amounts:

1. The sum of SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE and 27/100 (Php76,231.27) with interest at the legal rate of 6% per annum to be computed starting from September 30, 1993 until fully paid, for and as actual damages;

2. The amount equivalent to 25% of the total sum as attorneys fees;

29

3. Cost of this litigation.

SO ORDERED.[20]

On appeal, the CA affirmed the RTC decision on April 29, 2004. The CA rejected UTIs defense that it was merely a forwarder, declaring instead that it was a common carrier. The appellate court added that by issuing the Bill of Lading, UTI acknowledged receipt of the goods and agreed to transport and deliver them at a specific place to a person named or his order. The court further concluded that upon the delivery of the subject shipment to peti tioners warehouse, its liability became similar to that of a depositary. As such, it ought to have exercised ordinary diligence in the care of the goods. And as found by the RTC, the CA agreed that petitioner failed to exercise the required diligence. The CA also rejected petitioners claim that its liability should be limited to $500 per package pursuant to the Carriage of Goods by Sea Act (COGSA) considering that the value of the shipment was declared pursuant to the letter of credit and the pro forma invoice. As to APL, the court considered it as a common carrier notwithstanding the non-issuance of a bill of lading inasmuch as a bill of lading is not indispensable for the execution of a contract of carriage. [21]

Unsatisfied, petitioner comes to us in this petition for review on certiorari, raising the following issues:

1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN UPHOLDING THE DECISION OF THE REGIONAL TRIAL COURT DATED 22 FEBRUARY 2001, AWARDING THE SUM OF SEVENTY SIX THOUSAND TWO HUNDRED THIRTY ONE AND 27/100 PESOS (PHP76,231.27) WITH LEGAL INTEREST AT 6% PER ANNUM AS ACTUAL DAMAGES AND 25% AS ATTORNEYS FEES.

2.

WHETHER OR NOT PETITIONER UTI IS A COMMON CARRIER.

3.

WHETHER OR NOT PETITIONER UTI EXERCISED THE REQUIRED ORDINARY DILIGENCE.

4. WHETHER OR NOT THE PRIVATE RESPONDENT SUFFICIENTLY ESTABLISHED THE ALLEGED DAMAGE TO ITS CARGO.[22]

30

Petitioner admits that it is a forwarder but disagrees with the CAs conclusion that it is a common carrier. It also questions the appellate courts findings that it failed to establish that it exercised extraordinary or ordinary diligence in the vigilance over the subject shipment. As to the damages allegedly suffered by private respondent, petitioner counters that they were not sufficiently proven. Lastly, it insists that its liability, in any event, should be limited to $500 pursuant to the package limitation rule. Indeed, petitioner wants us to review the factual findings of the RTC and the CA and to evaluate anew the evidence presented by the parties.

The petition is partly meritorious.

Well established is the rule that factual questions may not be raised in a petition for review on certiorari as clearly stated in Section 1, Rule 45 of the Rules of Court, viz.:

Section 1. Filing of petition with Supreme Court. A party desiring to appeal by certiorari from a judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.

Admittedly, petitioner is a freight forwarder. The term freight forwarder" refers to a firm holding itself out to the general public (other than as a pipeline, rail, motor, or water carrier) to provide transportation of property for compensation and, in the ordinary course of its business, (1) to assemble and consolidate, or to provide for assembling and consolidating, shipments, and to perform or provide for break-bulk and distribution operations of the shipments; (2) to assume responsibility for the transportation of goods from the place of receipt to the place of destination; and (3) to use for any part of the transportation a carrier subject to the federal law pertaining to common carriers.[23]

A freight forwarders liability is limited to damages arising from its own negligence, including negligence in choosing the carrier; however, where the forwarder contracts to deliver goods to their destination instead of merely arranging for their transportation, it becomes liable as a common carrier for loss or damage to goods. A freight forwarder assumes the responsibility of a carrier, which actually executes the transport, even though the forwarder does not carry the merchandise itself.[24]

31

It is undisputed that UTI issued a bill of lading in favor of Unilab. Pursuant thereto, petitioner undertook to transport, ship, and deliver the 27 drums of raw materials for pharmaceutical manufacturing to the consignee.

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. [25] 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. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks, condition, quality, and value. As a contract, it names the contracting parties, which include the consignee; fixes the route, destination, and freight rate or charges; and stipulates the rights and obligations assumed by the parties.[26]

Undoubtedly, UTI is liable as a common carrier. Common 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 prove that they exercised extraordinary diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore, they have the burden of proving that they observed such diligence. [27] 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 facie case 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.[28]

Though it is not our function to evaluate anew the evidence presented, we refer to the records of the case to show that, as correctly found by the RTC and the CA, petitioner failed to rebut the prima facie presumption of negligence in the carriage of the subject shipment.

First, as stated in the bill of lading, the subject shipment was received by UTI in apparent good order and condition in New York, United States of America. Second, theOCMSC Survey Report stated that one steel drum STC Vitamin B Complex Extract was discovered to be with a cut/hole on the side, with approximate spilling of 1%. Third, though Gate Pass No. 7614, issued by Jardine, noted that the subject shipment was in good order and condition, it was specifically stated that there were 22 (should be 27 drums per Bill of Lading No. C320/C15991-2) drums of raw materials for pharmaceutical manufacturing. Last, J.G. Bernas Survey Report stated that 1 -s/drum was punctured and retaped on the bottom side and the content was lacking, and there was a short delivery of 5-drums.

32

All these conclusively prove the fact of shipment in good order and condition, and the consequent damage to one steel drum of Vitamin B Complex Extract while in the possession of petitioner which failed to explain the reason for the damage. Further, petitioner failed to prove that it observed the extraordinary diligence and precaution which the law requires a common carrier to exercise and to follow in order to avoid damage to or destruction of the goods entrusted to it for safe carriage and delivery.[29]

However, we affirm the applicability of the Package Limitation Rule under the COGSA, contrary to the RTC and the CAs findings.

It is to be noted that the Civil Code does not limit the liability of the common carrier to a fixed amount per package. In all matters not regulated by the Civil Code, the rights and obligations of common carriers are governed by the Code of Commerce and special laws. Thus, the COGSA supplements the Civil Code by establishing a provision limiting the carriers liability in the absence of a shippers declaration of a higher value in the bill of lading. [30] Section 4(5) of the COGSA provides:

(5) 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 of 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 facie evidence, but shall not be conclusive on the carrier.

In the present case, the shipper did not declare a higher valuation of the goods to be shipped. Contrary to the CAs conclusion, the insertion of the words L/C No. LC No. 1-187-008394/ NY 69867 covering shipment of raw materials for pharmaceutical Mfg. x x x cannot be the basis of petitioners liability. [31] Furthermore, the insertion of an invoice number does not in itself sufficiently and convincingly show that petitioner had knowledge of the value of the cargo. [32]

In light of the foregoing, petitioners liability should be limited to $500 per steel drum. In this case, as there was only one drum lost, private respondent is entitled to receive only $500 as damages for the loss. In addition to said amount, as aptly held by the trial court, an interest rate of 6% per annum should also be imposed, plus 25% of the total sum as attorneys fees.

33

WHEREFORE, premises considered, the petition is PARTIALLY GRANTED. The Court of Appeals Decision dated April 29, 2004 and Resolution dated November 26, 2004 are AFFIRMED with MODIFICATION by reducing the principal amount due private respondent Pioneer Insurance and Surety Corporation from P76,231.27 to $500, with interest of 6% per annum from date of demand, and 25% of the amount due as attorneys fees.

The other aspects of the assailed Decision and Resolution STAND.

SO ORDERED.

34

SECOND DIVISION G.R. No. 171337 July 11, 2012

BENJAMIN CUA (CUA UlAN TEK), Petitioner, vs. WALLEM PHILIPPINES SHIPPING, INC. and ADVANCE SHIPPING CORPORATION, Respondents. DECISION BRION, J.: Petitioner Benjamin Cua invokes the Court's power of review, through a petition for review on certiorari,1 to set aside the decision dated May 16, 20052 and the resolution dated January 31, 20063 of the Court of Appeals (CA)in CA-G.R. CV No. 53538. The CA rulings reversed the decision dated December 28, 19954 of the Regional Trial Court (RTC), Branch 31, Manila, in Civil Case No. 90-55098, where the RTC ordered the respondents, Wallem Philippines Shipping, Inc. (Wallem) and Advance Shipping Corporation (Advance Shipping), jointly and severally liable to pay damages in favor of Cua. THE FACTS On November 12, 1990, Cua filed a civil action for damages against Wallem and Advance Shipping before the RTC of Manila.5 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. Advance Shipping filed a motion to dismiss the complaint,6 assailing the RTCs jurisdiction over Cuas claim; it argued that Cuas claim should have first been brought to arbitration. Cua opposed Advance Shippings argument; he contended that he, as a consignee, was not bound by the Charter Party Agreement, which was a contract between the ship owner (Advance Shipping) and the charterers.7 The RTC initially deferred resolving the question of jurisdiction until after trial on the merits,8 but upon motion by Advance Shipping,9 the RTC ruled that Cua was not bound by the arbitration clause in the Charter Party Agreement.10 In the meantime, Wallem filed its own motion to dismiss,11 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 Cuas action has been barred. Cua filed an opposition to Wallems motion to dismiss, denying the latters claim of prescription. 12 Cua referred to the August 10, 1990 telex message sent by Mr. A.R. Filder of Thomas Miller, 13 manager of the UK P&I Club,14which stated that Advance Shipping agreed to extend the commencement of suit for 90 days, from August 14, 1990 to November 12, 1990; the extension was made with the concurrence of the insurer of the vessel, the UK P&I Club. A copy of the August 10, 1990 telex was supposedly attached to Cuas opposition. On February 11, 1992, Wallem filed an omnibus motion, 15 withdrawing its motion to dismiss and adopting instead the arguments in Advance Shippings motion to dismiss. It made an express reservation, however, that it was not waiving "the defense of prescription and will allege as one of its defenses, such defense of prescription and/or laches in its Answer should this be required by the circumstances."16 Accordingly, in an order dated June 5, 1992,17 the RTC resolved 35

that "the Court need not act on the Motion to Dismiss filed by the defendant Wallem Philippines Shipping, Inc.,"18 and required the defendants therein to file their Answer. After trial on the merits, the RTC issued its decision on December 28, 1995, 19 ordering the respondents jointly and severally liable to pay as damages to Cua: 1. the amount of P2,030,000.00, plus interests until the same is fully paid; 2. the sum of P100,00.00 as attorneys fees; and 3. the costs of [the] suit, and dismissing the counterclaims of the respondents. The respondents filed an appeal with the CA, insisting that Cuas claim is arbitrable and has been barred by prescription and/or laches.20 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 Cuas opposition to Wallems 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 Cuas complaint.21 Cua filed a motion for reconsideration22 of the CA decision, which was denied by the CA in a resolution dated January 31, 2006.23 Cua thus filed the present petition to assail the CA rulings. THE PARTIES ARGUMENTS Cua contends that the extension of the period to file a complaint for damages was a fact that was already admitted by the respondents who may no longer assert the contrary, unless they sufficiently show that it was made through palpable mistake or that no admission was made. Cua points out that Wallems motion to dismiss raised solely the issue of prescription, which he refuted by referring to the August 10, 1990 telex message extending the prescriptive period. Immediately after, Wallem withdrew its motion to dismiss. Cua thus attributes the withdrawal to an admission by Wallem of the existence of the August 10, 1990 telex message. Cua adds that Wallems withdrawal of its motion to dismiss dispensed with the need for him to present as evidence the telex message, since the RTC ruled that there is no more need to act on the motion to dismiss. Cua, therefore, prays for the setting aside of the CA rulings and the reinstatement of the RTC decision. The respondents, on the other hand, deny that an admission was made with respect to the existence of the August 10, 1990 telex message. The telex message was never attached to Cuas opposition to Wallems motion to dismiss, hence, there was no need for the respondents to deny its existence. They contend tha t Wallems withdrawal of its motion to dismiss does not amount to an admission of the existence of the telex message, nor does it amount to a waiver of the defense for prescription. As stated in the June 5, 1992 Order of the RTC, the "defendant [referring to Wallem] moved for the withdrawal of the Motion to Dismiss without waiving the defense of prescription."24 They thus pray for the denial of the petition. THE COURTS RULING The basic issue presented by the case is whether Cuas claim for payment of damages against the respondents has prescribed.1wphi1 After considering the facts and the applicable law, the Court finds that Cua timely filed his claim before the trial court. Prescription may be considered by the courts motu proprio if the facts supporting the ground are apparent from the pleadings or the evidence on record

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Section 1, Rule 16 of the Rules of Court25 enumerates the grounds on which a motion to dismiss a complaint may be based, and the prescription of an action is included as one of the grounds under paragraph (f). The defendant may either raise the grounds in a motion to dismiss or plead them as an affirmative defense in his answer. 26 The failure to raise or plead the grounds generally amounts to a waiver, except if the ground pertains to (1) lack of jurisdiction over the subject matter, (2) litis pendentia, (3) res judicata, or (4) prescription.27 If the facts supporting any of these four listed grounds are apparent from the pleadings or the evidence on record, the courts may consider these grounds motu proprio and accordingly dismiss the complaint. Accordingly, no reversible error may be attributed to the CA in considering prescription as a ground to dismiss Cuas action despite Wallems supposed waiver of the defense. The Court, therefore, need not resolve the question of whether Wallem actually waived the defense of prescription; an inquiry into this question is useless, as courts are empowered to dismiss actions on the basis of prescription even if it is not raised by the defendant so long as the facts supporting this ground are evident from the records. In the present case, what is decisive is whether the pleadings and the evidence support a finding that Cuas claim has prescribed, and it is on this point that we disagree with the CAs findings. We find that the CA failed to appreciate the admissions made by the respondents in their pleadings that negate a finding of prescription of Cuas claim. Respondents admitted the agreement extending the period to file the claim The COGSA is the applicable law for all contracts for carriage of goods by sea to and from Philippine ports in foreign trade;28 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."29 Jurisprudence, however, recognized the validity of an agreement between the carrier and the shipper/consignee extending the one-year period to file a claim.30 The vessel MV Argo Trader arrived in Manila on July 8, 1989; Cuas 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." 31 The allegation of an agreement extending the period to file an action in Cuas complaint is a material averment that, under Section 11, Rule 8 of the Rules of Court, must be specifically denied by the respondents; otherwise, the allegation is deemed admitted.32 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.33 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.34 A review of the pleadings submitted by the respondents discloses that they failed to specifically deny Cuas allegation of an agreement extending the period to file an action to November 12, 1990. Wallems motion to dismiss simply referred to the fact that Cuas complaint was filed more than one year from the arrival of the vessel, but it did not contain a denial of the extension.35 Advance Shippings motion to dismiss, on the other hand, focused solely on its contention that the action was premature for failure to first undergo arbitration. 36 While the joint answer submitted by the respondents denied Cuas allegation of an extension,37 they made no further statement other than a bare and unsupported contention that Cuas "complaint is barred by prescription and/or laches[.]"38 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, 39 since their arguments were based on Cuas supposed failure to comply with Article 366 of the Code of Commerce, not Section 3(6) 37

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 vessels 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 Cuas 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. This presumed admission is further bolstered by the express admission made by the respondents themselves in their Memorandum: 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. 40 (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. WHEREFORE, the decision dated May 16, 2005 and the resolution dated January 31, 2006 of the Court of Appeals in CAG.R. CV No. 53538 are SET ASIDE. The decision dated December 28, 1995 of the Regional Trial Court of Manila, Branch 31, in Civil Case No. 90-55098 is REINSTATED. Costs against the respondents. SO ORDERED.

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