SECOND DIVISION

[G.R. No. 124050. June 19, 1997]

MAYER STEEL PIPE CORPORATION and HONGKONG GOVERNMENT SUPPLIES DEPARTMENT, petitioners, vs. COURT OF APPEALS, SOUTH SEA SURETY AND INSURANCE CO., INC. and the CHARTER INSURANCE CORPORATION, respondents. DECISION PUNO, J.: This is a petition for review on certiorari to annul and set aside the Decision of respondent Court of Appeals dated [1] [2] December 14, 1995 and its Resolution dated February 22, 1996 in CA-G.R. CV No. 45805 entitled Mayer Steel Pipe Corporation and Hongkong Government Supplies Department v. South Sea Surety Insurance Co., Inc. and The Charter [3] Insurance Corporation. In 1983, petitioner Hongkong Government Supplies Department (Hongkong) contracted petitioner Mayer Steel Pipe Corporation (Mayer) to manufacture and supply various steel pipes and fittings. From August to October, 1983, Mayer shipped the pipes and fittings to Hongkong as evidenced by Invoice Nos. MSPC-1014, MSPC-1015, MSPC-1025, MSPC[4] 1020, MSPC-1017 and MSPC-1022. Prior to the shipping, petitioner Mayer insured the pipes and fittings against all risks with private respondents South Sea Surety and Insurance Co., Inc. (South Sea) and Charter Insurance Corp. (Charter). The pipes and fittings covered by Invoice Nos. MSPC-1014, 1015 and 1025 with a total amount of US$212,772.09 were insured with respondent South Sea, while those covered by Invoice Nos. 1020, 1017 and 1022 with a total amount of US$149,470.00 were insured with respondent Charter. Petitioners Mayer and Hongkong jointly appointed Industrial Inspection (International) Inc. as third-party inspector to examine whether the pipes and fittings are manufactured in accordance with the specifications in the contract. Industrial Inspection certified all the pipes and fittings to be in good order condition before they were loaded in the vessel. Nonetheless, when the goods reached Hongkong, it was discovered that a substantial portion thereof was damaged. Petitioners filed a claim against private respondents for indemnity under the insurance contract. Respondent Charter paid petitioner Hongkong the amount of HK$64,904.75. Petitioners demanded payment of the balance of HK$299,345.30 representing the cost of repair of the damaged pipes. Private respondents refused to pay because the insurance surveyor's report allegedly showed that the damage is a factory defect. On April 17, 1986, petitioners filed an action against private respondents to recover the sum of HK$299,345.30. For their defense, private respondents averred that they have no obligation to pay the amount claimed by petitioners because the damage to the goods is due to factory defects which are not covered by the insurance policies. The trial court ruled in favor of petitioners. It found that the damage to the goods is not due to manufacturing defects. It also noted that the insurance contracts executed by petitioner Mayer and private respondents are "all risks" policies which insure against all causes of conceivable loss or damage. The only exceptions are those excluded in the policy, or those sustained due to fraud or intentional misconduct on the part of the insured. The dispositive portion of the decision states: WHEREFORE, judgment is hereby rendered ordering the defendants jointly and severally, to pay the plaintiffs the following: 1. the sum equivalent in Philippine currency of HK$299,345.30 with legal rate of interest as of the filing of the complaint; 2. 3. P100,000.00 as and for attorney's fees; and costs of suit.
[5]

SO ORDERED.

Private respondents elevated the case to respondent Court of Appeals.

Respondent court affirmed the finding of the trial court that the damage is not due to factory defect and that it was covered by the "all risks" insurance policies issued by private respondents to petitioner Mayer. However, it set aside the decision of the trial court and dismissed the complaint on the ground of prescription. It held that the action is barred under Section 3(6) of the Carriage of Goods by Sea Act since it was filed only on April 17, 1986, more than two years from the time the goods were unloaded from the vessel. Section 3(6) of the Carriage of Goods by Sea Act 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 or the date when the goods should have been delivered." Respondent court ruled that this provision applies not only to the carrier but also to the insurer, citing Filipino Merchants Insurance Co., Inc. vs. [6] Alejandro. Hence this petition with the following assignments of error: 1. The respondent Court of Appeals erred in holding that petitioners' cause of action had already prescribed on the mistaken application of the Carriage of Goods by Sea Act and the doctrine of Filipino Merchants Co., Inc. v. Alejandro (145 SCRA 42); and 2. The respondent Court of Appeals committed an error in dismissing the complaint.
[7]

The petition is impressed with merit. Respondent court erred in applying Section 3(6) of the Carriage of Goods by Sea Act. Section 3(6) of the Carriage of Goods by Sea Act states that the carrier and the ship shall be discharged from all liability for loss or damage to the goods if no suit is filed within one year after delivery of the goods or the date when they should have been delivered. Under this provision, only the carrier's liability is extinguished if no suit is brought within one year. But the liability of the insurer is not extinguished because the insurer's liability is based not on the contract of carriage but on the contract of insurance. A close reading of the law reveals that the Carriage of Goods by Sea Act governs the relationship between the carrier on the one hand and the shipper, the consignee and/or the insurer on the other hand. It defines the obligations of the carrier under the contract of carriage. It does not, however, affect the relationship between the shipper and the insurer. The latter case is governed by the Insurance Code. Our ruling in Filipino Merchants Insurance Co., Inc. v. Alejandro and the other cases cited therein does not support respondent court's view that the insurer's liability prescribes after one year if no action for indemnity is filed against the carrier or the insurer. In that case, the shipper filed a complaint against the insurer for recovery of a sum of money as indemnity for the loss and damage sustained by the insured goods. The insurer, in turn, filed a third-party complaint against the carrier for reimbursement of the amount it paid to the shipper. The insurer filed the third-party complaint on January 9, 1978, more than one year after delivery of the goods on December 17, 1977. The court held that the Insurer was already barred from filing a claim against the carrier because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed within one year after delivery of the goods or the date when the goods should have [10] been delivered. The court said that "the coverage of the Act includes the insurer of the goods." The Filipino Merchants case is different from the case at bar. In Filipino Merchants, it was the insurer which filed a claim against the carrier for reimbursement of the amount it paid to the shipper. In the case at bar, it was the shipper which filed a claim against the insurer. The basis of the shipper's claim is the "all risks" insurance policies issued by private respondents to petitioner Mayer. The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the insurer. When the court said in Filipino Merchants that Section 3(6) of the Carriage of Goods by Sea Act applies to the insurer, it meant that the insurer, like the shipper, may no longer file a claim against the carrier beyond the one-year period provided in the law. But it does not mean that the shipper may no longer file a claim against the insurer because the basis of the insurer's liability is the insurance contract. An insurance contract is a contract whereby one party, for a consideration known as the premium, agrees to indemnify another for loss or damage which he may suffer [11] from a specified peril. An "all risks" insurance policy covers all kinds of loss other than those due to willful and [12] fraudulent act of the insured. Thus, when private respondents issued the "all risks" policies to petitioner Mayer, they bound themselves to indemnify the latter in case of loss or damage to the goods insured. Such obligation prescribes in [13] ten years, in accordance with Article 1144 of the New Civil Code. IN VIEW WHEREOF, the petition is GRANTED. The Decision of respondent Court of Appeals dated December 14, 1995 and its Resolution dated February 22, 1996 are hereby SET ASIDE and the Decision of the Regional Trial Court is hereby REINSTATED. No costs. SO ORDERED. Regalado, (Chairman), Romero, Mendoza, and Torres, Jr., JJ., concur.
[8] [9]

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-24064 February 29, 1968

RIZAL SURETY & INSURANCE, CO., plaintiff-appellant, vs. MACONDRAY & CO., INC., defendant-appellee. CONCEPCION, C.J.: Plaintiff, Rizal Surety & Insurance Company seeks the reversal of a decision of the Court of First Instance of Manila dismissing the complaint herein, with costs. Plaintiff seeks to recover from defendant, Macondray & Co., Inc., as authorized agent, in Manila, of Barber Steamship Line Inc., which operates the vessel "SS Tai Ping," the sum of P2,000.00 representing the maximum value recoverable under the corresponding bill of lading of some machinery parts shipped, on board said vessel, at New York, and consigned to Edwardson Manufacturing Corporation, in Manila, but not discharged by the vessel in Manila, in view of which the plaintiff had to pay, pursuant to its contract of insurance with the consignee, the value of said effects to the latter. In its answer, the defendant set up the defense of prescription which the lower court sustained. Hence, the dismissal of the complaint, which has been appealed directly to this Court. Defendant's plea is predicated upon Section 3, Title I, of the Carriage of Goods by Sea Act, the penultimate paragraph of subparagraph 6 of which reads; 1wph1.t In any event the carrier and the ship shall be discharged from all liability in respect to loss or damages 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. The only question submitted for our determination is whether the period of prescription in the foregoing provision is controlling in the case at bar, considering the conditions obtaining therein. Plaintiff maintains the negative view, upon the theory that the above-quoted provision cannot apply when the shipment in question has not been discharged from the carrying vessel, as in the case at bar. In such event, it claims, our general statute of limitations of action should apply. We find no merit in this contention. The aforementioned provision contemplates not only the case of damage, but, also, that of loss. It goes without saying that there could be no possible discharge of goods lost during the voyage and before reaching the destination. Then again, said provision, likewise, anticipates two (2) other possibilities, viz.: 1) that delivery has been made, in which case the action should be brought "within one year after delivery of the goods;" or 2) that no delivery has taken place, in which event said period should be computed from "the date when the goods should have been delivered." In the latter contingency, the cause of such non-delivery that is to say, whether the goods have been discharged from the vessel or not is immaterial. If the goods have not been discharged from the vessel, the non-delivery is imputable to the carrier. So would it be, if the goods had been unloaded from the vessel, but not delivered to the consignee. Indeed, in such case of discharge of the goods from the vessel, the carrier would still be liable for non-delivery of the goods, because the same would be due to its own omission, if it undertook to make the delivery by itself, or to the omission of its agent, if the carrier entrusted the custody of the goods and/or its delivery to a third party. Again, our statute of limitations of action cannot be applied to the present case because the corresponding bill of lading which is the contract and, hence, the law between the parties expressly stipulates that it is "subject to the Provisions of the Carriage by Sea Act of the U.S. of America, approved April 16, 1936, which shall be deemed to be incorporated" therein. The lower court held and, correctly, that, inasmuch as the "SS Tai Ping" arrived at the Port of Manila on November 2, 1962 and left it on November 4, 1962, it was on the latter date that the carrier had the last opportunity to deliver the goods; that the period of one year within which the carrier could be sued commenced to run, therefore, from November 5, 1962 and expired on November 4, 1963; and that said period has expired before this action was commenced on February 10, 1964. WHEREFORE, the decision appealed from should be, as it is hereby, affirmed, with costs against plaintiff-appellant. It is so ordered.1wph1.t Reyes, J.B.L., Dizon, Makalintal, Bengzon, J.P., Sanchez, Castro, Angeles and Fernando, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-27798 June 15, 1977 UNION CARBIDE PHILIPPINES, INC. (formerly National Carbon Philippines, Inc.), plaintiff-appellant, vs. MANILA RAILROAD CO., substituted by the PHILIPPINE NATIONAL RAILWAYS, MANILA PORT SERVICE and AMERICAN STEAMSHIP AGENCIES, INC., defendants- appellees. Solicitor General Antonio P. Barredo and Solicitor Buenaventura J. Guerrero for appellants. virtual law library Salcedo, Del Rosario, Bito & Misa for appellee. AQUINO, J.: This is an admiralty and arrastre case. On December 18, 1961 the vessel Daishin Maru arrived in Manila with a cargo of 1,000 bags of synthetic resin consigned to General Base Metals, Inc. which later sold the cargo to Union Carbide Philippines, Inc.virtualawlibrary virtual law library On the following day, December 19, that cargo was delivered to the Manila Port Service in good order and condition except for twentyfive bags which were in bad order (Par. IV and Annexes C to C-25 of Stipulation of Facts).virtualawlibrary virtual law library On January 20 and February 6 and 8, 1962 eight hundred ninety-eight (898) bags of resin (out of the 1,000 bags) were delivered by the customs broker to the consignee. One hundred two bags were missing. The contents of twenty-five bags were damaged or pilfered while they were in the custody of the arrastre operator (Par. XII and Annexes D and H of Stipulation of Facts All in all fifty bags out of the 898 bags were damaged (Annex D-5).virtualawlibrary virtual law library The 152 bags of resin (102 missing and 50 damaged) were valued at $12.65 a bag or a total value of $1,992.80, which amount at the prevailing rate of exchange of P3.85 to the American dollar, is equivalent to P7,402.78 (Annex I of Stipulation of Facts).virtualawlibrary virtual law library The consignee, through the customs broker, filed on January 3, 1962 with the Manila Port Service, as arrastre operator, and the American Steamship Agencies, Inc., as agent of the carrier, a provisional claim advising them that the shipment in question was "shorthanded, short delivered and/or landed in bad order" (Annexes E and F of Stipulation of Facts).virtualawlibrary virtual law library Formal claims dated June 11, 1962 were made by the consignee with the arrastre operator and the agent of the carrier (Annexes I and I-1 of Stipulation of Facts The claims were reiterated by the consignee's lawyer in his letters dated September 26, 1962 which were received by the carrier's agent and the arrastre operator on October 4, 1962 (Annexes J and J-1 of Stipulation of Facts).virtualawlibrary virtual law library As the claims were not paid, Union Carbide Philippines, Inc. filed a complaint on December 21, 1962 in the Court of First Instance of Manila against the Manila Railroad Company, the Manila Port Service and the American Steamship Agencies, Inc. for the recovery of damages amounting to P7,402.78 as the value of the undelivered 102 bags of resin and the damaged 50 bags plus legal rate of interest from the filing of the complaint and P1,000 as attorney's fees.virtualawlibrary virtual law library Union Carbide's complaint was a double-barrelled action or a joinder of two causes of action. One was an action in admiralty under the Carriage of Goods by Sea Act against the carrier's agent for the recovery of P1,217.56 as the value of twenty-five bags of resin which were damaged before they were landed (Annex C-25).virtualawlibrary virtual law library The other was an action under the management contract between the Bureau of Customs and the Manila Port Service, a subsidiary of the Manila Railroad Company, for the recovery of P6,185.22 as the value of the undelivered 102 bags of resin and twenty-five bags, the contents of which were damaged or pilfered while in the custody of the arrastre operator.virtualawlibrary virtual law library The case was submitted for decision on the basis of a stipulation of facts. The trial court in its decision of January 15, 1964 dismissed the case as to the carrier's agent on the ground that the action had already prescribed because it was not "brought within one year after delivery of the goods", as contemplated in section 3(6) of the Carriage of Goods by Sea Act. The one-year period was counted from December 19, 1961 when the cargo was delivered to the arrastre operator. As above stated, the action was brought on December 21, 196'2 or two days late, according to the trial court's reckoning (Civil Case No. 52562).virtualawlibrary virtual law library

With respect to the consignee's claim against the arrastre operator, the trial court found that the provisional claim was filed within the fifteen-day period fixed in paragraph 15 of the arrastre contract. Yet, in spite of that finding, the trial court dismissed the action against the arrastre operator (p. 65, Record on Appeal).virtualawlibrary virtual law library Union Carbide appealed to the Court of Appeals on questions of fact and of law, That Appellate Court elevated the case to this Court because in its opinion the appeal raises only the legal issue of prescription (Resolution of May 10, 1967 in CA-G. R. No. 33743R).virtualawlibrary virtual law library Union Carbide contends that the trial court erred (1) in finding that its action was barred by the statute of limitations and (2) in not holding that the carrier and the arrastre operator were liable for the value of the undelivered and damaged cargo. Claim against the carrier's agent.-There is no question that, as shown in the twenty-five tally sheets, 975 bags of resin were delivered by the carrier in good order to the arrastre operator and that only twenty-five (25) bags were damaged while in the carrier's custody (Annexes C to C-25 and K-1 of Stipulation of Facts).virtualawlibrary virtual law library The one-year period within which the consignee should sue the carrier is computed from "the delivery of the goods or the date when the goods should have been delivered". The Carriage of Goods by Sea Act provides: RESPONSIBILITIES AND LIABILITIES virtual law library SEC. 3. xxx xxx xxx virtual law library (6) Unless notice of loss or damage and the general nature of such loss or damage be given in writing to the carrier or hi 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.virtualawlibrary virtual law library Said notice of loss or damage may be endorsed upon the receipt for the goods given by the person taking delivery thereof.virtualawlibrary virtual law library 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.virtualawlibrary virtual law library 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.virtualawlibrary virtual law library In the case of any actual or apprehended loss or damage the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods. (Commonwealth Act No. 65, adopting U.S. Public Act No. 521 of April 16,1936). What is the meaning of "delivery" in section 3(6) of the Carriage of Goods by Sea Act The trial court construed delivery as referring to the discharge or landing of the cargo. Union Carbide contends that "delivery" does not mean the discharge of goods or the delivery thereof to the arrastre operator but the actual delivery of the goods to the consignee by the customs broker. The carrier contends that delivery means discharge from the vessel into the custody of the customs arrastre operator because under sections 1201 and 1206 of the Tariff and Customs Code merchandise cannot be directly delivered by the carrier to the consignee but should first pass through the customhouse at a port of entry for the collection of customs duties.virtualawlibrary virtual law library The carrier cites the following provisions of the bill of lading to support its contention: 9. Delivery. The Carrier retains the option of delivery at all times from ship's side or from craft, hulk, custom house, warehouse, wharf or quay at the risk of the shippers, consignees or owners of the goods, and all expenses incurred by delivery otherwise than from ship's side shall be borne by the shippers, consignee or owners of the goods.virtualawlibrary virtual law library

11. Discharge of Goods. The goods may be discharge without notice, as soon as the ship is ready to unload, continuously day and night, Sundays and holidays included, on to wharf or quay or into warehouse, or into hulk, lazaretto or craft or on any other place and be stored there at the risk and expense of the shippers, consignees or owners of the goods, any custom of the port to the contrary notwithstanding. In any case, the Carrier's liability is to cease as soon as the goods are lifted from ship's deck or leave the ship's tackle, any custom of the port to the contrary notwithstanding. Consignees to pay charges for sorting and stocking the goods on wharf or in shed.virtualawlibrary virtual law library If the consignees fail to take delivery of their goods immediately the ship is ready to discharge them, the Carrier shall be at liberty to land and warehouse or discharge the said goods into hulk or craft, or at any other place at the risk and expense of the shippers, consignees or owners of the goods without notice.virtualawlibrary virtual law library 15. Notice of Claim. Any claim for loss of or damage to the goods must be preferred in writing to the Carrier's Agents at the place of delivery within 3 days after the ship'sdischarge thereof, and before the goods are removed from the quay or ship's " or place of discharge, and in the event of such claim not being preferred as above specified, the claim shall be deemed as waived, and the Carrier shall be discharged therefrom.virtualawlibrary virtual law library Suit for the recovery of loss or damage shall not in any event be maintainable against the Carrier or the ship unless instituted within one year after the delivery of the written notice above specified. The amount of claim shall be restricted to the Cash Value of the goods at the place and time of original shipment plus all charges actually paid thereon, and all claims for either partial or total loss or damage shall be entertained and adjusted upon this basis of value. (Annex B). In this connection, it is pertinent to state that the Tarifff and Customs Code allows the delivery of imported merchandise to the arrastre operator: SEC. 1213. Receiving Handling Custody and Delivery of Articles. - The Bureau of Customs shall have "elusive supervision and control over the receiving, handling, custody and delivery of articles on the wharves and piers at all ports of entry and in the exercise of its functions it is hereby authorized to acquire, take over, operate and superintend such plants and facilities as may be necessary for the receiving, handling, custody and delivery of articles, and the convenience and comfort of passengers and the handling of baggage, as well as to acquire fire protection equipment for use in the piers: Provided, That whenever in his judgment the receiving, handling, custody and delivery of articles can be carried on by private parties with greater efficiency, the Commissioner may, after public bidding and subject to the approval of the department head, contract with any private party for the service of receiving, handling, custody and delivery of articles, and in such event, the contract may include the sale or lease of government-owned equipment and facilities used in such service. The sensible and practical interpretation is that delivery within the meaning of section 3(6) of the Carriage of Goods by Sea Law means delivery to the arrastre operator. That delivery is evidenced by tally sheets which show whether the goods were landed in good order or in bad order, a fact which the consignee or shipper can easily ascertain through the customs broker.virtualawlibrary virtual law library To use as basis for computing the one-year period the delivery to the consignee would be unrealistic and might generate confusion between the loss or damage sustained by the goods while in the carrier's custody and the loss or damage caused to the goods while in the arrastre operator's possession.virtualawlibrary virtual law library Apparently, section 3(6) adheres to the common-law rule that the duty imposed water carriers was merely to transport from wharf to wharf and that the carrier was not bound to deliver the goods at the warehouse of the consignee (Tan Hi vs. United States, 94 Fed. Supp. 432,435).virtualawlibrary virtual law library In the Tan Hi case, it was held that a requirement of Philippine law that all cargo unloaded at Manila be delivered to the consignee through the arrastre operator acting as customs' agent was not unreasonable. The common-law requirements as to the proper delivery of goods by water carrier apply only when customs regulations at the port of destination do not otherwise provide. The delivery must be in accordance with the usages of the port in order that such delivery would discharge the carrier of responsibility. (Notes 50 and 51, 80 C.J.S. 922; 58 C. J. 372 note 24. See 70 Am. Jur 2nd 613, note 19).virtualawlibrary virtual law library Under the facts of this case, we held that the one-year period was correctly reckoned by the trial court from December 19, 1961, when, as agreed upon by the parties and as shown in the tally sheets, the cargo was discharged from the carrying vessel and delivered to the Manila Port Service. That one-year period expired on December 19, 1962. Inasmuch as the action was filed on December 21, 1962, it was barred by the statute of limitations.virtualawlibrary virtual law library Defendant American Steamship Agencies, Inc., as agent of the carrier, has no more liability to the consignee's assignee, Union Carbide Philippines, Inc., in connection with the damaged twenty-five bags of resin.virtualawlibrary virtual law library

Prescription was duly pleaded by the said defendant in its answer and motion to dismiss. That defense was correctly entertained by trial court. Claim against the arrastre operator. - The liability of the arrastre contractor has a factual and legal basis different from that of the carrier's. The management contract between the Manila Port Service and the Bureau of Customs provides: 15. ... ; in any event the CONTRACTOR hall be relieved and released of any and all responsibility or liability for loss, damage, misdelivery, and/or non-delivery of goods, unless suit in the court of proper jurisdiction is brought within a period of one (1) year from the date of the discharge of the goods, or from the date when the claim for the value of such goods have been rejected or denied by the CONTRACTOR, provided that such claim shall have been filed with the CONTRACTOR within fifteen (15) days from the date of discharge of the last package from the carrying vessel. ... (Annex A of Stipulation of Facts Under the foregoing contractual provisions, the action against the arrastre operator to enforce liability for loss of the cargo or damage thereto should be filed within one year from the date of the discharge of the goods or from the date when the claim for the value of such goods has been rejected or denied by the arrastre operator.virtualawlibrary virtual law library However, before such action can be filed a condition precedent should be complied with and that is, that a claim (provisional or final) shall have been previously filed with the arrastre operator within fifteen days from the date of the discharge of the last package from the carrying vessel (Continental Insurance Company vs. Manila Port Service, L-22208, March 30,1966,16 SCRA 425).virtualawlibrary virtual law library In this case, the consignee's customs broker filed with the Manila Port Service as provisional claim advising the latter that the cargo was "short, short delivered and/or landed in bad order". That claim was filed on January 3, 1962 or on the fifteenth day following December 19, 1961, the date of the discharge of the last package from the carrying vessel. That claim was never formally rejected or denied by the Manila Port Service. Having complied with the condition precedent for the filing of a claim within the fifteen- day period, Union Carbide could file the court action within one year, either from December 19, 1961 or from December 19, 1962. This second date is regarded as the expiration of the period within which the Manila Port Service should have acted on the claim (Philippine Education Co., Inc. vs. Manila Port Service, L-24091, 21 SCRA, 174, 178).virtualawlibrary virtual law library In other words, the claimant or consignee has a two-year prescriptive period, counted from the date of the discharge of the goods, within which to file the action in the event that the arrastre contractor, as in this case, has not rejected nor admitted liability (Continental Insurance Company vs. Manila Port Service, supra. Philippine Education Company vs. Manila Port Service, L-23444, October 29, 1971, 42 SCRA 31).virtualawlibrary virtual law library Since the action in this case against the arrastre operator was filed on December 21, 1962, or within the two-year period expiring on December 19, 1963, that action was filed on time. The trial court erred in dismissing the action against the Manila Port Service and its principal, the Manila Railroad Company.virtualawlibrary virtual law library As shown in the statement of facts, the arrastre operator is responsible for the value of 102 bags of resin which were not delivered, and twenty-five bags, which were damaged, or a total of one hundred twenty-seven bags valued at P6,185.22.virtualawlibrary virtual law library The arrastre operator should pay attorney's fees to the plaintiff for not having satisfied its plainly valid, just and demandable claim (Art. 2208, Civil Code). We fix the attorney's fees and the litigation expenses in the sum of one thousand pesos.virtualawlibrary virtual law library WHEREFORE, the trial court's judgment is affirmed insofar as it dismissed plaintiff-appellant's claim against defendant American Steamship Agencies, Inc. on the ground of prescription.virtualawlibrary virtual law library The trial court's decision is reversed insofar as it dismissed plaintiff's claim against the Manila Railroad Company, as arrastre operator. The Philippine National Railways, as the successor of the Manila Railroad Company (See. 22, Republic Act No. 4156), is hereby ordered to pay plaintiff Union Carbide Philippines, Inc. the sum of P6,185.22, as the value of the 127 bags of resin (102 bags missing and 25 bags damaged), with legal rate of interest from the filing of the complaint on December 21, 1962 up to the date of payment, Plus P1,000 as attorney's fees and litigation expenses, and the costs.virtualawlibrary virtual law library SO ORDERED. Fernando (Chairman), Barredo, Antonio and Fernandez, JJ., concur.virtualawlibrary virtual law library Concepcion Jr., J., is on leave.virtualawlibrary virtual law library Fernandez J., was designated to sit in the Second Davison.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-22491 January 27, 1967

DOMINGO ANG, plaintiff-appellant, vs. AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellee. Juan T. David and M.C. Ginigundo for plaintiff-appellant. Ross, Salcedo, Del Rosario, Bito & Misa for defendant-appellee.

BENGZON, J.P., J.: Yau Yue Commercial Bank Ltd. of Hongkong, referred to hereafter as Yau Yue agreed to sell 140 packages of galvanized steel durzinc sheets to one Herminio G. Teves (the date of said agreement is not shown in the record here) for the sum of $32,458.26 (US). Said agreement was subject to the following terms and arrangements: (a) the purchase price should be covered by a bank draft for the corresponding amount which should be paid by Herminio G. Teves in exchange for the delivery to him of the corresponding bill of lading to be deposited with a local bank, the Hongkong & Shanghai Bank of Manila (b) upon arrival of the articles in Manila, Teves would be notified and he would have to pay the amount called for in the corresponding demand draft, after which the bill of lading would be delivered to him; and (c) Teves would present said bill of lading to the carrier's agent, American Steamship Agencies, Inc. which would then issue the corresponding "Permit To Deliver Imported Articles" to be presented to the Bureau of Customs to obtain the release of the articles. Pursuant to said terms and arrangements, Yau Yue through Tokyo Boeki Ltd. of Tokyo, Japan, shipped the articles at Yawata, Japan, on April 30, 1961 aboard the S.S. TENSAI MARU, Manila, belonging to the Nissho Shipping Co., Ltd. of Japan, of which the American Steamship Agencies, Inc. is the agent in the Philippines, under a shipping agreement, Bill of Lading No. WM-2 dated April 30, 1961, consigned "to order of the shipper with Herminio G. Teves as the party to be notified of the arrival of the 140 packages of galvanized steel durzinc sheets in Manila. The bill of lading was indorsed to the order of and delivered to Yau Yue by the shipper. Upon receipt thereof, Yau Yue drew a demand draft together with the bill of lading against Herminio G. Teves, through the Hongkong & Shanghai Bank. When the articles arrived in Manila on or about May 9, 1961, Hongkong & Shanghai Bank notified Teves, the "notify party" under the bill of lading, of the arrival of the goods and requested payment of the demand draft representing the purchase price of the articles. Teves, however, did not pay the demand draft, prompting the bank to make the corresponding protest. The bank likewise returned the bill of lading and demand draft to Yau Yue which indorsed the said bill of lading to Domingo Ang. Meanwhile, despite his non-payment of the purchase price of the articles, Teves was able to obtain a bank guaranty in favor of the American Steamship Agencies, Inc., as carrier's agent, to the effect that he would surrender the original and negotiable bill of lading duly indorsed by Yau Yue. On the strength of this guaranty, Teves succeeded in securing a "Permit To Deliver Imported Articles" from the carrier's agent, which he presented to the Bureau of Customs which in turn released to him the articles covered by the bill of lading. Subsequently, Domingo Ang claimed for the articles from American Steamship Agencies, Inc., by presenting the indorsed bill of lading, but he was informed by the latter that it had delivered the articles to Teves. On October 30, 1963 Domingo Ang filed a complaint in the Court of First Instance of Manila against the American Steamship Agencies, Inc., for having allegedly wrongfully delivered and/or converted the goods covered by the bill of lading belonging to plaintiff Ang, to the damage and prejudice of the latter.

On December 2, 1963, defendant filed a motion to dismiss upon the ground that plaintiff's cause of action has prescribed under the Carriage of Goods by Sea Act (Commonwealth Act No. 65), more particularly Section 3 (6), paragraph 4, which provides: In any event, the carrier and the ship shall be discharged from all liability in respect to loss or damage unless suit is brought within one year, after delivery of the goods or the date when the goods should have been delivered. It argued that the cargo should have been delivered to the person entitled to the delivery thereof (meaning the plaintiff) on May 9, 1961, the date of the vessel's arrival in Manila, and that even allowing a reasonable time (even one month) after such arrival within which to make delivery, still, the action commenced on October 30, 1963 was filed beyond the prescribed period of one year. By order dated December 21, 1963, copy of which was received by plaintiff on December 26, 1963, the lower court dismissed the action on the ground of prescription. His motion for reconsideration dated December 26, 1963 having been denied by the lower court in its order dated January 13, 1964, plaintiff appealed directly to this Court on a question of law: Has plaintiff-appellant's cause of action prescribed under Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act? The provision of law involved in this case speaks of "loss or damage". That there was no damage caused to the goods which were delivered intact to Herminio G. Teves who did not file any notice of damage, is admitted by both parties in this case. What is to be resolved in order to determine the applicability of the prescriptive period of one year to the case at bar is whether or not there was "loss" of the goods subject matter of the complaint. Nowhere is "loss" defined in the Carriage of Goods by Sea Act. Therefore, recourse must be had to the Civil Code which provides in Article 18 thereof that, "In matters which are governed by the Code of Commerce and special laws, their deficiency shall be supplied by the provisions of this Code." Article 1189 of the Civil Code defines the word "loss" in cases where conditions have been imposed with the intention of suspending the efficacy of an obligation to give. The contract of carriage under consideration entered into by and between American Steamship Agencies, Inc. and the Yau Yue (which later on endorsed the bill of lading covering the shipment to plaintiff herein Domingo Ang), is one involving an obligation to give or to deliver the goods "to the order of shipper", that is, upon the presentation and surrender of the bill of lading. This being so, said article can be applied to the present controversy, more specifically paragraph 2 thereof which provides that, "... it is understood that a thing is lost when it perishes, or goes out of commerce, or disappears in such a way that its existence unknown or it cannot be recovered." As defined in the Civil Code and as applied to Section 3 (6) paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared that their existence is unknown or they cannot be recovered. It does not include a situation where there was indeed delivery but delivery to the wrong person, or a misdelivery, as alleged in the complaint in this case. The distinction between non-delivery and misdelivery has reference to bills of lading. As this Court shall in Tan Pho vs. Hassamal Dalamal, 67 Phil. 555, 557-558: Considering that the bill of lading covering the goods in question has been made to order, which means that said goods cannot be delivered without previous payment of the value thereof, it is evident that, the said goods having been delivered to Aldeguer without paying the price of the same, these facts constitute misdelivery and not nondelivery, because their was in fact delivery of merchandise. We do not believe it can be seriously and reasonably argued that what took place, as contended of by the petitioner, is a case of misdelivery with respect to Aldeguer and at the same time nondelivery with respect to the PNB who had the bill of lading, because the only thing to consider in this question is whether Enrique Aldeguer was entitled to get the merchandise or whether, on the contrary, the PNB is the one entitled thereto. Under the facts, the defendant petitioner should not have delivered the goods to Aldeguer but to the Philippine National Bank. Having made the delivery to Aldeguer, the delivery is a case of misdelivery. If the goods have been delivered, it cannot at the same time be said that they have not been delivered. According to the bill of lading which was issued in the case at bar to the order of the shipper, the carrier was under a duty not to deliver the merchandise mentioned in the bill of lading except upon presentation of the bill of lading duly endorsed by the shipper. (10 C.J., 259) Hence, the defendant-petitioner Tan Pho having delivered the goods to Enrique Aldeguer without the presentation by the latter of the bill of lading duly endorsed to him by the shipper, the said defendant made a misdelivery and violated the bill of lading, because his duty was not only to

transport the goods entrusted to him safely, but to deliver them to the person indicated in the bill of lading. (Emphasis supplied) Now, it is well settled in this jurisdiction that when a defendant files a motion to dismiss, he thereby hypothetically admits the truth of the allegations of fact contained in the complaint (Philippine National Bank v. Hipolito, et al., L-16463, Jan. 30, 1965; Republic v. Ramos, L-15484, Jan. 31, 1963; Pascual v. Secretary of Public Works & Communications, L-10405, Dec. 29, 1960; Pangan v. Evening News Publishing Co., Inc., L-13308, Dec. 29, 1960). Thus, defendant-appellant having filed a motion to dismiss, it is deemed to have admitted, hypothetically, paragraphs 6, 7 and 8 of the complaint, and these alleges: 6. That, when the said articles arrived in Manila, the defendant authorized the delivery thereof to Herminio G. Teves, through the issuance of the corresponding Permit To Deliver Imported Articles, without the knowledge and consent of the plaintiff, who is the holder in due course of said bill of lading, notwithstanding the fact that the said Herminio G. Teves could not surrender the corresponding bill of lading; . 7. That, without any evidence of the fact that Herminio G. Teves is the holder of the corresponding bill of lading in due course; without the surrender of the bill of lading without the knowledge and consent of the plaintiff, as holder thereof in due course, and in violation of the provision on the bill of lading which requires that the articles are only to be delivered to the person who is the holder in due course of the said bill of lading, or his order, the defendant issued the corresponding 'Permit To Deliver Imported Articles' in favor of the defendant, without the knowledge and consent of the plaintiff as holder in due course of said bill of lading, which, originally was Yau Yue subsequently, the plaintiff Domingo Ang; 8. That, as a result of the issuance by the defendant of said permit, Herminio G. Teves was able to secure the release of the articles from the Bureau of Customs, which is not legally possible without the presentation of said permit to the said Bureau; ... From the allegations of the complaint, therefore, the goods cannot be deemed "lost". They were delivered to Herminio G. Teves, so that there can only be either delivery, if Teves really was entitled to receive them, or misdelivery, if he was not so entitled. It is not for Us now to resolve whether or not delivery of the goods to Teves was proper, that is, whether or not there was rightful delivery or misdelivery. The point that matters here is that the situation is either delivery or misdelivery, but not nondelivery. Thus, the goods were either rightly delivered or misdelivered, but they were not lost. There being no loss or damage to the goods, the aforequoted provision of the Carriage of Good by Sea Act stating that "In any event, the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered," does not apply. The reason is not difficult to see. Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither last nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain. It follows that for suits predicated not upon loss or damage but on alleged misdelivery (or conversion) of the goods, the applicable rule on prescription is that found in the Civil Code, namely, either ten years for breach of a written contract or four years for quasi-delict. (Arts. 1144[1], 1146, Civil Code) In either case, plaintiff's cause of action has not vet prescribed, since his right of action would have accrued at the earliest on May 9, 1961 when the ship arrived in Manila and he filed suit on October 30, 1963. Wherefore, the dismissal order appealed from is hereby reversed and set aside and this case is remanded to the court a quo for further proceedings. No costs. So ordered. Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and Castro, JJ., concur.

Republic of the Philippines SUPREME COURT Manila EN BANC G.R. No. L-24515 November 18, 1967

THE AMERICAN INSURANCE COMPANY, Plaintiff-Appellant, vs. COMPAIA MARITIMA, ET AL., defendants. MAKALINTAL, J.: virtual law library Appeal from the order of the Court of First Instance of Manila (Civil Case No. 55056) dismissing, on the ground of prescription, the amended complaint of plaintiff-appellant, The American Insurance Company as against alternative defendant Macondray & Co., Inc.virtualawlibrary virtual law library On August 11, 1962, a certain cargo insured with plaintiff corporation was shipped in New York, U.S. aboard "M/S TOREADOR", of which the general agent in the Philippines is appellee Macondray & Co., Inc. (hereinafter referred to as Macondray). The cargo, with an invoice value of $3,539.61 CIF Cebu, was consigned to the order of the importer Atlas Consolidated Mining and Development Corporation.virtualawlibrary virtual law library Inasmuch as the final port of call of the " M/S TOREADOR" was Manila, the carrier, in accepting the cargo at the point of shipment, agreed to transship the same, after its discharge in Manila, aboard an inter-island vessel to its destination in Cebu.virtualawlibrary virtual law library On September 18, 1962, the " M/S TOREADOR" arrived at the port of Manila and on the same date discharged the cargo in question. Pursuant to the arrangement the cargo was subsequently loaded aboard the "SS SIQUIJOR", an inter-island vessel. The shipment was finally discharged in Cebu on September 24, 1962.virtualawlibrary virtual law library When the consignee took delivery of the shipment it was found to be short of two (2) pieces of tractor parts worth $2,834.88, or P11,063.12 at the exchange rate of P3.9025. Plaintiff paid the insured value of the lost merchandise to the consignee. To recover the said sum of P11,063.12 plaintiff, as subrogee of the consignee rights, filed on September 24, 1963 a complaint against the Compaia Maritima and the Visayan Cebu Terminal Co., Inc. as alternative defendants. The former was sued as operator and owner of "SS SIQUIJOR" and the latter as operator of the arrastre service at the port of Cebu charged with the care and custody of all cargo discharged there.virtualawlibrary virtual law library In view of Maritima's allegation in its answer that the lost merchandise had not actually been delivered to it, plaintiff filed on November 6, 1964 a motion to admit its amended complaint impleading Macondray and Luzon Brokerage Corporation as additional defendants and eliminating the Visayan Cebu Terminal Co., Inc. According to plaintiff, "the amended complaint is necessary in view of defendant Maritima's assertion and records tending to show that the lost merchandise was not delivered to it, contrary to Macondray's representation, even after the filing of the original complaint, that the cargo was delivered to Maritima." The amended complaint was admitted on November 14, 1964.virtualawlibrary virtual law library On December 23, 1964 Macondray moved to dismiss the amended complaint against it on the ground that plaintiff's 1 action had already prescribed under the provisions of the Carriage of Goods by Sea Act which provides in section 3 (6): 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 shall have been delivered: . . . Macondray contended that since the amended complaint in which it was impleaded for the first time was filed only on November 6, 1964 and admitted on November 14, 1964, the period of one year had expired whether reckoned from one or the other of two dates, namely September 18, 1962, when the "M/S TOREADOR" arrived at the port of Manila and discharged the cargo for transshipment to Cebu on board the "SS SIQUIJOR," and September 24, 1962, when the shipment finally arrived in Cebu and was discharged the same day.virtualawlibrary virtual law library The motion to dismiss was granted and plaintiff interposed the present appeal from the order of dismissal. Plaintiff avers that the one year prescriptive period provided for in the Carriage of Goods by Sea Act does not apply in this case, which should be governed by the statute of limitations in the Civil Code. In support of this contention it is pointed out that the

cargo in question was transshipment cargo; that the discharge thereof in Manila terminated the obligation of Macondray as carrier; and that its obligation to transship the cargo to Cebu was merely that of a "forwarding agent" of the shipper. Reliance is placed on Clause 11 of the bill of lading which states: This carrier, in making arrangements for any transshipping or forwarding vessel or means of transportation not operated by this carrier shall be considered solely the forwarding agent of the shipper and without any other responsibility. We do not see that the use of the term "forwarding agent of the shipper" is decisive of the issue. According to paragraph 4 of the amended complaint the cargo was loaded on board the "M/S TOREADOR" in New York, "freight prepaid to Cebu City . . . pursuant to the bill of lading No. 13." In other words, the action is based on the contract of carriage up to the final port of destination, which was Cebu City, for which the corresponding freight had been prepaid. The following provisions of the bill of lading are the ones directly in point: 1. This bill of lading shall have effect subject to the provisions of the Carriage of Goods by Sea Act of the United States of America, approved April 16, 1936, which shall be deemed to be incorporated herein and nothing herein contained shall be deemed a surrender by the Carrier of any of its rights or immunities or an increase of any of its responsibilities or liabilities under said Act. The provisions stated in said Act (except as may be otherwise specifically provided herein) shall govern before the goods are loaded on and after they are discharged from the ship and throughout the entire time the goods are in the custody of the Carrier. . . .virtualawlibrary virtual law library 19. 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. ... The transshipment of the cargo from Manila to Cebu was not a separate transaction from that originally entered into by Macondray, as general agent for the "M/S TOREADOR". It was part of Macondray's obligation under the contract of carriage and the fact that the transshipment was made via an inter-island vessel did not operate to remove the transaction from the operation of the Carriage of Goods by Sea Act. (See Go Chang & Co., Inc. vs. Aboitiz & Co., Inc., 98 Phil. 197).virtualawlibrary virtual law library WHEREFORE, the order appealed from is hereby affirmed, with costs.virtualawlibrary virtual law library Concepcion, C.J., Reyes, J.B.L., Dizon, Bengzon, J.P., Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. L-54140 October 14, 1986 FILIPINO MERCHANTS INSURANCE COMPANY, INC., petitioner, vs. HONORABLE JOSE ALEJANDRO, Presiding Judge of Branch XXVI of the Court of First Instance of Manila and FROTA OCEANICA BRASILIERA, respondents. G.R. No. L-62001 October 14, 1986 FILIPINO MERCHANTS INSURANCE COMPANY, INC., petitioner, vs. HONORABLE ALFREDO BENIPAYO, Presiding Judge of Branch XVI of the Court of First Instance of Manila and AUSTRALIAWEST PACIFIC LINE, respondents.

GUTIERREZ, JR., J.: These consolidated petitions raise the issue of whether or not the one-year period within which to file a suit against the carrier and theship, in case of damage or loss as provided for in the Carriage of Goods by Sea Act applies to the insurer of the goods. On August 3, 1977, plaintiff Choa Tiek Seng filed a complaint, docketed as Civil Case No. 109911, against the petitioner before the then Court of First Instance of Manila for recovery of a sum of money under the marine insurance policy on cargo. Mr. Choa alleged that the goods he insured with the petitioner sustained loss and damage in the amount of P35,987.26. The vessel SS Frotario which was owned and operated by private respondent Frota Oceanica Brasiliera, (Frota) discharged the goods at the port of Manila on December 13, 1976. The said goods were delivered to the arrastre operator E. Razon, Inc., on December 17, 1976 and on the same date were received by the consignee-plaintiff. On December 19, 1977, the petitioner filed its amended answer disclaiming liability, imputing against the plaintiff the commission of fraud and counterclaiming for damages. On January 9, 1978, the petitioner filed a third-party complaint against the carrier, private respondent Frota and the arrastre contractor, E. Razon, Inc. for indemnity, subrogation, or reimbursement in the event that it is held liable to the plaintiff. Meanwhile, on August 10, 1977, Joseph Benzon Chua filed a similar complaint against the petitioner which was docketed as Civil Case No. 110061, for recovery under the marine insurance policy for cargo alleging that the goods insured with the petitioner sustained loss and damage in the sum of P55,996.49. The goods were delivered to the plaintiff-consignee on or about January 25-28, 1977. On May 31, 1978, the petitioner filed its answer. On September 28, 1978, it filed an amended third-party complaint against respondent carrier, the Australia-West Pacific Line (Australia-West). In both cases, the private respondents filed their respective answers and subsequently filed a motion for preliminary hearing on their affirmative defense of prescription. The private respondents alleged in their separate answers that the petitioner is already barred from filing a claim because under the Carriage of Goods by Sea Act, the suit against the carrier must be filed within one year after delivery of the goods or the date when the goods should have been delivered... The petitioner contended that the provision relied upon by the respondents applies only to the shipper and not to the insurer of the goods. On April 30, 1980, the respondent judge in Civil Case No. 109911, upheld respondent Frota and dismissed the petitioner's third-party complaint. Likewise, on August 31, 1982, the respondent judge in Civil Case No. 110061 dismissed the petitioner's third-party complaint against respondent Australia-West on the ground that the same was filed beyond the prescriptive period provide in Section 3 (6) of the

Carriage of Goods by Sea Act of 1936. These both cases, the petitioner appealed to us on a pure question of law, raising the issue of whether or not the prescriptive period of one year under the said Act also applies to an insurer such as herein petitioner. The petitioner maintains that the one-year prescriptive period cannot cover an insurer which has not settled the claim of its insured because it cannot be considered as the person referred to in the applicable provision of the said Act that has the duty or right to give notice of loss or damage to the carrier or to sue such carrier within the period of one year and that where an insurer does not settle the claim of its insured it cannot be considered as subrogated to the rights of said insured that would then authorize it to sue the carrier within the time-bar of one year. The petitioner further contends that the period for the filing of a third-party complaint must be reckoned from the date when the principal action was filed, that is, from the time the insured filed a suit against the petitioner, because the thirdparty complaint is merely an incident of the main action. On the other hand, the respondents argue that the one-year prescriptive period within which to file a case against the carrier also applies to a claim filed by an insurer who stands as a subrogee to the insured and that the third-party complaint filed by the petitioner cannot be reckoned from the firing of the main action because such complaint is independent of, and separate and distinct from the insured's action against the petitioner. The lower courts did not err. Section 3(b) of the Carriage of Goods by Sea Act provides: (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 may be 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 the suit within one year after the delivery of the goods or the date when the goods should have been delivered. In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods. (Emphasis supplied) Philippine Permanent and General Statutes (Revised Edition, Vol. 1, pp. 663-666). Chua Kuy v. Everett Steamship Corporation (93 Phil 207, 213-214), expounds on the extent of the applicability of the aforequoted provision. We ruled: Neither do we find tenable the claim that the prescriptive period contained in said act can only be invoked by the shipper, excluding all other parties to the transaction. While apparently the proviso contained in the portion of section 3(6) of the act we have quoted gives the impression that the right to file suit within one year after delivery of the goods applies to the shipper alone, however, reading the proviso in conjunction with the rest of section 3(6), it at once becomes apparent that the conclusion drawn by petitioner is unwarranted. In the first place, said section provides that the notice of loss or damage for which a claim for indemnity may be made should be given in writing to the carrier at the port of discharge before or at the time of the removal of the goods, and if the loss or damage is not apparent said notice should be given 'within three days on delivery.' From the language of this section, it seems clear that the notice of loss or damage is required to be filed not necessarily by the shipper but also by the consignee or any legal holder of the bill of lading. In fact, said section requires that the notice be given at the port of discharge and the most logical party to file the notice is either the consignee or the endorsee of the bill of lading. In the second place, a study of the historical background of this particular provision will show that although the word shipper is used in the proviso referred to by the petitioner, the intention of the law was not to exclude the consignee or endorsee of the bill of lading from bringing the action but merely to limit the filing of the same within one year after the delivery of the goods at the port of discharge. [The Southern Cross, 1940, A. M. C. 59 (SDNY); Lindgren v. Farley, 1938 A. M. C. 805 (SDNY)]. Arnold W. Knauth, an eminent authority on admiralty, commenting on this proviso, says: xxx xxx xxx

It seems evident that this language does not alter the sense of the text of the Hague Rules; it merely reiterates in another form the rule already laid down. Curiously, the proviso seems limited to the rightsof shippers, and might strictly be construed not to give any rights to consignees, representatives, or subrogated parties; whereas the Hague Rules phraseology is broader. As the Act contains both phrases, it would seem to be as broad as the broader of the two forms of words. (Ocean Bills of Lading, by Knauth, p. 229). Clearly, the coverage of the Act includes the insurer of the goods. Otherwise, what the Act intends to prohibit after the lapse of the oneyear prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the insurer even after the lapse of one year. This would be the result if we follow the petitioner's argument that the insurer can, at any time, proceed against the carrier and the ship since it is not bound by the time-bar provision. In this situation, the one-year limitation will be practically useless. This could not have been the intention of the law which has also for its purpose the protection of the carrier and the ship from fraudulent claims by having "matters affecting transportation of goods by sea be decided in as short a time as possible" and by avoiding incidents which would "unnecessarily extend the period and permit delays in the settlement of questions affecting the transportation." (See The Yek Tong Fire and Marine Insurance Co., Ltd., v. American President Lines, Inc., 103 Phil. 1125-1126). In the case of Aetna Insurance Co. v. Luzon Stevedoring Corporation (62 SCRA 11, 15), we denied the appeal of an insurance company which filed a suit against the carrier after the lapse of one year. We ruled: There is no merit in the appeal. The trial court correctly held that the one-year statutory and contractual prescriptive period had already expired when appellant company filed on April 7, 1965 its action against Barber Line Far East Service. The one-year period commenced on February 25, 1964 when the damaged cargo was delivered to the consignee. (See Chua Kuy v. Everrett Steamship Corporation, 93 Phil. 207; Yek Tong Fire & Marine Insurance Co., Ltd. v. American President Lines, Inc., 103 Phil. 1125). We likewise agree with the respondents that the third-party complaint of the petitioner cannot be considered to have been filed upon the filing of the main action because although it can be said that a third-party complaint is but ancilliary to the main action (Eastern Assurance and Surety Corporation v. Cui 105 SCRA 622), it cannot abridge, enlarge, nor modify the substantive rights of any litigant. It creates no substantive rights. Thus, unless there is some substantive basis for the third-party Plaintiff's claim, he cannot utilized the filing of such action to acquire any right of action against the third-party defendant. (See also Francisco, The Revised Rules of Court in the Philippines, Vol. 1, 1973 Ed., p. 507). The petitioner can only rightfully file a third-party complaint against the respondents if, in the first place, it can still validly maintain an action against the latter. In the case at bar, the petitioner's action has prescribed under the provisions of the Carriage of Goods by Sea Act. Hence, whether it files a third-party complaint or chooses to maintain an independent action against herein respondents is of no moment. Had the plaintiffs in the civil cases below filed an action against the petitioner after the one-year prescriptive period, then the latter could have successfully denied liability on the ground that by their own doing, the plaintiffs had prevented the petitioner from being subrogated to their respective rights against the herein respondents by filing a suit after the one-year prescriptive period. The situation, however, does not obtain in the present case. The plaintiffs in the civil cases below gave extra-judicial notice to their respective carriers and filed suit against the petitioner well within one year from their receipt of the goods. The petitioner had plenty of time within which to act. In Civil Case No. 109911, the petitioner had more than four months to file a third-party complaint while in Civil Case No. 110061, it had more than five months to do so. In both instances, however, the petitioner failed to file the appropriate action. WHEREFORE, IN VIEW OF THE FOREGOING, the petitions in G. R. No. 54140 and G. R. No. 62001 are hereby DISMISSED for lack of merit. Costs against the petitioner. SO ORDERED. Feria (Chairman), Fernan, Alampay and Paras, JJ., concur.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. L-61352 February 27, 1987 DOLE PHILIPPINES, INC., plaintiff-appellant, vs. MARITIME COMPANY OF THE PHILIPPINES, defendant-appellee. Domingo E. de Lara & Associates for plaintiff-appellant. Bito, Misa and Lozada Law Office for defendant-appellee.

NARVASA, J.: This appeal, which was certified to the Court by the Court of Appeals as involving only questions of law, relates to a claim for loss and/or damage to a shipment of machine parts sought to be enforced by the consignee, appellant Dole Philippines, Inc. (hereinafter caged Dole) against the carrier, Maritime Company of the Philippines (hereinafter called Maritime), under the provisions of the Carriage 2 of Goods by Sea Act. The basic facts are succinctly stated in the order of the Trial Court dated March 16, 1977, the relevant portion of which reads: xxx xxx xxx Before the plaintiff started presenting evidence at today's trial at the instance of the Court the lawyers entered into the following stipulation of facts: 1. The cargo subject of the instant case was discharged in Dadiangas unto the custody of the consignee on December 18, 1971; 2. The corresponding claim for the damages sustained by the cargo was filed by the plaintiff with the defendant vessel on May 4, 1972; 3. On June 11, 1973 the plaintiff filed a complaint in the Court of First Instance of Manila, docketed therein as Civil Case No. 91043, embodying three (3) causes of action involving three (3) separate and different shipments. The third cause of action therein involved the cargo now subject of this present litigation; 4. On December 11, 1974, Judge Serafin Cuevas issued an Order in Civil Case No. 91043 dismissing the first two causes of action in the aforesaid case with prejudice and without pronouncement as to costs because the parties had settled or compromised the claims involved therein. The third cause of action which covered the cargo subject of this case now was likewise dismissed but without prejudice as it was not covered by the settlement. The dismissal of that complaint containing the three causes of action was upon a joint motion to dismiss filed by the parties; 5. Because of the dismissal of the (complaint in Civil Case No. 91043 with respect to the third cause of action without prejudice, plaintiff instituted this present complaint on January 6, 1975. xxx xxx xxx
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To the complaint in the subsequent action Maritime filed an answer pleading inter alia the affirmative defense of prescription under the 5 6 provisions of the Carriage of Goods by Sea Act, and following pre-trial, moved for a preliminary hearing on said defense. The Trial 7 Court granted the motion, scheduling the preliminary hearing on April 27, 1977. The record before the Court does not show whether or not that hearing was held, but under date of May 6, 1977, Maritime filed a formal motion to dismiss invoking once more the ground of 8 9 prescription. The motion was opposed by Dole and the Trial Court, after due consideration, resolved the matter in favor of Maritime 10 11 and dismissed the complaint Dole sought a reconsideration, which was denied, and thereafter took the present appeal from the order of dismissal.

The pivotal issue is whether or not Article 1155 of the Civil Code providing that the prescription of actions is interrupted by the making of an extrajudicial written demand by the creditor is applicable to actions brought under the Carriage of Goods by Sea Act which, in its Section 3, paragraph 6, 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 or the date when the goods should have been delivered; Provided, That, if a notice of loss or damage, either apparent or conceded, 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. xxx xxx xxx Dole concedes that its action is subject to the one-year period of limitation prescribe in the above-cited provision. The substance of its argument is that since the provisions of the Civil Code are, by express mandate of said Code, suppletory of deficiencies in the Code of 13 Commerce and special laws in matters governed by the latter, and there being "*** a patent deficiency *** with respect to the tolling of 14 the prescriptive period ***" provided for in the Carriage of Goods by Sea Act, prescription under said Act is subject to the provisions of Article 1155 of the Civil Code on tolling and because Dole's claim for loss or damage made on May 4, 1972 amounted to a written extrajudicial demand which would toll or interrupt prescription under Article 1155, it operated to toll prescription also in actions under the Carriage of Goods by Sea Act. To much the same effect is the further argument based on Article 1176 of the Civil Code which provides that the rights and obligations of common carriers shag be governed by the Code of Commerce and by special laws in all matters not regulated by the Civil Code. These arguments might merit weightier consideration were it not for the fact that the question has already received a definitive answer, adverse to the position taken by Dole, in The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs. American President Lines, 15 Inc. There, in a parallel factual situation, where suit to recover for damage to cargo shipped by vessel from Tokyo to Manila was filed more than two years after the consignee's receipt of the cargo, this Court rejected the contention that an extrajudicial demand toiled the prescriptive period provided for in the Carriage of Goods by Sea Act, viz: In the second assignment of error plaintiff-appellant argues that it was error for the court a quo not to have considered the action of plaintiff-appellant suspended by the extrajudicial demand which took place, according to defendant's own motion to dismiss on August 22, 1952. We notice that while plaintiff avoids stating any date when the goods arrived in Manila, it relies upon the allegation made in the motion to dismiss that a protest was filed on August 22, 1952 which goes to show that plaintiff-appellant's counsel has not been laying the facts squarely before the court for the consideration of the merits of the case. We have already decided that in a case governed by the Carriage of Goods by Sea Act, the general provisions of the Code of Civil Procedure on prescription should not be made to apply. (Chua Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.) Similarly, we now hold that in such a case the general provisions of the new Civil Code (Art. 1155) cannot be made to apply, as such application would have the effect of extending the one-year period of prescription fixed in the law. It is desirable that matters affecting transportation of goods by sea be decided in as short a time as possible; the application of the provisions of Article 1155 of the new Civil Code would unnecessarily extend the period and permit delays in the settlement of questions affecting transportation, contrary to the clear intent and purpose of the law. * * * Moreover, no different result would obtain even if the Court were to accept the proposition that a written extrajudicial demand does toll prescription under the Carriage of Goods by Sea Act. The demand in this instance would be the claim for damage-filed by Dole with Maritime on May 4, 1972. The effect of that demand would have been to renew the one- year prescriptive period from the date of its making. Stated otherwise, under Dole's theory, when its claim was received by Maritime, the one-year prescriptive period was interrupted "tolled" would be the more precise term and began to run anew from May 4, 1972, affording Dole another period of one (1) year counted from that date within which to institute action on its claim for damage. Unfortunately, Dole let the new period lapse without filing action. It instituted Civil Case No. 91043 only on June 11, 1973, more than one month after that period has expired and its right of action had prescribed. Dole's contention that the prescriptive period "*** remained tolled as of May 4, 1972 *** (and that) in legal contemplation *** (the) case (Civil Case No. 96353) was filed on January 6, 1975 *** well within the one-year prescriptive period in Sec. 3(6) of the Carriage of 16 Goods by Sea Act." equates tolling with indefinite suspension. It is clearly fallacious and merits no consideration. WHEREFORE, the order of dismissal appealed from is affirmed, with costs against the appellant, Dole Philippines, Inc. SO ORDERED. Yap (Chairman), Melencio-Herrera, Cruz, Feliciano, Gancayco and Sarmiento, JJ., concur.
12

SECOND DIVISION

[G.R. No. 119571. March 11, 1998]

MITSUI O.S.K. LINES LTD., represented by MAGSAYSAY AGENCIES, INC., petitioner, vs. COURT OF APPEALS and LAVINE LOUNGEWEAR MFG. CORP., respondents. DECISION MENDOZA, J.: This is a petition for review on certiorari of the January 25, 1995 decision of the Court of Appeals and its resolution of March 22, 1995 denying petitioners motion for reconsideration. The appellate court upheld orders of Branch 68 (Pasig) of the Regional Trial Court, National Capital Judicial Region, denying petitioners motion to dismiss in the original action filed against petitioner by private respondent. The facts are not in dispute.
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Petitioner Mitsui O.S.K. Lines Ltd. is a foreign corporation represented in the Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage through Meister Transport, Inc., an international freight forwarder, with private respondent Lavine Loungewear Manufacturing Corporation to transport goods of the latter from Manila to Le Havre, France. Petitioner undertook to deliver the goods to France 28 days from initial loading. On July 24, 1991, petitioners vessel loaded private respondents container van for carriage at the said port of origin. However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with the result that the shipment arrived in Le Havre only on November 14, 1991. The consignee allegedly paid only half the value of the said goods on the ground that they did not arrive in France until the off season in that country. The remaining half was allegedly charged to the account of private respondent which in turn demanded payment from petitioner through its agent. As petitioner denied private respondents claim, the latter filed a case in the Regional Trial Court on April 14, 1992. In the original complaint, private respondent impleaded as defendants Meister Transport, Inc. and Magsaysay Agencies, Inc., the latter as agent of petitioner Mitsui O.S.K. Lines Ltd. On May 20, 1993, it amended its complaint by impleading petitioner as defendant in lieu of its agent. The parties to the case thus became private respondent as plaintiff, on one side, and Meister Transport Inc. and petitioner Mitsui O.S.K. Lines Ltd. as represented by Magsaysay Agencies, Inc., as defendants on the other. Petitioner filed a motion to dismiss alleging that the claim against it had prescribed under the Carriage of Goods by Sea Act. The Regional Trial Court, as aforesaid, denied petitioners motion as well as its subsequent motion for reconsideration. On petition forcertiorari, the Court of Appeals sustained the trial courts orders. Hence this petition containing one assignment of error: THE RESPONDENT COURT OF APPEALS COMMITTED A SERIOUS ERROR OF LAW IN RULING THAT PRIVATE RESPONDENTS AMENDED COMPLAINT IS (sic) NOT PRESCRIBED PURSUANT TO SECTION 3(6) OF THE CARRIAGE OF GOODS BY SEA ACT. The issue raised by the instant petition is whether private respondents action is for loss or damage to goods shipped, within the meaning of 3(6) of the Carriage of Goods by Sea Act (COGSA). Section 3 provides: (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 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 may be 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.

In the case of any actual or apprehended loss or damage, the carrier and the receiver shall give all reasonable facilities to each other for inspecting and tallying the goods. In Ang v. American Steamship Agencies, Inc., the question was whether an action for the value of goods which had been delivered to a party other than the consignee is for loss or damage within the meaning of 3(6) of the COGSA. It was held that there [3] was no loss because the goods had simply been misdelivered. Loss refers to the deterioration or disappearance of goods. As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, loss contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of [4] commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered. Conformably with this concept of what constitutes loss or damage, this Court held in another case that the deterioration of goods due to delay in their transportation constitutes loss or damage within the meaning of 3(6), so that as suit was not brought within one year the action was barred: Whatever damage or injury is suffered by the goods while in transit would result in loss or damage to either the shipper or the consignee. As long as it is claimed, therefore, as it is done here, that the losses or damages suffered by the shipper or consignee were due to the arrival of the goods in damaged or deteriorated condition, the action is still basically one for damage to the goods, and must [6] be filed within the period of one year from delivery or receipt, under the above-quoted provision of the Carriage of Goods by Sea Act. But the Court allowed that There would be some merit in appellants insistence that the damages suffered by him as a result of the delay in the shipment of his cargo are not covered by the prescriptive provision of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the deterioration and decay of the goods while in transit, but to other causes independent of the condition of the cargo upon [7] arrival, like a drop in their market value. . . . The rationale behind limiting the said definitions to such parameters is not hard to find or fathom. As this Court held in Ang: Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither lost nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does [8] not obtain. In the case at bar, there is neither deterioration nor disappearance nor destruction of goods caused by the carriers breach of contract. Whatever reduction there may have been in the value of the goods is not due to their deterioration or disappearance because they had been damaged in transit. Petitioner contends: Although we agree that there are places in the section (Article III) in which the phrase need have no broader meaning than loss or physical damage to the goods, we disagree with the conclusion that it must so be limited wherever it is used. We take it that the phrase has a uniform meaning, not merely in Section 3, but throughout the Act; and there are a number of places in which the restricted interpretation suggested would be inappropriate. For example Section 4(2) [Article IV(2) (sic) exempts exempts (sic) the carrier, the [9] ship (sic), from liability loss or damage(sic) resulting from certain courses beyond their control. Indeed, what is in issue in this petition is not the liability of petitioner for its handling of goods as provided by 3(6) of the COGSA, but its liability under its contract of carriage with private respondent as covered by laws of more general application. Precisely, the question before the trial court is not the particular sense of damages as it refers to the physical loss or damage of a shippers goods as specifically covered by 3(6) of COGSA but petitioners potential liability for the damages it has caused in the general sense and, as such, the matter is governed by the Civil Code, the Code of Commerce and COGSA, for the breach of its contract of carriage with private respondent. We conclude by holding that as the suit below is not for loss or damage to goods contemplated in 3(6), the question of prescription of action is governed not by the COGSA but by Art. 1144 of the Civil Code which provides for a prescriptive period of ten years. WHEREFORE, the decision of the Court of Appeals is AFFIRMED. SO ORDERED. Regalado (Chairman), Melo, Puno and Martinez, JJ., concur.
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