CO., INC.,
Petitioner, Present:
-
versus - TINGA,
Acting Chairperson,
VELASCO,
JR., and
BRION, JJ.
WALLEM
PHILS. SHIPPING,
INC., UNKNOWN OWNER
AND/OR Promulgated:
UNKNOWN CHARTERER OF THE
VESSEL M/S “OFFSHORE
MASTER” March 26, 2009
AND “SHANGHAI FAREAST SHIP
BUSINESS COMPANY,”
Respondents.
x----------------------------------------------------------------------------x
Tinga,
J.:
Before us is a Rule 45 petition[1]
which seeks the reversal of the Decision[2]
and Resolution[3] of the
Court of Appeals in CA-G.R. No. 61885. The Court of Appeals reversed the
Decision[4] of
the Regional Trial Court (RTC) of
The facts of
the case follow.[5]
On or about 2 October 1995, Anhui
Chemicals Import & Export Corporation loaded on board M/S Offshore Master a shipment consisting of 10,000 bags of sodium
sulphate anhydrous 99 PCT Min. (shipment), complete and in good order for
transportation to and delivery at the port of Manila for consignee, L.G.
Atkimson Import-Export, Inc. (consignee), covered by a Clean Bill of Lading.
The Bill of Lading reflects the gross weight of the total cargo at 500,200
kilograms.[6] The Owner and/or Charterer of M/V Offshore Master is unknown while the
shipper of the shipment is Shanghai Fareast Ship Business Company. Both are
foreign firms doing business in the
On or about 16 October 1995, the
shipment arrived at the port of Manila on board the vessel M/S Offshore Master from which it was subsequently discharged. It
was disclosed during the discharge of the shipment from the carrier that 2,426 poly
bags (bags) were in bad order and condition, having sustained various degrees of spillages and losses.
This is evidenced by the Turn Over Survey of Bad Order Cargoes (turn-over
survey) of the arrastre operator, Asian Terminals, Inc. (arrastre operator).[8] The bad
state of the bags is also evinced by the arrastre operator’s Request for
Bad Order Survey.[9]
Asia Star Freight Services, Inc.
undertook the delivery of the subject shipment from the pier to the consignee’s
warehouse in
On P2,470,213.50,[12]
the consignee filed a formal claim[13]
with petitioner for the damage and losses sustained by the shipment. After evaluating
the invoices, the turn-over survey, the bad order certificate and other documents,[14]
petitioner found the claim to be in order and compensable under the marine
insurance policy. Consequently, petitioner paid the consignee the sum of P397,879.69
and the latter signed a subrogation receipt.
Petitioner, in the exercise of its
right of subrogation, sent a demand letter to Wallem for the recovery of the
amount paid by petitioner to the consignee. However, despite receipt of the letter, Wallem
did not settle nor even send a response to petitioner’s claim.[15]
Consequently, petitioner instituted
an action before the RTC for damages against respondents for the recovery of P397,879.69
representing the actual damages suffered by petitioner plus legal interest
thereon computed from the time of the filing of the complaint until fully paid
and attorney’s fees equivalent to 25% of the principal claim plus costs of
suit.
In a decision[16]
dated P397,879.69 with 6%
interest plus attorney’s fees and costs of the suit. It attributed the damage
and losses sustained by the shipment to the arrastre operator’s mishandling in the
discharge of the shipment. Citing Eastern Shipping Lines, Inc. v. Court of
Appeals,[17] the RTC
held the shipping company and the arrastre operator solidarily liable since
both the arrastre operator and the carrier are charged with and obligated to
deliver the goods in good order condition to the consignee. It also ruled that the ship functioned as a
common carrier and was obliged to observe the degree of care required of a
common carrier in handling cargoes. Further, it held that a notice of loss or
damage in writing is not required in this case because said goods already underwent
a joint inspection or survey at the time of receipt thereof by the consignee, which
dispensed with the notice requirement.
The Court of Appeals reversed and set
aside the RTC’s decision.[18]
According to the appellate court, there is no solidary liability between the
carrier and the arrastre operator because it was clearly established by the
court a quo that the damage and losses of the shipment were attributed
to the mishandling by the arrastre operator in the discharge of the shipment. The
appellate court ruled that the instant case falls
under an exception recognized in Eastern
Shipping Lines.[19] Hence, the arrastre operator was
held solely liable to the consignee.
Petitioner raises the following
issues:
1. Whether or not the Court of Appeals
erred in not holding that as a common carrier, the carrier’s duties extend to
the obligation to safely discharge the cargo from the vessel;
2. Whether or not the carrier should be held
liable for the cost of the damaged shipment;
3. Whether or not Wallem’s failure to answer the
extra judicial demand by petitioner for the cost of the lost/damaged shipment
is an implied admission of the former’s liability for said goods;
4. Whether or not the courts below erred in
giving credence to the testimony of Mr. Talens.
It is beyond question that respondent’s
vessel is a common carrier.[20] Thus, the standards for determining the
existence or absence of the respondent’s liability will be gauged on the degree
of diligence required of a common carrier.
Moreover, as the shipment was an exercise of international trade, the
provisions of the Carriage of Goods
by Sea Act[21] (COGSA),
together with the Civil Code and the Code of Commerce, shall apply.[22]
The first and second issues raised in
the petition will be resolved concurrently since they are interrelated.
It is undisputed that the shipment
was damaged prior to its receipt by the insured consignee. The damage to the shipment was documented by
the turn-over survey[23]
and Request for Bad Order Survey.[24]
The turn-over survey, in particular, expressly stipulates that 2,426 bags of
the shipment were received by the arrastre operator in damaged condition. With these documents, petitioner insists that
the shipment incurred damage or losses while still in the care and
responsibility of Wallem and before it was turned over and delivered to the
arrastre operator.
The trial court, however, found
through the testimony of Mr. Maximino Velasquez Talens, a cargo surveyor of
Oceanica Cargo Marine Surveyors Corporation, that the losses and damage to the
cargo were caused by the mishandling of the arrastre operator. Specifically,
that the torn cargo bags resulted from the use of steel hooks/spikes in piling
the cargo bags to the pallet board and in pushing the bags by the stevedores of
the arrastre operator to the tug boats then to the ports.[25] The
appellate court affirmed the finding of mishandling in the discharge of cargo
and it served as its basis for exculpating respondents from liability,
rationalizing that with the fault of the arrastre operator in the unloading of
the cargo established it should bear sole liability for the cost of the
damaged/lost cargo.
While it is established that damage or
losses were incurred by the shipment during the unloading, it is
disputed who should be liable for the damage incurred at that point of
transport. To address this issue, the pertinent laws and jurisprudence are
examined.
Common carriers, from the nature of
their business and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods transported by them.[26]
Subject to certain exceptions enumerated under Article 1734[27]
of the Civil Code, common carriers are responsible for the loss, destruction,
or deterioration of the goods. The extraordinary responsibility of the common
carrier lasts from the time the goods are unconditionally placed in the
possession of, and received by the carrier for transportation until the same
are delivered, actually or constructively, by the carrier to the consignee, or
to the person who has a right to receive them.[28]
For marine vessels, Article 619 of
the Code of Commerce provides that the ship captain is liable for the cargo
from the time it is turned over to him at the dock or afloat alongside the
vessel at the port of loading, until he delivers it on the shore or on the
discharging wharf at the port of unloading, unless agreed otherwise. In Standard
Oil Co. of
Lastly, Section 2 of the COGSA
provides that under every contract of carriage of goods by sea, the carrier in
relation to the loading, handling, stowage, carriage, custody, care, and
discharge of such goods, shall be subject to the responsibilities and
liabilities and entitled to the rights and immunities set forth in the Act.[30]
Section 3 (2) thereof then states that among the carriers’ responsibilities are
to properly and carefully load, handle, stow, carry, keep, care for, and
discharge the goods carried.
The above doctrines are in fact
expressly incorporated in the bill of lading between the shipper Shanghai
Fareast Business Co., and the consignee, to wit:
4. PERIOD OF RESPONSIBILITY. The responsibility of the carrier shall commence from the time when the goods are loaded on board the vessel and shall cease when they are discharged from the vessel.
The Carrier shall not be liable of loss of or damage to the goods before loading and after discharging from the vessel, howsoever such loss or damage arises.[31]
On the other hand, the functions of
an arrastre operator involve the handling of cargo deposited on the wharf or
between the establishment of the consignee or shipper and the ship's tackle.[32] Being
the custodian of the goods discharged from a vessel, an arrastre operator's
duty is to take good care of the goods and to turn them over to the party
entitled to their possession.[33]
Handling cargo is mainly the arrastre
operator's principal work so its drivers/operators or employees should observe the
standards and measures necessary to prevent losses and damage to shipments
under its custody.[34]
In Fireman’s Fund Insurance Co. v.
Metro Port Service, Inc.[35] the Court explained the relationship
and responsibility of an arrastre operator to a consignee of a cargo, to quote:
The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator. Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with and obligated to deliver the goods in good condition to the consignee.(Emphasis supplied) (Citations omitted)
The liability of the arrastre operator
was reiterated in Eastern Shipping Lines, Inc. v. Court of Appeals[36]
with the clarification that the arrastre operator and the carrier are not
always and necessarily solidarily liable as the facts of a case may vary the
rule.
Thus, in this case the appellate
court is correct insofar as it ruled that an arrastre operator and a carrier
may not be held solidarily liable at all times. But the precise question is which
entity had custody of the shipment during its unloading from the vessel?
The aforementioned Section 3(2) of
the COGSA states that among the carriers’ responsibilities are to properly and
carefully load, care for and discharge the goods carried. The bill of lading
covering the subject shipment likewise stipulates that the carrier’s liability
for loss or damage to the goods ceases after its discharge from the vessel. Article
619 of the Code of Commerce holds a ship captain liable for the cargo from the
time it is turned over to him until its delivery at the port of unloading.
In a case decided by a U.S. Circuit
Court, Nichimen Company v. M./V. Farland,[37]
it was ruled that like the duty of
seaworthiness, the duty of care of the cargo is non-delegable,[38] and
the carrier is accordingly responsible for the acts of the master, the crew,
the stevedore, and his other agents. It has also been held that it is ordinarily
the duty of the master of a vessel to unload the cargo and place it in
readiness for delivery to the consignee, and there is an implied obligation
that this shall be accomplished with sound machinery, competent hands, and in
such manner that no unnecessary injury shall be done thereto.[39]
And the fact that a consignee is required to furnish persons to assist in
unloading a shipment may not relieve the carrier of its duty as to such
unloading.[40]
The exercise of the carrier’s custody
and responsibility over the subject shipment during the unloading actually
transpired in the instant case during the unloading of the shipment as
testified by Mr. Talens, the cargo surveyor, to quote:
Atty. Repol:
- Do you agree with me that Wallem Philippines is a shipping [company]?
A Yes, sir.
Q And, who hired the services of the stevedores?
A The checker of the vessel of Wallem, sir.[41]
x x x
Q Mr. Witness, during the discharging operation of this cargo, where was the master of the vessel?
A On board the vessel, supervising, sir.
Q And, observed the discharging operation?
A Yes, sir.
Q And, what did the master of the vessel do when the cargo was being unloaded from the vessel?
A He would report to the head checker, sir.
Q He did not send the stevedores to what manner in the discharging of the cargo from the vessel?
A And head checker po and siyang nagpapatakbo ng trabaho sa loob ng barko, sir.[42]
x x x
Q Is he [the head checker] an employee of the company?
A He is a contractor/checker of Wallem
Moreover, the liability of Wallem is highlighted by Mr. Talen’s notes in the Bad Order Inspection, to wit:
“The bad order torn bags, was due to stevedores[‘] utilizing steel hooks/spikes in piling the cargo to [the] pallet board at the vessel’s cargo holds and at the pier designated area before and after discharged that cause the bags to torn [sic].”[44] (Emphasis supplied)
The records are replete with evidence
which show that the damage to the bags happened before and after their
discharge[45] and it was
caused by the stevedores of the arrastre operator who were then under the
supervision of Wallem.
It is settled in maritime law
jurisprudence that cargoes while being unloaded generally remain under the
custody of the carrier. In the instant case, the damage or losses were incurred
during the discharge of the shipment while under the supervision of the
carrier. Consequently, the carrier is liable for the damage or losses caused to
the shipment. As the cost of the actual damage to the subject shipment has long
been settled, the trial court’s finding of actual damages in the amount of P397,879.69
has to be sustained.
On the credibility of Mr. Talens which
is the fourth issue, the general rule in assessing credibility of witnesses is
well-settled:
x x x the trial court's evaluation as to the credibility of witnesses is viewed as correct and entitled to the highest respect because it is more competent to so conclude, having had the opportunity to observe the witnesses' demeanor and deportment on the stand, and the manner in which they gave their testimonies. The trial judge therefore can better determine if such witnesses were telling the truth, being in the ideal position to weigh conflicting testimonies. Therefore, unless the trial judge plainly overlooked certain facts of substance and value which, if considered, might affect the result of the case, his assessment on credibility must be respected.[46]
Contrary to petitioner’s stance on the third issue, Wallem’s failure to respond to its demand letter does not constitute an implied admission of liability. To borrow the words of Mr. Justice Oliver Wendell Holmes, thus:
A man cannot make evidence for himself by writing a letter containing the statements that he wishes to prove. He does not make the letter evidence by sending it to the party against whom he wishes to prove the facts [stated therein]. He no more can impose a duty to answer a charge than he can impose a duty to pay by sending goods. Therefore a failure to answer such adverse assertions in the absence of further circumstances making an answer requisite or natural has no effect as an admission.[47]
With respect to the attorney’s fees,
it is evident that petitioner was compelled to litigate this matter to protect
its interest. The RTC’s award of P20,000.00 as attorney’s fees is
reasonable.
WHEREFORE, the
petition is GRANTED. The Decision of
the Court of Appeals dated P397,879.69, with interest
thereon at 6% per annum from the filing of the complaint on P20,000.00 for and as attorney’s fees, together with the
costs of the suit.
SO ORDERED.
DANTE O. TINGA
Acting Chairperson
WE CONCUR:
MA. ALICIA
Associate
Justice
Associate Justice
PRESBITERO
J. VELASCO, JR. ARTURO
D. BRION
Associate Justice
Associate Justice
ATTESTATION
I attest that the conclusions in the above
Decision had been reached in consultation before the case was assigned to the
writer of the opinion of the Court’s Division.
DANTE O. TINGA
Associate Justice
Acting Chairperson, Second Division
CERTIFICATION
Pursuant to Section 13, Article VIII
of the Constitution, and the Division Acting Chairperson’s Attestation, it is
hereby certified that the conclusions in the above Decision had been reached in
consultation before the case was assigned to the writer of the opinion of the
Court’s Division.
REYNATO S. PUNO
Chief Justice
**Additional member per Special Order No. 600 in lieu of J. Carpio Morales who is on official business.
.
[2]
[3]
[22]Commonwealth
Act No. 65 (1936). "Section 1. That the provisions of Public Act No. 521 of
the 74th Congress of the United States, approved on April 16, 1936, 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 this Act shall
be construed as repealing any existing provision of the Code of Commerce which
is now in force or as limiting its application." Approved on
However, in American President Lines, Ltd. v. Klepper, et al., 110 Phil. 243, 248 (1960), reiterated in Maritime Company of the Philippines v. Court of Appeals (G.R. No. 47004. March 8, 1989, 171 SCRA 61), the Court ruled that the provisions of the Carriage of Goods by Sea Act are merely suppletory to the Civil Code in view of Articles 1753 and 1756 of the Civil Code.
See also Sea-Land
Service, Inc. v. Intermediate Appellate Court, No. L-75118,
[27]Civil Code, Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
[30]This is subject to Section 6 thereof which provides the carrier and the shipper are at liberty to enter into any agreement in any terms as to the responsibility and liability of the carrier for such goods provided that in this case, no bill of lading shall be issued and that the terms agreed shall be embodied in a receipt which shall be a non-negotiable document and marked as such.
[32]Hijos de F. Escaño, Inc. v. National Labor Relations
Commission, G.R. No. 59229,
[33]Summa Insurance Corporation, v. Court of Appeals, 323 Phil. 214, 223 (1996).
[34]Fireman’s
Fund Insurance Co., v. Metro Port Service, Inc., G.R. No. 83613, 21 February 1990, 182 SCRA 455, 461.
[37]462 F.2d 319, 1972 AMC 1573 (2d Cir. 1972), as cited in Schoenbaum, Thomas J., Admiralty and Maritime Law, Vol. I, 4th Ed. (2004), p. 687.
[38]Schoenbaum, id., then cites another case, Sumitomo Corp. of America v. M./V. Sie Kim, 632 F. Supp. 824, 1987 AMC 160 (S.D.N.Y. 1985) qualifying that the court ruled therein that a shipper and a carrier could enter into a valid agreement placing the duty and expense of loading the cargo on the shipper and, where damage is caused by improper stowage performed by a stevedore who was engaged by the shipper and over whom the carrier has no control, the carrier is not liable.
[40]§375,
70 Am Jur 2d, citing Standard Oil Co. v. Soderling,
112
[42]It is
the head checker who manages the operations inside the vessel, sir. TSN,
[45]
In similar tone, in Exhibit 1-j another surveyor’s note states: “The bad order torn bags was due to stevedores/winch operator at the inner cargo holds before discharge and the forklift operator in towing the bag to the designated area at pier apron after discharged.”
[46]People
of the Philippines v. Ramirez, 334 Phil. 305 citing People v. Gabris,
G.R. No. 116221, pp. 8-9,
[47]Cited in Ravago
Equipment Rentals, Inc. v. Court of Appeals, 337 Phil. 584, 590-591 (1997) citing A.B. Leach and Co. v. Peirson,
275 US 120 [1927].