Overseas trade: COGSA

UCPB General Insurance Co, Inc. vs Aboitiz Shipping Corp. (578 SCRA 251) (2009)

UCPB GENERAL INSURANCE CO., INC., petitioner, vs. ABOITIZ SHIPPING CORP., EAGLE
EXPRESS LINES, DAMCO INTERMODAL SERVICES, INC., and PIMENTEL CUSTOMS
BROKERAGE CO., respondents

G.R. No. 168433. February 10, 2009

TOPIC: Overseas Trade – Carriage of Goods By Sea Act (COGSA)

Mercantile Law; Carriage of Goods by Sea Act; The law clearly requires that the claim for damage on
carriage must be made within 24 hours from receipt of the merchandise if, as in this case, damage
cannot be ascertained merely from the outside packaging of the cargo. — The law clearly requires
that the claim for damage or average must be made within 24 hours from receipt of the merchandise
if, as in this case, damage cannot be ascertained merely from the outside packaging of the cargo.

Same; Same; The requirement to give notice of loss or damage to the goods is not an empty
formalism. — The requirement to give notice of loss or damage to the goods is not an empty
formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from
just liability, but reasonably to inform it that the shipment has been damaged and that it is charged
with liability therefor, and to give it an opportunity to examine the nature and extent of the injury.
This protects the carrier by affording it an opportunity to make an investigation of a claim while the
matter is still fresh and easily investigated so as to safeguard itself from false and fraudulent claims.

Same; Same; The 24-hour claim requirement construed as a condition precedent to the accrual of a
right of action against a carrier for loss of, or damage to, the goods. — We have construed the 24-
hour claim requirement as a condition precedent to the accrual of a right of action against a carrier
for loss of, or damage to, the goods. The shipper or consignee must allege and prove the fulfillment
of the condition. Otherwise, no right of action against the carrier can accrue in favor of the former.

Same; Same; Carriage of Goods by Sea Act (COGSA) prescribes a period of three (3) days within
which notice of claims must be given if the loss or damage is not apparent.—Sec. 3(6) of the COGSA
provides a similar claim mechanism as the Code of Commerce but prescribes a period of three (3)
days within which notice of claim must be given if the loss or damage is not apparent.

PETITION for review on certiorari of the decision and resolution of the Court of Appeals.

The facts are stated in the opinion of the Court.

Jose J. Ferrer, Jr. for petitioner.

Del Rosario & Del Rosario for respondent Eagle Express Lines, Inc.

Libra Law for respondent Aboitiz Shipping Corporation.

Arreza & Associates for respondent Pimentel Customs Brokerage Co.

TINGA, J.:

UCPB General Insurance Co., Inc. (UCPB) assails the Decision1 of the Court of Appeals dated October
29, 2004, which reversed the Decision2 dated November 29, 1999 of the Regional Trial Court of
Makati City, Branch 146, and its Resolution3 dated June 14, 2005, which denied UCPB’s motion for
reconsideration.

The undisputed facts, culled from the assailed Decision, are as follows:

“On June 18, 1991, three (3) units of waste water treatment plant with accessories were purchased
by San Miguel Corporation (SMC for brevity) from Super Max Engineering Enterprises, Co., Ltd. of
Taipei, Taiwan. The goods came from Charleston, U.S.A. and arrived at the port of Manila on board
MV “SCANDUTCH STAR.” The same were then transported to Cebu on board MV “ABOITIZ
SUPERCON II.” After its arrival at the port of Cebu and clearance from the Bureau of Customs, the
goods were delivered to and received by SMC at its plant site on August 2, 1991. It was then
discovered that one electrical motor of DBS Drive Unit Model DE-30-7 was damaged.

Pursuant to an insurance agreement, plaintiff-appellee paid SMC the amount of P1,703,381.40

representing the value of the damaged unit. In turn, SMC executed a Subrogation Form dated March
31, 1992 in favor of plaintiff-appellee.

Consequently, plaintiff-appellee filed a Complaint on July 21, 1992 as subrogee of SMC seeking to
recover from defendants the amount it had paid SMC.

On September 20, 1994, plaintiff-appellee moved to admit its Amended Complaint whereby it
impleaded East Asiatic Co. Ltd. (EAST for brevity) as among the defendants for being the “general
agent” of DAMCO. In its Order dated September 23, 1994, the lower court admitted the said
amended complaint.

Upon plaintiff-appellee’s motion, defendant DAMCO was declared in default by the lower court in its
Order dated January 6, 1995.

In the meantime, on January 25, 1995, defendant EAST filed a Motion for Preliminary Hearing on its
affirmative defenses seeking the dismissal of the complaint against it on the ground of prescription,
which motion was however denied by the court a quo in its Order dated September 1, 1995. Such
denial was elevated by defendant EAST to this Court through a Petition for Certiorari on October 30,
1995 in CA G.R. SP No. 38840. Eventually, this Court issued its Decision dated February 14, 1996
setting aside the lower court’s assailed order of denial and further ordering the dismissal of the
complaint against defendant EAST. Plaintiff-appellee moved for reconsideration thereof but the same
was denied by this Court in its Reso

lution dated November 8, 1996. As per Entry of Judgment, this Court’s decision ordering the dismissal
of the complaint against defendant EAST became final and executory on December 5, 1996.

Accordingly, the court a quo noted the dismissal of the complaint against defendant EAST in its Order
dated December 5, 1997. Thus, trial ensued with respect to the remaining defendants.

On November 29, 1999, the lower court rendered its assailed Decision, the dispositive portion of
which reads:

WHEREFORE, all the foregoing premises considered, judgment is hereby rendered declaring DAMCO
Intermodal Systems, Inc., Eagle Express Lines, Inc. and defendant Aboitiz Shipping solidarily liable to
plaintiff-subrogee for the damaged shipment and orders them to pay plaintiff jointly and severally the
sum of P1,703,381.40.

No costs.

SO ORDERED.”

Not convinced, defendants-appellants EAGLE and ABOITIZ now come to this Court through their
respective appeals x x x”

The appellate court, as previously mentioned, reversed the decision of the trial court and ruled that
UCPB’s right of action against respondents did not accrue because UCPB failed to file a formal notice
of claim within 24 hours from (SMC’s) receipt of the damaged merchandise as required under Art. 366
of the Code of Commerce. According to the Court of Appeals, the filing of a claim within the time
limitation in Art. 366 is a condition precedent to the accrual of a right of action against the carrier for
the damages caused to the merchandise.

In its Memorandum dated February 8, 2007, UCPB asserts that the claim requirement under Art. 366
of the Code of Commerce does not apply to this case because the damage to the merchandise had
already been known to the carrier. Interestingly, UCPB makes this revelation: “x x x damage to the
cargo was found upon discharge from the foreign carrier onto the International Container Terminal
Services, Inc. (ICTSI) in the presence of the carrier’s representative who signed the
Request for Bad Order Survey and the Turn Over of Bad Order Cargoes. On transshipment, the cargo
was already damaged when loaded on board the inter-island carrier.” This knowledge, UCPB argues,
dispenses with the need to give the carrier a formal notice of claim. Incidentally, the carrier’s
representative mentioned by UCPB as present at the time the merchandise was unloaded was in fact
a representative of respondent Eagle Express Lines (Eagle Express).

UCPB claims that under the Carriage of Goods by Sea Act (COGSA), notice of loss need not be given if
the condition of the cargo has been the subject of joint inspection such as, in this case, the inspection
in the presence of the Eagle Express representative at the time the cargo was opened at the ICTSI.

UCPB further claims that the issue of the applicability of Art. 366 of the Code of Commerce was never
raised before the trial court and should, therefore, not have been considered by the Court of Appeals.

Eagle Express, in its Memorandum dated February 7, 2007, asserts that it cannot be held liable for
the damage to the merchandise as it acted merely as a freight forwarder’s agent in the transaction. It
allegedly facilitated the transshipment of the cargo from Manila to Cebu but represented the interest
of the cargo owner, and not the carrier’s. The only reason why the name of the Eagle Express
representative appeared on the Permit to Deliver Imported Goods was that the form did not have a
space for the freight forwarder’s agent, but only for the agent of the shipping line. Moreover, UCPB
had previously judicially admitted that upon verification from the Bureau of Customs, it was East
Asiatic Co., Ltd. (East Asiatic), regarding whom the original complaint was dismissed on the ground of
prescription, which was the real agent of DAMCO Intermodal Services, Inc. (DAMCO), the ship owner.

Eagle Express argues that the applicability

of Art. 366 of the Code of Commerce was properly raised as an issue before the trial court as it
mentioned this issue as a defense in its Answer to UCPB’s Amended Complaint. Hence, UCPB’s
contention that the question was raised for the first time on appeal is incorrect.

Aboitiz Shipping Corporation (Aboitiz), on the other hand, points out, in its Memorandum10 dated
March 29, 2007, that it obviously cannot be held liable for the damage to the cargo which, by UCPB’s
admission, was incurred not during transshipment to Cebu on board one of Aboitiz’s vessels, but was
already existent at the time of unloading in Manila. Aboitiz also argues that Art. 366 of the Code of
Commerce is applicable and serves as a condition precedent to the accrual of UCPB’s cause of action
against it.

The Memorandum dated June 3, 2008, filed by Pimentel Customs Brokerage Co. (Pimentel Customs),
is also a reiteration of the applicability of Art. 366 of the Code of Commerce.

It should be stated at the outset that the issue of whether a claim should have been made by SMC, or
UCPB as SMC’s subrogee, within the 24-hour period prescribed by Art. 366 of the Code of Commerce
was squarely raised before the trial court.

In its Answer to Amended Complaint dated May 10, 1993, Eagle Express averred, thus:

“The amended complaint states no cause of action under the provisions of the Code of Commerce
and the terms of the bill of lading; consignee made no claim against herein defendant within twenty-
four (24) hours following the receipt of the alleged cargo regarding the condition in which said cargo
was delivered; however, assuming arguendo that the damage or loss, if any, could not be ascertained
from the outside part of the shipment, consignee never made any claim against herein defendant at
the time of receipt of said cargo; herein defendant learned of the alleged claim only upon receipt of
the complaint.”

Likewise, in its Answer dated September 21, 1992, Aboitiz raised the defense that UCPB did not file a
claim with it and that the complaint states no cause of action.

UCPB obviously made a gross misrepresentation to the Court when it claimed that the issue regarding
the applicability of the Code of Commerce, particularly the 24-hour formal claim rule, was not raised
as an issue before the trial court. The appellate court, therefore, correctly looked into the validity of
the arguments raised by Eagle Express, Aboitiz and Pimentel Customs on this point after the trial
court had so ill-advisedly centered its decision merely on the matter of extraordinary diligence.
Interestingly enough, UCPB itself has revealed that when the shipment was discharged and opened at
the ICTSI in Manila in the presence of an Eagle Express representative, the cargo had already been
found damaged. In fact, a request for bad order survey was then made and a turnover survey of bad
order cargoes was issued, pursuant to the procedure in the discharge of bad order cargo. The
shipment was then repacked and transshipped from Manila to Cebu on board MV Aboitiz Supercon II.
When the cargo was finally received by SMC at its Mandaue City warehouse, it was found in bad
order, thereby confirming the damage already uncovered in Manila.

In charging Aboitiz with liability for the damaged cargo, the trial court condoned UCPB’s wrongful suit
against Aboitiz to whom the damage could not have been attributable since there was no evidence
presented that the cargo was further damaged during its transshipment to Cebu. Even by the
exercise of extraordinary diligence, Aboitiz could not have undone the damage to the cargo that had
already been there when the same was shipped on board its vessel.

That said, it is nonetheless necessary to ascertain whether any of the remaining parties may still be

held liable by UCPB. The provisions of the Code of Commerce, which apply to overland, river and
maritime transportation, come into play.

Art. 366 of the Code of Commerce states:

“Art. 366. Within twenty-four hours following the receipt of the merchandise, the claim against the
carrier for damage or average which may be found therein upon opening the packages, may be
made, provided that the indications of the damage or average which gives rise to the claim cannot be
ascertained from the outside part of such packages, in which case the claim shall be admitted only at
the time of receipt.

After the periods mentioned have elapsed, or the transportation charges have been paid, no claim
shall be admitted against the carrier with regard to the condition in which the goods transported were
delivered.”

The law clearly requires that the claim for damage or average must be made within 24 hours from
receipt of the merchandise if, as in this case, damage cannot be ascertained merely from the outside
packaging of the cargo.

In Philippine Charter Insurance Corporation v. Chemoil Lighterage Corporation, petitioner, as

subrogee of Plastic Group Phil., Inc. (PGP), filed suit against respondent therein for the damage found
on a shipment of chemicals loaded on board respondent’s barge. Respondent claimed that no timely
notice in accordance with Art. 366 of the Code of Commerce was made by petitioner because an
employee of PGP merely made a phone call to respondent’s Vice President, informing the latter of the
contamination of the cargo. The Court ruled that the notice of claim was not timely made or relayed
to respondent in accordance with Art. 366 of the Code of Commerce.

The requirement to give notice of loss or damage to the goods is not an empty formalism. The
fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but
reasonably to inform it that the shipment has been damaged and that it is charged with liability
therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects
the carrier by affording it an opportunity to make an investigation of a claim while the matter is still
fresh and easily investigated so as to safeguard itself from false and fraudulent claims.

We have construed the 24-hour claim requirement as a condition precedent to the accrual of a right
of action against a carrier for loss of, or damage to, the goods. The shipper or consignee must allege
and prove the fulfillment of the condition. Otherwise, no right of action against the carrier can accrue
in favor of the former.

The shipment in this case was received by SMC on August 2, 1991. However, as found by the Court
of Appeals, the claims were dated October 30, 1991, more than three (3) months from receipt of the
shipment and, at that, even after the extent of the loss had already been determined by SMC’s
surveyor. The claim was, therefore, clearly filed beyond the 24-hour time frame prescribed by Art.
366 of the Code of Commerce.
But what of the damage already discovered in the presence of Eagle Express’s representative at the

time the shipment was discharged in Manila? The Request for Bad Order Survey and Turn Over
Survey of Bad Order Cargoes, respectively dated June 17, 1999 and June 28, 1991, evince the fact
that the damage to the cargo was already made known to Eagle Express and, possibly, SMC, as of
those dates.

Sec. 3(6) of the COGSA provides a similar claim mechanism as the Code of Commerce but prescribes
a period of three (3) days within which notice of claim must be given if the loss or damage is not
apparent. It states:

“Sec. 3(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 descibed 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 of 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.”

UCPB seizes upon the last paragraph which dispenses with the written notice if the state of the goods
has been the subject of a joint survey which, in this case, was the opening of the shipment in the
presence of an Eagle Express representative. It should be noted at this point that the applicability of
the above-quoted provision of the COGSA was not raised as an issue by UCPB before the trial court
and was only cited by UCPB in its Memorandum in this case. UCPB, however, is ambivalent as to
which party Eagle Express represented in the transaction. By its own manifestation, East Asiatic, and
not Eagle Express, acted as the agent through which summons and court notices may be served on
DAMCO. It would be unjust to hold that Eagle Express’s knowledge of the damage to the cargo is
such that it served to preclude or dispense with the 24-hour notice to the carrier required by Art. 366
of the Code of Commerce. Neither did the inspection of the cargo in which Eagle Express’s
representative had participated lead to the waiver of the written notice under the Sec. 3(6) of the
COGSA. Eagle Express, after all, had acted as the agent of the freight consolidator, not that of the
carrier to whom the notice should have been made.

At any rate, the notion that the request for bad order survey and turn over survey of bad cargoes
signed by Eagle Express’s representative is construable as compliant with the notice requirement
under Art. 366 of the Code of Commerce was foreclosed by the dismissal of the complaint against
DAMCO’s representative, East Asiatic.

As regards respondent Pimentel Customs, it is sufficient to acknowledge that it had no participation in

the physical handling, loading and delivery of the damaged cargo and should, therefore, be absolved
of liability.

Finally, UCPB’s misrepresentation that the applicability of the Code of Commerce was not raised as an
issue before the trial court warrants the assessment of double costs of suit against it.

WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 68168,
dated October 29, 2004 and its Resolution dated June 14, 2005 are AFFIRMED. Double costs against
petitioner.

SO ORDERED.

Quisumbing (Chairperson), Carpio-Morales, Velasco, Jr. and Brion, JJ., concur. UCPB General
Insurance Co. Inc. vs. Aboitiz Shipping Corp., 578 SCRA 251, G.R. No. 168433 February 10, 2009

——oOo——
 WALLEM PHILIPPINES SHIPPING, INC., Petitioner,
vs.
S.R. FARMS, INC., Respondent.

G.R. No. 161849 July 9, 2010

TOPIC: Overses Trade – Carriage of Goods by Sea Act (COGSA)

PERALTA, J.:

Assailed in the present petition for review on certiorari are the Decision and Resolution of the Court of
Appeals (CA) dated June 2, 2003 and January 15, 2004, respectively, in CA-G.R. CV No. 65857. The
CA Decision reversed and set aside the Decision dated October 8, 1999 of the Regional Trial Court
(RTC) of Manila, Branch 11, in Civil Case No. 93-65021, while the CA Resolution denied petitioners’
Motion for Reconsideration.

The facts of the case, as found by the RTC and affirmed by the CA, are as follows:

x x x On March 25, 1992, Continental Enterprises, Ltd. loaded on board the vessel M/V "Hui Yang," at
Bedi Bunder, India, a shipment of Indian Soya Bean Meal, for transportation and delivery to Manila,
with plaintiff [herein respondent] as consignee/notify party. The said shipment is said to weigh 1,100
metric tons and covered by Bill of Lading No. BEDI 4 dated March 25, 1992 (Exhibit A; also Exhibit I).
The vessel is owned and operated by defendant Conti-Feed, with defendant [herein petitioner]
Wallem as its ship agent.

The subject cargo is part of the entire shipment of Indian Soya Bean Meal/India Rapeseed Meal
loaded in bulk on board the said vessel for delivery to several consignees. Among the consignees
were San Miguel Corporation and Vitarich Corporation, including the herein plaintiff (Exhibit A;
Exhibits 1 to 6; TSN, p. 13, June 28, 1996).

On April 11, 1992, the said vessel, M/V "Hui Yang" arrived at the port of Manila, Pier 7 South Harbor.
Thereafter, the shipment was discharged and transferred into the custody of the receiving barges, the
NorthFront-333 and NorthFront-444. The offloading of the shipment went on until April 15, 1992 and
was handled by [Ocean Terminal Services, Inc.] OTSI using its own manpower and equipment and
without the participation of the crew members of the vessel. All throughout the entire period of
unloading operation, good and fair-weather condition prevailed.

At the instance of the plaintiff, a cargo check of the subject shipment was made by one Lorenzo
Bituin of Erne Maritime and Allied Services, Co. Inc., who noted a shortage in the shipment which was
placed at 80.467 metric tons based on draft survey made on the NorthFront-33 and NorthFront-444
showing that the quantity of cargo unloaded from the vessel was only 1019.53 metric tons. Thus, per
the bill of lading, there was an estimated shortage of 80.467.

Upon discovery thereof, the vessel chief officer was immediately notified of the said short shipment
by the cargo surveyor, who accordingly issued the corresponding Certificate of Discharge dated April
15, 1992 (Exhibit D). The survey conducted and the resultant findings thereon are embodied in the
Report of Superintendence dated April 21, 1992 (Exhibits C to C-2) and in the Barge Survey Report
both submitted by Lorenzo Bituin (Exhibits C-3 and C-4). As testified to by Lorenzo Bituin, this alleged
shortage of 80.467 metric tons was arrived at using the draft survey method which calls for the
measurement of the light and loaded condition of the barge in relation to the weight of the water
supposedly displaced.

Petitioner then filed a Complaint for damages against Conti-Feed & Maritime Pvt. Ltd., a foreign
corporation doing business in the Philippines and the owner of M/V "Hui Yang"; RCS Shipping
Agencies, Inc., the ship agent of Conti-Feed; Ocean Terminal Services, Inc. (OTSI), the arrastre
operator at Anchorage No. 7, South Harbor, Manila; and Cargo Trade, the customs broker.
On June 7, 1993, respondent filed an Amended Complaint impleading herein petitioner as defendant
alleging that the latter, and not RCS, was the one which, in fact, acted as Conti-Feed’s ship agent.

On June 22, 1993, the complaint against Cargo Trade was dismissed at the instance of respondent on
the ground that it has no cause of action against the former.

Subsequently, upon motion of RCS, the case against it was likewise dismissed for lack of cause of
action.

Meanwhile, defendant OTSI filed its Answer with Counterclaim and Crossclaim denying the material
allegations of the Complaint and alleging that it exercised due care and diligence in the handling of
the shipment from the carrying vessel unto the lighters; no damage or loss whatsoever was sustained
by the cargo in question while being discharged by OTSI; petitioner’s claim had been waived,
abandoned or barred by laches or estoppels; liability, if any, is attributable to its co-defendants.

For its part, petitioner denied the allegations of respondent claiming, among others, that it is not
accountable nor responsible for any alleged shortage sustained by the shipment while in the
possession of its co-defendants; the alleged shortage was due to negligent or faulty loading or
unloading of the cargo by the stevedores/shipper/consignee; the shortage, if any, was due to pre-
shipment damage, inherent nature, vice or defect of the cargo for which herein petitioner is not
liable; respondent’s claim is already barred by laches and/or prescription.

Conti-Feed did not file an Answer.

Pre-Trial Conference was conducted, after which trial ensued.

On October 8, 1999, the RTC rendered its Decision dismissing respondent’s complaint, as well as the
opposing parties’ counterclaims and crossclaims.

Aggrieved by the RTC Decision, respondent filed an appeal with the CA.

On June 2, 2003, the CA rendered its presently assailed Decision disposing as follows:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE and another one
entered ordering defendants-appellees Conti-Feed and Maritime Pvt. Ltd. and Wallem Philippines
Shipping, Inc., to pay the sum representing the value of the 80.467 metric tons of Indian Soya Beans
shortdelivered, with legal interest from the time the judgment becomes final until full payment, plus
attorney’s fees and expenses of litigation of ₱10,000.00, as well as the cost of suit.

SO ORDERED.

Petitioner filed a Motion for Reconsideration.

On July 8, 2003, respondent filed a Motion for a More Definite Dispositive Portion praying that the
value of the 80.467 metric tons of Indian Soya Beans, which petitioner and Conti-Feed were ordered
to pay, be specified in the dispositive portion of the CA Decision.

Petitioner filed its Comment/Opposition to private respondent’s Motion.

On January 15, 2004, the CA issued a Resolution denying petitioner’s Motion for Reconsideration and
modifying the dispositive portion of its Decision, thus:

WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE and another one
entered ordering defendants-appellees Conti-Feed and Maritime Pvt. Ltd. and Wallem Shipping, Inc.,
to pay the sum of $19,070.06 representing the value of the 80.467 metric tons of Indian Soya Beans
shortdelivered, with legal interest from the time the judgment becomes final until full payment, plus
attorney’s fees and expenses of litigation of ₱10,000.00, as well as the costs of suit.

SO ORDERED.

Hence, the instant petition based on the following Assignment of Errors:

I
THE COURT OF APPEALS ERRED IN APPLYING THE PRESUMPTION OF NEGLIGENCE UNDER ARTICLE
1735 OF THE CIVIL CODE. THIS PROVISION DOES NOT APPLY IN THIS CASE BECAUSE THERE WAS
NO LOSS OR SHORTAGE OR SHORTDELIVERY.

II

THE COURT OF APPEALS ERRED IN GIVING DUE COURSE TO THE CASE CONSIDERING THAT:

A. THE CLAIM WAS ALREADY TIME-BARRED WHEN THE CASE WAS FILED AGAINST HEREIN
PETITIONER ON 8 MAY 1993, AS PROVIDED IN SECTION 3 (6) OF THE COGSA. THE ONE-YEAR
PRESCRIPTIVE PERIOD COMMENCED ON 15 APRIL 1992 WHEN THE SUBJECT SHIPMENT WAS
DELIVERED TO PRIVATE RESPONDENT AND LAPSED ON 15 APRIL 1993; AND

B. [RESPONDENT] WAIVED ITS RIGHT OF ACTION WHEN IT DID NOT GIVE A WRITTEN NOTICE OF
LOSS TO THE PETITIONER WITHIN THREE (3) DAYS FROM DISCHARGE OF THE SUBJECT SHIPMENT
AS PROVIDED IN SECTION 3 (6) OF THE COGSA.

III

IN THE REMOTE POSSIBILITY OF LOSS OR SHORTAGE OR SHORTDELIVERY, THE COURT OF

APPEALS ERRED IN IMPUTING NEGLIGENCE AGAINST THE PETITIONER WHICH WAS NOT
RESPONSIBLE IN LOADING AND/OR DISCHARGING THE SUBJECT SHIPMENT.

IV

THE COURT OF APPEALS ERRED IN GRANTING [RESPONDENT’S] MOTION FOR A MORE DEFINITE
DISPOSITIVE PORTION WITHOUT STATING IN THE DECISION, THE LEGAL BASES FOR DOING SO.

THE COURT OF APPEALS ERRED IN GRANTING THE MOTION FOR A MORE DEFINITE DISPOSITIVE
PORTION BECAUSE [RESPONDENT] FILED SAID MOTION MORE THAN FIFTEEN (15) DAYS AFTER
[RESPONDENT] RECEIVED THE DECISION OF THE COURT OF APPEALS. THE COURT OF APPEALS
FURTHER ERRED IN INSERTING A DEFINITE MONETARY VALUE OF THE ALLEGED SHORTAGE
BECAUSE THERE WAS NO FACTUAL FINDING, BOTH IN THE TRIAL COURT AND IN THE COURT OF
APPEALS, AS TO THE SPECIFIC AMOUNT OF THE ALLEGED SHORTDELIVERED CARGO.

The Court finds it proper to resolve first the question of whether the claim against petitioner was
timely filed.

With respect to the prescriptive period involving claims arising from shortage, loss of or damage to
cargoes sustained during transit, the law that governs the instant case is the Carriage of Goods by
Sea Act (COGSA), Section 3 (6) of which provides:

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 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.

Petitioner claims that pursuant to the above-cited provision, respondent should have filed its Notice of
Loss within three days from delivery. It asserts that the cargo was fully discharged from the vessel on
April 15, 1992, but that respondent failed to file any written notice of claim. Petitioner also avers that,
pursuant to the same provision of the COGSA, respondent’s claim had already prescribed because the
complaint for damages was filed more than one year after the shipment was discharged.

The Court agrees.

Under Section 3 (6) of the COGSA, notice of loss or damages must be filed within three days of
delivery. Admittedly, respondent did not comply with this provision.

Under the same provision, however, a failure to file a notice of claim within three days will not bar
recovery if a suit is nonetheless filed within one year from delivery of the goods or from the date
when the goods should have been delivered.

In Loadstar Shipping Co., Inc. v. Court of Appeals, the Court ruled that a claim is not barred by
prescription as long as the one-year period has not lapsed. Thus, in the words of the ponente, Chief
Justice Hilario G. Davide Jr.:

Inasmuch as neither the Civil Code nor the Code of Commerce states a specific prescriptive period on
the matter, the Carriage of Goods by Sea Act (COGSA) -- which provides for a one-year period of
limitation on claims for loss of, or damage to, cargoes sustained during transit -- may be applied
suppletorily to the case at bar.

In the instant case, the Court is not persuaded by respondent’s claim that the complaint against
petitioner was timely filed. Respondent argues that the suit for damages was filed on March 11, 1993,
which is within one year from the time the vessel carrying the subject cargo arrived at the Port of
Manila on April 11, 1993, or from the time the shipment was completely discharged from the vessel
on April 15, 1992.

There is no dispute that the vessel carrying the shipment arrived at the Port of Manila on April 11,
1992 and that the cargo was completely discharged therefrom on April 15, 1992. However,
respondent erred in arguing that the complaint for damages, insofar as the petitioner is concerned,
was filed on March 11, 1993.

As the records would show, petitioner was not impleaded as a defendant in the original complaint
filed on March 11, 1993. It was only on June 7, 1993 that the Amended Complaint, impleading
petitioner as defendant, was filed.

Respondent cannot argue that the filing of the Amended Complaint against petitioner should retroact
to the date of the filing of the original complaint.

The settled rule is that the filing of an amended pleading does not retroact to the date of the filing of
the original; hence, the statute of limitation runs until the submission of the amendment. It is true
that, as an exception, this Court has held that an amendment which merely supplements and
amplifies facts originally alleged in the complaint relates back to the date of the commencement of
the action and is not barred by the statute of limitations which expired after the service of the original
complaint. The exception, however, would not apply to the party impleaded for the first time in the
amended complaint.

The rule on the non-applicability of the curative and retroactive effect of an amended complaint,
insofar as newly impleaded defendants are concerned, has been established as early as in the case of
Aetna Insurance Co. v. Luzon Stevedoring Corporation. In the said case, the defendant Barber Lines
Far East Service was impleaded for the first time in the amended complaint which was filed after the
one-year period of prescription. The order of the lower court dismissing the amended complaint
against the said defendant on ground of prescription was affirmed by this Court.

In the instant case, petitioner was only impleaded in the amended Complaint of June 7, 1993, or one
(1) year, one (1) month and twenty-three (23) days from April 15, 1992, the date when the subject
cargo was fully unloaded from the vessel. Hence, reckoned from April 15, 1992, the one-year
prescriptive period had already lapsed.

Having ruled that the action against petitioner had already prescribed, the Court no longer finds it
necessary to address the other issues raised in the present petition.

WHEREFORE, the petition is PARTLY GRANTED. The Decision of the Court of Appeals dated June 2,
2003 and its Resolution dated January 15, 2004 in CA-G.R. CV No. 65857 are MODIFIED by
dismissing the complaint against petitioner. In all other respects, the challenged Decision and
Resolution of the CA are AFFIRMED.

SO ORDERED.

TOPIC: Warsaw Convention on Air Transportation

Phil. Airlines, Inc. VS CA (214 SCRA 262) (1992)

PHILIPPINE AIRLINES, INC., petitioner, vs. THE COURT OF APPEALS and CHUA MIN,
respondents

G.R. No. 44936. September 25, 1992

TOPIC: Warsaw Convention on Air Transportation

Civil Procedure; Parties; Private respondent has personality to seek redress for loss of films regardless
of its ownership. — Before discussing the intrinsic worth of petitioner’s discourse, We shall addres

s the issue of private respondent’s personality to seek redress for the loss of the films. We believe,
and so hold, that Chua Min is no stranger to the cause of action instituted at the court of origin in
spite of the message conveyed by him when he sat on the witness stand which seems to lead to the
opposite conclusion xxx since what is important, per his narration, is that he assumes the loss while
these films are in his custody and that he is accountable either to Loong Kee Pen Company or to the
De Mil Theatrical Corporation should he fail to produce the films upon demand. On the hypothetical
scenario, had the judgment of the trial court been adverse, in the sense that the complaint was
ordered dismissed, the pecuniary burden for the loss will certainly fall on private respondent’s
shoulders, which obligation, it is needless to stress, will constitute a material and substantial injury to
him.

Transportation Laws; Common Carriers; Liability for loss of baggage; Warsaw Convention. — Now, as
to whether petitioner may utilize the provision under Article 22(2) of the Warsaw Convention which
limits the liability of a common carrier for loss of baggage, We have to consider other salient features
thereof such as Article 4, paragraph 1 that reads: “For the transportation of baggage, other than
small personal objects of which the passenger takes charge himself, the carrier must deliver a
baggage check.” and the explicit wordings of Article 4, paragraph 4 of the same Convention that:
“The absence, irregularity, or loss of the baggage checks shall not affect the existence or the validity
of the contract of transportation which shall nonetheless be subject to the rules of this Convention.
Nevertheless, if the carrier accepts baggage without a baggage check having been delivered, or if the
baggage check does not contain the particulars set out at (d), (f), and (h) above, the carrier shall not
be entitled to avail himself of those provisions of the Convention which exclude or limit his liability.”
because these axioms will spell the difference between success and failure of the petition at bar. It
may be recalled that petitioner made a categorical distinction between a passenger ticket and a
baggage check when petitioner responded to the complaint for a sum of money (paragraphs 7 and 8,
Answer; pp. 6-8, Record on Appeal; p. 2, supra). In its motion for reconsideration before the court a
quo, petitioner had a sudden change of heart by asserting that the passenger ticket and the baggage
check are one and the same thing (p. 81, Record on appeal). On a later occasion, it stressed that the
‘baggage tags’ were erroneously labeled as ‘baggage checks’ under paragraph 7 of its Answer to the
Complaint (p. 3, Reply Brief for the Petitioner; p. 97, Rollo). But the question of semantics on whether
the passenger ticket, the baggage check, and the tag refer to the same object is undoubtedly without
legal significance and will not obliterate the fact that the baggage check was not presented by
petitioner in the trial court inasmuch as it merely relied on, and adopted private respondent’s exhibits,
none of which was offered for the purpose of proving the missing link, so to speak (pp. 57-58, Record
on Appeal). To rectify these lapses, petitioner argued that it is not in a position to introduce the
baggage check in evidence since private respondent as passenger, is the one who retains possession
thereof. Yet, such pretense does not sit well with what is expected of petitioner as an air carrier
under Article 4(2), Section II of the Warsaw Convention that: “The baggage check shall be made out
in duplicate, one part for the passenger and the other part of the carrier.” Consequently, petitioner
can not capitalize on the limited liability clause under Article 22 (2) of the Warsaw Convention
because of the unequivocal condition set forth under the second sentence of Article 4, paragraph 4
that: “. . . if the carrier accepts baggage without a baggage check having been delivered, or if the
baggage check does not contain the particulars set out at (d), (f), and (h) above, the carrier shall not
be entitled to avail himself of those provisions of the Convention which exclude or limit his liability.”

PETITION for review on certiorari of the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Siguion Reyna, Montecillo and Ongsiako for petitioner.

Plaridel C. Jose for private respondent.

MELO, J.:

On December 10, 1974, the Honorable Francisco de la Rosa, at that time Presiding Judge of Branch 7
of the then Court of in Pasay City, adjudged the accountability of herein petitioner as defendant in a
suit for a sum of money in this manner:

“WHEREFORE, judgment is hereby rendered in favor of Plaintiff:

(a) Ordering Defendant to pay Plaintiff the amount in Philippine Pesos equivalent to U.S. $4,000.00 at
the rate of exchange obtaining in March, 1972, with legal interest from the filing of this suit until fully
paid;

(b) Ordering Defendant to pay the costs; and

(c) Dismissing Defendants’ Compulsory Counterclaim.” (p. 70, Record on Appeal)

The foregoing conclusion was formulated by the court of origin on the basis of the following facts:

On April 4, 1972, private respondent boarded herein petitioner’s Flight PR 301 from Hongkong to
Manila and checked in four (4) pieces of baggage. When the plane landed in Manila, private
respondent was not able to locate the two pieces of baggage containing cinematographic films
despite diligent search therefor. Private respondent made the claim for such loss to petitioner which
admitted the loss and offered to compensate private respondent (Annex “3”, Answer; page 17,
Record on Appeal; page 64, Rollo).

Instead of accepting the offer, private respondent opted to file the case below to principally recover
the value of the lost items which he estimated to be worth P20,000.00 (paragraph 7, Complaint; page
3, Record on Appeal). Herein petitioner responded by asserting that:

“(4) Plaintiff has no cause of action against defendant.

(5) On 4 April 1972, plaintiff was a passenger, economy class on defendant’s Flight No. PR 301/4
April 1972, from Hongkong to Manila, under Passenger Ticket No. 2974-231418. As such passenger,
plaintiff checked-in four (4) pieces of baggage, with a total weight of only twenty (20) kilos, inclusive
of their contents, such that it would be physically impossible for the two alleged lost pieces, to have
in themselves an aggregate weight of twenty-five (25) kilos.

(6) As such passenger the contractual relationship between plaintiff and defendant is wholly governed
by the terms, conditions and stipulations which are clearly printed on plaintiff’s Passenger Ticket No.
2974-231418. Among the stipulations embodied in said ticket is a provision granting plaintiff a free
baggage allowance of twenty (20) kilos. A copy of this provision, as embodied in plaintiff’s ticket is
attached hereto as Annex “1” and made part hereof.

(7) In accordance with and in pursuant of this free baggage allowance (Annex “1”) plaintiff checked-
in his four (4) pieces of baggage on Flight No. PR301/4 April 1972, for which he was issued
corresponding baggage-checks, among them, baggage checks Nos. PR 24-89-61 and PR 24-89-76,
covering plaintiff’s two alleged lost pieces of baggage.

(8) Under Passenger Ticket No. 2974-231-418, which is the contract of carriage between plaintiff and
defendant, it is an express condition of the contract that the same shall be ‘subject to the rules and
limitations relating to liability established by the Warsaw Convention.’ A xerox copy of page 2 of
plaintiff’s Passenger Ticket No. 2974-231418 which contains the aforesaid condition is hereto
attached as Annex “2” and made part hereof.

(9) Under applicable rules and regulations of the Warsaw Convention on International Carriage by Air
(as amended by The Hague Protocol of 1955), which is the convention referred to in Annex “2”
hereof, defendant’s liability for plaintiff’s two (2) alleged lost pieces of baggage is limited to a
maximum of US$16.50 per kilogram.

(10) The total weight of plaintiff’s four (4) pieces of checked-in baggage, inclusive of their contents,
was only twenty (20) kilograms, such that each baggage would have an average weight of five (5)
kilograms, and the two alleged lost pieces, an average total weight of only ten (10) kilograms.
Accordingly, defendant’s maximum liability to plaintiff is US$165.00, or its equivalent in Philippine
currency.” (pp. 6-8, Record on Appeal)

After issues were joined, then plaintiff, now private respondent Chua Min testified and presented four
documents (p. 57, Record on Appeal) while petitioner did not call any witness and merely adopted
three exhibits of herein private respondent (p. 58, Record on Appeal).

Petitioner attempted to challenge private respondent’s personality to file the suit on the ground that
the film rolls belonged to the Hongkong firm of “Loong Kee Pen Co., Film Exchange Dept.”, apart
from the vacillating testimony spewed by Chua Min on the witness stand which supposedly suggests
that he has no right to seek restitution for the lost films, including the damages resulting therefrom.
On the merits of private respondent’s plea for relief, petitioner tried to call the attention of the trial
judge to the herein below quoted provisions of the Warsaw Convention which limit the liability of
petitioner as an air carrier to 250 francs per kilogram, thus:

“Article 3 (1). For the transportation of passengers, the carrier must deliver a passenger ticket which
shall contain the following particulars:

(a) x x x

(b) x x x

(c) x x x

(d) x x x

(e) A statement that the transportation is subject to the rules relating to liability established by this
convention.”

“Article 22 (2). In the transportation of checked baggage and of goods, the liability of the carrier shall
be limited to a sum of 250 francs per kilogram, unless the consignor has made, at the time when the
package was handed over to the carrier, a special declaration of the value at delivery and has paid a
supplementary sum if the case so requires. In that case the carrier will be liable to pay a sum not
exceeding the declared sum, unless he proves that the sum is greater than the actual value to the
consignor at delivery.”

In resolving the issue of private respondent’s legal standing to sue, the trial court expressed the view
that he can be considered as if he were the owner on account of his responsibility for any eventuality
that may occur to the film rolls. Verily, private respondent was considered to be a consignee of the
lost goods since he accompanied the films aboard petitioner’s plane who is presumed to have
accepted the contract of carriage between the consignor and petitioner when he later demanded the
delivery to him of the movie films (p. 63, Record on Appeal).

Anent the aspect of liability, the trial court opined that since petitioner did not introduce a single piece
of document and merely adopted private respondent’s exhibits, it may not invoke the limitation of its
liability with respect to ‘checked baggage’ under the provisions of the Warsaw Convention. The
apathy of petitioner seems to have extended its impact on the outcome of the case when the trial
court ruled that the films were worth $4,000.00 based on private respondent’s Exhibit “A” which, as
aforesaid, was nonchalantly adopted by petitioner as its Exhibit “1” (p. 69, Record on Appeal).
Realizing the vacuum insofar as the evidence is concerned,

petitioner tried to fill the hiatus by starting with the proposition in its motion for reconsideration that
the ticket under which private respondent was a passenger on petitioner’s plane was a passenger
ticket and baggage check at the same time. This tactic was resorted to in order to establish the
conclusion that petitioner could not have produced the same since the ticket is usually retained by the
passenger. Petitioner continued to asseverate that Article 4 paragraph 4 of the Warsaw Convention
which reads:

“(4) The absence, irregularity, or loss of the baggage checks shall not affect the existence or the
validity of the contract of transportation which shall nonetheless be subject to the rules of this
convention. Nevertheless, if the carrier accepts baggage without a baggage check having been
delivered, or if the baggage check does not contain the particulars set out at (d), (f), and (h) above,
the carrier shall not be entitled to avail himself of those provisions of the convention which exclude or
limit his liability.” (p. 66, Record on Appeal; p. 23, Motion for Reconsideration, p. 65, Rollo)

upon which provision the trial court allegedly relied in rejecting petitioner’s contention, is in fact
applicable judging from what is explicitly stated under the first sentence of the proviso. These ideas,
however, did not persuade the trial judge to reconsider his findings of accountability on the part of
petitioner (p. 111, Record on Appeal).

The appeal interposed therefrom to the Court of Appeals was likewise rebuffed on September 17,
1976 by the Fifth Division (Fernandez (ponente), Serrano, Batacan, JJ.) which sustained the
observations and dispositions reached by the trial court on the same grounds, except that the sum of
$4,000.00 was directed to be paid by petitioner in Philippine Currency, at the exchange rate obtaining
on the date the amount is actually paid to herein private respondent (pp. 43-44, Rollo). Petitioner’s
subsequent recourse to secure re-evaluation of the judgment did not merit the nod of approval of the
respondent Court of Appeals (p. 56, Rollo).

Thereupon, petitioner elevated to Us the matter of its liability under the contract of carriage via the
instant petition for

WHETHER OR NOT PETITIONER CAN AVAIL OF THE LIMITATIONS ON LIABILITY UNDER THE
WARSAW CONVENTION.

II

WHETHER OR NOT RESPONDENT IS THE REAL PARTY-IN-INTEREST TO ASSERT THE CLAIM FOR
COMPENSATION IN THIS CASE.”

Before discussing the intrinsic worth of petitioner’s discourse, We shall address the issue of private
respondent’s personality to seek redress for the loss of the films. We believe, and so hold, that Chua
Min is no stranger to the cause of action instituted at the court of origin in spite of the message
conveyed by him when he sat on the witness stand which seems to lead to the opposite conclusion
thus:

“ATTY. LAURETA:

Q: Mr. Chua Min, may I invite your attention to Exhibit A, particularly the entry which reads: ‘To De
Mil Theatrical Corporation.’ This is the corporation which bought supp osedly the motion picture films
listed in this invoice?

WITNESS:

A: It was not bought by the company, sir. It was only ent rusted by Loong Kee Pen to be distributed
here in the Philippines.

ATTY. LAURETA:

Q: So that the films listed here (Exhibit ‘A’ for plaintiff) is owned by Loong Kee Pen Company of
Hongkong?

WITNESS:

A: Yes sir, and it was only entrusted to De Mil Theatrical Corporation.

Q: This De Mil Theatrical Corporation, is this an existing corporation?

A: Yes, sir.

Q: Now, these films listed herein which numbers 5 in all are still owned by the supplier, Loong Kee
Pen Company of Hongkong. Do I understand then that those films which were supposedly lost were
not paid for by De Mil Theatrical Corporation?

A: It was not paid, sir. It was authorized to be the distributor but we take responsibility of all losses,
of everything.

Q: Now, when your made reference to ‘we’, you refer actually to the De Mil Theatrical Corporation?

A: Yes, sir.

Q: Do I understand, therefore, that you, De Mil Theatrical Corporation, has already paid for the films
in cartoons No. 3, 4 and 5, as specified in the invoice?

A: It’s not yet paid, sir. (pp. 73-75, Record on Appeal)

since what is important, per his narration, is that he assumes the loss while these films are in his
custody and that he is accountable either to Loong Kee Pen Company or to the De Mil Theatrical
Corporation should he fail to produce the films upon demand. On the hypothetical scenario, had the
judgment of the trial court been adverse, in the sense that the complaint was ordered dismissed, the
pecuniary burden for the loss will certainly fall on private respondent’s shoulders, which obligation, it
is needless to stress, will constitute a material and substantial injury to him. Withal, another pivotal
factor to consider is the letter from petitioner on August 28, 1972 addressed to herein private
respondent that says:

“We are in receipt of your claim for loss of baggage in connection with your travel to Manila from
Hongkong on our flight. We sincerely regret that this loss occurred and that despite a careful search
we have been unsuccessful in recovering your property. We feel we should settle your claim without
further delay.

We wish we could compensate you for the total amount of your loss. However, existing rules and
regulations established pursuant to the Warsaw Convention on International Carriage by Air (as
amended by the Hague Protocol) limit our liability for losses of this nature to the sum of US$16.50 for
every kilogram of checked-in baggage. The weight of your 4 pieces of baggage inclusive of its
contents as stated in the Property Irregularity Report (PIR) and your ticket shows a total weight of 20
kilos. Based thereon, the average weight of 2 pieces of your lost baggage would come out to 10 kilos.
Therefore, our maximum liability for the 2 pieces should be for a total amount of US$165.00 (10 kilos
x US$16.50).

Upon receipt of your advise, we shall have payment remitted in your favor.” (pp. 17-18, Record on
Appeal) which seems to be at least a failure to object to, if not an admission of the personality of
private respondent to initiate the suit below. The assurance made by petitioner that it will
compensate private respondent’s loss is a sufficient admission that indeed, private respondent has
the right to avail himself of the suit for the sum of money.

It follows, therefore, that whatever testimony may have been extracted through cross-examination
from Chua Min, is of no legal bearing to what was expressly conceded previously by petitioner.
Otherwise, We will in effect take the cudgels for petitioner and in the process, permit it to extricate
itself from the fatal aftermath of an admission as a tenet under substantive law. Of course, the plea
of avoidance raised by petitioner along this line is akin to lack of cause of action which may be
utilized even for the first time on appeal (Section 1(q), Rule 16; Section 2, Rule 9, Revised Rules of
Court), but the adjective norm permitting such a belated defense under Section 2, Rule 9 of the
Revised Rules of Court does not totally rule out the application of other legal doctrines under
substantive law, like estoppel, to the elastic undertones of petitioner.

Now, as to whether petitioner may utilize the provision under Article 22(2) of the Warsaw Convention
which limits the liability of a common carrier for loss of baggage, We have to consider other salient
features thereof such as Article 4, paragraph 1 that reads:

“For the transportation of baggage, other than small personal objects of which the passenger takes
charge himself, the carrier must deliver a baggage check.”

and the explicit wordings of Article 4, paragraph 4 of the same Convention that:

“The absence, irregularity, or loss of the baggage checks shall not affect the existence or the validity
of the contract of transportation which shall nonetheless be subject to the rules of this Convention.
Nevertheless, if the carrier accepts baggage without a baggage check having been delivered, or if the
baggage check does not contain the particulars set out at (d), (f), and (h) above, the carrier shall not
be entitled to avail himself of those provisions of the Convention which exclude or limit his liability.”
because these axioms will spell the difference between successand failure of the petition at bar.

It may be recalled that petitioner made a categorical distinction between a passenger ticket and a
baggage check when petitioner responded to the complaint for a sum of money (paragraphs 7 and 8,
Answer; pp. 6-8, Record on Appeal; p. 2, supra). In its motion for reconsideration before the court a
quo, petitioner had a sudden change of heart by asserting that the passenger ticket and the baggage
check are one and the same thing (p. 81, Record on appeal). On a later occasion, it stressed that the
‘baggage tags’ were erroneously labeled as ‘baggage checks’ under paragraph 7 of its Answer to the
Complaint (p. 3, Reply Brief for the Petitioner; p. 97, Rollo). But the question of semantics on whether
the passenger ticket, the baggage check, and the tag refer to the same object is undoubtedly without
legal significance and will not obliterate the fact that the baggage check was not presented by
petitioner in the trial court inasmuch as it merely relied on, and adopted private respondent’s exhibits,
none of which was offered for the purpose of proving the missing link, so to speak (pp. 57-58, Record
on Appeal). To rectify these lapses, petitioner argued that it is not in a position to introduce the
baggage check in evidence since private respondent as passenger, is the one who retains possession
thereof. Yet, such pretense does not sit well with what is expected of petitioner as an air carrier
under Article 4(2), Section II of the Warsaw Convention that:

“The baggage check shall be made out in duplicate, one part for the passenger and the other part for
the carrier.”

Consequently, petitioner can not capitalize on the limited liability clause under Article 22 (2) of the
Warsaw Convention because of the unequivocal condition set forth under the second sentence of
Article 4, paragraph 4 that:

“. . . if the carrier accepts baggage without a baggage check having been delivered, or if the baggage
check does not contain the particulars set out at (d), (f), and (h) above, the carrier shall not be
entitled to avail himself of those provisions of the Convention which exclude or limit his liability.”
Petitioner contends that it is covered by the first and not by the second sentence of Article 4,
paragraph 4 (page 8, supra). But the argument as proferred, requires Us to read something which is
not so stated between the lines for the first sentence speaks only of the “existence” or the “validity”
of the contract of transportation while the query on “liability” is particularly and directly resolved by
the second sentence. To be sure, and even assuming in gratia argumenti that an inconsistency exists,
the first sentence must be construed as the general proposition governing the existence or validity of
the contract of transportation which must yield to the particular rule under the second sentence
regarding liability. Furthermore, even if We consider the two sentences as particular in nature, the
rule has been laid down that the clause which comes later shall be given effect upon the presumption
that it expresses the dominant purpose of the instrument (Graham Paper Co. vs. National
Newspapers Asso. (Mo. App.) 193 S.W. 1003; Barnett vs. Merchants’ L. Ins. Co., 87 Okl. 42).

WHEREFORE, the petition for review is hereby DISMISSED for lack of merit.

SO ORDERED.

Bidin, Davide, Jr., and Romero, JJ., concur.

Gutierrez, Jr., J., (Chairman), On leave.

Petition dismissed.

Note. — The Warsaw Convention does not operate as an absolute limit of the extent of an airline’s
liability; it does not regulate or exclude liability for other breaches of contract by the carrier, or
misconduct of its employees, or for some particular or exceptional type of damage (Alitalia vs.
Intermediate Appellate Court, 192 SCRA 9).

——o0o——

TOPIC: COGSA’s (In) Applicability to Claims on Insurance

Mayer Steel Pipe Corp. VS CA ( 274 SCRA 432) (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

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

TOPIC: COGSA’s (In) Applicability to Claims on Insurance

Insurance; Carriage of Goods by Sea Act; Prescription; Under Section 3(6) of the Carriage of Goods
by Sea Act, only the carrier’s liability is extinguished if no suit is brought within one year. — 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.

Same; Same; Same; Ruling in Filipino Merchants should apply only to suits against the carrier filed
either by the shipper, the consignee or the insurer. — 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.

Same; Same; An “all risks” insurance policy covers all kinds of loss other than those due to willful and
fraudulent act of the insured. — An insurance contract is a contract whereby one party, for a
consideration known as the premium, agrees to indemnify another for loss or damage which he may
suffer from a specified peril. An “all risks” insurance policy covers all kinds of loss other than those
due to willful and fraudulent act of the insured. Thus, when private respondents issued the “all risks”
policies to petitioner Mayer, they bound themselves to indemnify the latter in case of loss or damage
to the goods insured. Such obligation prescribes in ten years, in accordance with Article 1144 of the
New Civil Code.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Arturo S. Santos for petitioner.

Conrado R. Mangahas & Associates for Charter Insurance Corp.

Laurel Law Offices for South Sea Surety & Insurance Co., Inc.

PUNO, J.:

This is a petition for review on certiorari to annul and set aside the Decision of respondent Court of
Appeals dated 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 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-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. P100,000.00 as and for attorney’s fees; and

3. costs of suit.

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. v. 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.

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 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 l

onger file a claim against the insurer because the basis of the insurer’s liability is the insurance
contract. An insurance contract is a contract whereby one party, for a consideration known as the
premium, agrees to indemnify another for loss or damage which he may suffer from a specified peril.
An “all risks” insurance policy covers all kinds of loss other than those due to willful and fraudulent
act of the insured. Thus, when private respondents issued the “all risks” policies to petitioner Mayer,
they bound themselves to indemnify the latter in case of loss or damage to the goods insured. Such
obligation prescribes in ten years, in accordance with Article 1144 of the New Civil Code.

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.

Petition granted.

Note. — It is settled that the terms of the policy constitute the measure of the insurer’s liability.
(Fortune Insurance and Surety Co., Inc. vs. Court of Appeals, 244 SCRA 308 [1995])