Facts:

The case involves Asian Terminals, Inc. (ATI) as the petitioner and First Lepanto-Taisho Insurance Corporation (FIRST LEPANTO) as the respondent. The events leading to the case began on July 6, 1996, when 3,000 bags of sodium tripolyphosphate were loaded onto the M/V aDa Fenga, owned by China Ocean Shipping Co. (COSCO), for delivery to Grand Asian Sales, Inc. (GASI). The shipment was insured against all risks for P7,959,550.50 under Marine Open Policy No. 0123 with FIRST LEPANTO. Upon arrival in Manila on July 18, 1996, the shipment was discharged into the custody of ATI, which is engaged in the arrastre business.

The shipment remained in ATI's storage until it was withdrawn by Proven Customs Brokerage Corporation (PROVEN) on August 8 and 9, 1996. Upon inspection, GASI discovered shortages totaling 11,915 kg, valued at P166,772.41. GASI sought recompense from COSCO, ATI, and PROVEN but was denied. Consequently, GASI filed a claim with FIRST LEPANTO, which paid GASI the...

Facts:

Chronology and Shipment Details

• On July 6, 1996, 3,000 bags of sodium tripolyphosphate, contained in 100 plain jumbo bags and verified to be complete and in good condition, were loaded and received on board the vessel M/V aDa Fenga, owned by China Ocean Shipping Co. (COSCO).
• The shipment, insured against all risks under Marine Open Policy No. 0123 for P7,959,550.50, was consigned in favor of Grand Asian Sales, Inc. (GASI) and covered by a Certificate of Insurance dated August 24, 1995.
• The cargo arrived in Manila on July 18, 1996 and was discharged into the custody of petitioner Asian Terminals, Inc. (ATI), a domestic corporation engaged in arrastre (land transportation) services.

Discovery of Loss/Damage and Subsequent Actions

• Following the withdrawal of the goods by Proven Customs Brokerage Corporation (PROVEN) on August 8 and 9, 1996 for delivery to GASI, an inspection by GASI revealed shortages amounting to 8,600 kilograms and spillage of 3,315 kilograms, totaling a loss/damage of 11,915 kg with a value of P166,772.41.
• GASI, having suffered the loss, sought compensation from all parties involved (COSCO, its Philippine agent Smith Bell Shipping Lines, Inc. (SMITH BELL), ATI, and PROVEN) but was denied indemnification from each.
• FIRST LEPANTO, having acted as the insurer by paying GASI an indemnity of P165,772.40 after requisite adjustment and investigation, obtained a Release of Claim from GASI. This document discharged FIRST LEPANTO from further liability and subrogated it to all of GASI’s rights and claims against the parties responsible for the loss/damage.

Initiation of Legal Proceedings

• With its rights as subrogee established, FIRST LEPANTO filed a Complaint on May 29, 1997 before the Metropolitan Trial Court (MeTC) of Manila, Branch 3, claiming reimbursement of the indemnity amount, attorney’s fees (25% of the amount), and costs of suit.
• ATI denied liability, asserting that it exercised due diligence when handling the shipment and that any damage observed (specifically to one jumbo bag) occurred while the cargo was still in COSCO’s custody.
• In support of its version, ATI submitted documentary evidence, including the Turn Over Survey of Bad Order Cargo and the Request for Bad Order Survey executed jointly with representatives of relevant parties, as well as various Cargo Gate Passes, contending that the shipment, except for the one bag, remained intact upon PROVEN’s withdrawal.

Procedural History and Court Rulings

• The MeTC rendered a Judgment on May 30, 2006, dismissing the claim against ATI (and PROVEN) by absolving them of liability and affirming that COSCO was at fault; however, jurisdictional issues (foreign status of COSCO and non-establishment of SMITH BELL’s agency) prevented enforcement against some parties.
• On appeal, the Regional Trial Court (RTC) in its Decision dated January 26, 2007, reversed the MeTC ruling and found ATI liable for the loss/damage sustained by the shipment, rejecting ATI’s defenses regarding due diligence and limitations of liability under its Management Contract with the Philippine Ports Authority (PPA).
• The Court of Appeals (CA) in its Decision dated October 10, 2008, dismissed ATI’s appeal, affirming the RTC’s finding that ATI, as arrastre operator, was liable for the damage. The CA also held that the submitted Certificate of Insurance and the executed Release of Claim sufficiently established FIRST LEPANTO’s right to subrogation, without the need for the actual insurance contract.
• ATI subsequently filed a petition for review on certiorari before the Supreme Court challenging the CA’s findings, particularly on issues of subrogation and the prescription defense; however, the petition was ultimately denied.

Contentions Raised by ATI

• ATI argued that FIRST LEPANTO’s right of subrogation was not valid because the actual insurance contract had not been produced; it maintained that the Certificate of Insurance did not equate to a binding marine insurance contract.
• In addition, ATI contended that its liability was limited to a maximum amount per package in accordance with its contract with PPA and that a claim should be barred by prescription due to the 15-day limitation rule stated in the gate pass.
• ATI further sought to shift liability to COSCO, basing its argument on the timing of surveys and the apparent delay in the discovery of damage when the shipment had been in its custody longer than acceptable under the due diligence standard.

Issue:

Whether the subrogation rights of FIRST LEPANTO, as evidenced by the Certificate of Insurance and the Release of Claim from GASI, were validly established despite the absence of the actual marine insurance contract in evidence.

• Whether the documentation submitted by FIRST LEPANTO is sufficient to effect a subrogation in favor of the insurer.

Whether ATI, as the arrastre operator, exercised the requisite due diligence in handling the shipment once it was discharged from the vessel.

• Whether the evidence supports the claim that the damage occurred while the cargo was under ATI’s custody rather than prior to its receipt.

Whether the requirement to present the marine insurance contract is an indispensable element in proving the insurer’s subrogation rights.

• The extent to which the exception (as seen in previous cases such as Delsan Transport Lines, Inc. and International Container Terminal Services, Inc.) applies.

Whether the defense of prescription (based on the 15-day claim filing limitation) can be validly raised by ATI to bar FIRST LEPANTO’s claim for reimbursement.

• Whether the submission of a provisional claim through a Request for Bad Order Survey sufficiently satisfies the notice requirements to avert the prescription issue.

• Whether ATI’s attempt to shift the fault onto COSCO is legally tenable in light of the evidence regarding the timing and condition of the shipment upon receipt.

Ruling:

• (Subscriber-Only)

Ratio:

• (Subscriber-Only)

Doctrine:

• (Subscriber-Only)