Title
Eastern Shipping Lines, Inc. vs. N.V. Netherlands Insurance Co.
Case
G.R. No. 146472
Decision Date
Jul 27, 2006
Shipment of printing plates arrived in Manila; Case No. 4 discharged in good order but later claimed damaged. Carrier not liable; damage occurred post-delivery.
shipping company
liability
damages

Case Summary (G.R. No. 146472)

Factual Background of the Marine Shipment and Alleged Damage

On July 4, 1985, Sunglobe International Corporation shipped five cases comprising a total of 5,000 pieces of pre-sensitized printing plates from Yokohama, Japan on board the vessel M/S Eastern Venus, owned and operated by Eastern Shipping Lines, Inc. The shipment was covered by Bill of Lading No. YMA-14 and was bound for Manila for delivery to Liwayway Publishing, Inc. The shipment was insured for P398,118 under Marine Risk Insurance Note No. 21.01940.01P issued by N.V. The Netherlands Insurance Company.

The shipment arrived in Manila on July 20, 1985. It was unloaded from the vessel to the custody of arrastre operator Metro Port Services, Inc. (Metro Port) from July 21 to July 22, 1985. Upon discharge, three cases—Cases Nos. 1, 2, and 4—were accepted by Metro Port in good order condition, resulting in the issuance and signing of two Good Order Cargo Receipts by the vessel’s representative and Metro Port’s representative. In contrast, Cases Nos. 3 and 5 were found to be in bad order, prompting the execution of Bad Order Cargo Receipt No. 10226 (for Case No. 3) and Bad Order Cargo Receipt No. 10227 (for Case No. 5), both signed by the same parties.

On July 23, 1985, Metro Port issued two “Turn Over Survey of Bad Order Cargoes” signed by representatives of both the vessel and Metro Port covering Cases Nos. 3 and 5. Prior to formal turnover from the vessel to Metro Port or on July 23, 1985, petitioner’s surveyor, R & R Industrial Surveyors, Co., Inc. (R & R Surveyors), inspected the cargoes for the cases later identified as in bad order. R & R Surveyors issued documents titled “BAD ORDER CARGO INSPECTED ON BOARD PRIOR TO DISCHARGE/AFTER LEAVING SHIP’S TACKLE”. For Case No. 3, it found the wooden case “broken on sides,” although the packages inside were “ok.” For Case No. 5, it found the wooden case “badly broken,” but the packages inside were “ok.”

After the shipment was withdrawn from the pier and delivered to the consignee’s warehouse on July 26, 1985, Liwayway Publishing, Inc. engaged another surveyor, Audemus Adjustment Corporation, which later became the basis of the consignee’s claim. By letter dated August 30, 1985, the consignee demanded from petitioner damages for total loss allegedly sustained by Case No. 4, quantified at P41,065.88. The letter stated that two wooden cases arrived in bad order and that, from the damaged case No. 4, fourteen (14) packages were torn on the sides with contents partly exposed, rendering the fifteen (15) packages (each containing printing plates) unusable.

Demands, Subrogation, and the Filing of the Civil Action

Petitioner denied the consignee’s claim in a letter dated September 30, 1985, asserting that the cargo claimed as damaged was recorded in petitioner’s discharge records as intact and in good condition. Meanwhile, respondent issued a check to the consignee in the amount of P35,501.38, described as the “full and final settlement” of the marine cargo claim under the marine risk insurance. In turn, the consignee executed a Letter of Subrogation in favor of respondent, ceding its right to recover the P35,501.38 refund from petitioner.

Because petitioner did not settle the subrogated amount, respondent filed on July 11, 1986 a complaint for sum of money before the RTC of Makati, docketed as Civil Case No. 14309.

RTC Disposition and Appellate Reversal

The trial court resolved in the negative two key issues: first, whether Case No. 4 sustained damage while under petitioner’s custody and control; and second, whether petitioner was liable to pay respondent the amount of P31,501.38 claimed. By judgment dated October 15, 1993, the RTC dismissed respondent’s complaint.

On appeal, the Court of Appeals, in a decision dated September 7, 2000, reversed the RTC. The appellate court reasoned that petitioner failed to prove the foresight required by law, and it rejected petitioner’s defense that the damage occurred after discharge and after the goods were already in the consignee’s custody. The Court of Appeals found, based on its review of evidence, that the cases of pre-sensitized plates were damaged while they were still under the carrier’s responsibility and were reported as bad order at the time of discharge. It emphasized that, upon leaving the vessel’s tackle prior to discharging the consignee’s property, two cases containing the imported plates were reported by petitioner’s surveyor R & R Industrial Surveyors Inc. as in bad order, with one described as broken on one side and another as badly broken, and it noted the arrastre operator’s report that two cases discharged in bad order were the vessel’s responsibility. Consequently, the Court of Appeals ordered petitioner to pay respondent P35,501.38 with legal interest at 6% per year from the date of entry of judgment, and it further awarded attorney’s fees equivalent to twenty-five percent (25%) of the principal award.

Petitioner’s motion for reconsideration was denied on December 8, 2000, which prompted the petition for review before the Supreme Court.

The Parties’ Contentions Before the Supreme Court

Petitioner argued that the RTC decision had sound factual and legal bases. It invoked the principle that while the Supreme Court generally does not retry facts, it recognized exceptions allowing review of appellate fact findings. Petitioner specifically targeted the appellate court’s factual understanding of which cases were damaged and when the damage was discovered, stressing that the consignee’s August 30, 1985 demand letter referred to documents that related to Cases Nos. 3 and 5, not Case No. 4, the subject of the claim.

Petitioner also argued that the inspection by the consignee’s designated surveyor, Audemus Adjustment Corporation, occurred only on July 26, 1985, at the consignee’s warehouse, not while the goods were under petitioner’s custody. Petitioner further relied on the evidence that, at discharge, Case No. 4 was covered by a Good Order Cargo Receipt No. 152999 dated July 22, 1985, countersigned by Metro Port with a statement that the goods checked and received upon discharge were as to quantity, quality, and description.

Respondent, for its part, alleged that petitioner’s surveyor reports showed the damage while the cargo was “on board prior to discharge/after leaving ship’s tackle,” and it urged the Court to accept the appellate court’s finding that petitioner failed to prove due diligence or the carrier’s required foresight.

Evidence Considered: Cargo Receipts, Survey Turnover, and Inspection Reports

To illuminate where fault lay, the Supreme Court reviewed the pattern and content of documentary evidence as reflected in the tabulation reproduced in the records. The Court considered that Case Nos. 1 and 2 were covered by Good Order Cargo Receipts, and Case No. 3 was covered by a Bad Order Cargo Receipt dated July 21, 1985. It also noted that Case No. 5 was covered by a Bad Order Cargo Receipt dated July 22, 1985. For Case No. 4, the tabulation showed that it was covered by Good Order Cargo Receipt No. 152999 dated July 22, 1985.

In the Court’s understanding, the documents cited by respondent as proving pre-discharge damage—specifically Exhibits “9” and “10” issued by R & R Surveyors—referred to inspections made on Cases Nos. 3 and 5, not Case No. 4. The Court reasoned that, where cases were unqualifiedly accepted as good by Metro Port and covered by Good Order Cargo Receipts, there was no reason for a separate written memorandum of bad order inspection with respect to Case No. 4. It further treated as implausible the notion that R & R Surveyors would omit writing any adverse finding for Case No. 4 while issuing documents of bad order inspection for other cases.

The Court also addressed petitioner’s reliance on documentary frameworks previously recognized in Summa Insurance Corporation v. CA and Hartford Fire Insurance Co. v. E. Razon, Inc., where the decisive weight of pre-release documentation was considered against later reports made after custody had already shifted. Consistent with that approach, the Court held that the documentary record in the present case demonstrated that the relevant bad order descriptions were associated with Cases Nos. 3 and 5, not Case No. 4.

On the Alleged Carrier Liability and the Failure to Prove Damage While Under the Carrier’s Custody

The Court examined the July 26, 1985 demand letter and respondent’s later survey report, as well as Metro Port’s Bad Order Survey documentation. It noted that the Metro Port request for bad order survey signed in July 26, 1985 did not cover or refer to Case No. 4. It likewise reviewed Metro Port’s report dated October 31, 1985, which stated that the two cases covered by its B.O. Examination Report No. 31166 were discharged in bad order from the vessel and that loss or damage was the vessel’s responsibility, but it concluded that such statement could not be given weight insofar as the examination report referred to turnover survey receipt numbers corresponding to Cases Nos. 3 and 5.

In addition, the Court considered the Audemus Adjustment Corporation report for the consignee’s claim and found it unavailing because the inspection was performed only on July 26, 1985 at the consignee’s warehouse and without a representative from the shipping company being present, as supported by the testimony taken in the case. Thus, even if the consignee later detected damage in Case No. 4, the Court held that the evidence did not establish that Case No. 4 was already in a damaged state when petitioner discharged it to Metro Port.

Accordingly, the Court held that Case No. 4 was not in a damaged state when petitioner discharged it and that petitioner could not be held liable for any damages discovered only after delivery to the consignee.

Ruling of the Court and Disposition

The Supreme Court granted the petition. It reversed and set aside the Court of Appeals decision dated September 7, 20

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