Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No.

165647 March 26, 2009

PHILIPPINES FIRST INSUR NCE CO., INC., Petitioner, vs. ! LLEM PHILS. SHIPPING, INC., UN"NO!N O!NER N#$OR UN"NO!N CH RTERER OF THE %ESSEL M$S &OFFSHORE M STER& N# &SH NGH I F RE ST SHIP 'USINESS COMP N(,& Respondents. DECISION TING , J.: efore us is a Rule !" petition# $hich see%s the reversal of the Decision& and Resolution' of the Court of (ppeals in C()*.R. No. +#,,". -he Court of (ppeals reversed the Decision ! of the Re.ional -rial Court /R-C0 of Manila, ranch "" in Civil Case No. 1+),2&1,, dis3issin. the co3plaint for su3 of 3one4. -he facts of the case follo$." On or about & October #11", (nhui Che3icals I3port 5 E6port Corporation loaded on board M7S Offshore Master a ship3ent consistin. of #2,222 ba.s of sodiu3 sulphate anh4drous 11 PC- Min. /ship3ent0, co3plete and in .ood order for transportation to and deliver4 at the port of Manila for consi.nee, 8.*. (t%i3son I3port)E6port, Inc. /consi.nee0, covered b4 a Clean ill of 8adin.. -he ill of 8adin. reflects the .ross $ei.ht of the total car.o at "22,&22 %ilo.ra3s. + -he O$ner and7or Charterer of M7V Offshore Master is un%no$n $hile the shipper of the ship3ent is Shan.hai 9areast Ship usiness Co3pan4. oth are forei.n fir3s doin. business in the Philippines, thru its local ship a.ent, respondent :alle3 Philippines Shippin., Inc. /:alle30. ; On or about #+ October #11", the ship3ent arrived at the port of Manila on board the vessel M7S Offshore Master fro3 $hich it $as subse<uentl4 dischar.ed. It $as disclosed durin. the dischar.e of the ship3ent fro3 the carrier that &,!&+ pol4 ba.s /ba.s0 $ere in bad order and condition, havin. sustained various de.rees of spilla.es and losses. -his is evidenced b4 the -urn Over Surve4 of ad Order Car.oes /turn)over surve40 of the arrastre operator, (sian -er3inals, Inc. /arrastre operator0., -he bad state of the ba.s is also evinced b4 the arrastre operator=s Re<uest for ad Order Surve4.1 (sia Star 9rei.ht Services, Inc. undertoo% the deliver4 of the sub>ect ship3ent fro3 the pier to the consi.nee=s $arehouse in ?ue@on Cit4,#2 $hile the final inspection $as conducted >ointl4 b4 the consi.nee=s representative and the car.o surve4or. Durin. the unloadin., it $as found and noted that the ba.s had been dischar.ed in da3a.ed and bad order condition. Apon inspection, it $as discovered that +',2+".22 %ilo.ra3s of the ship3ent had sustained unrecovered spilla.es, $hile ",,&'".22 %ilo.ra3s had been e6posed and conta3inated, resultin. in losses due to depreciation and do$n.radin..##

On &1 (pril #11+, the consi.nee filed a for3al clai3 $ith :alle3 for the value of the da3a.ed ship3ent, to no avail. Since the ship3ent $as insured $ith petitioner Philippines 9irst Insurance Co., Inc. a.ainst all ris%s in the a3ount of P&,!;2,&#'."2,#& the consi.nee filed a for3al clai3#' $ith petitioner for the da3a.e and losses sustained b4 the ship3ent. (fter evaluatin. the invoices, the turn)over surve4, the bad order certificate and other docu3ents, #! petitioner found the clai3 to be in order and co3pensable under the 3arine insurance polic4. Conse<uentl4, petitioner paid the consi.nee the su3 of P'1;,,;1.+1 and the latter si.ned a subro.ation receipt. Petitioner, in the e6ercise of its ri.ht of subro.ation, sent a de3and letter to :alle3 for the recover4 of the a3ount paid b4 petitioner to the consi.nee. Bo$ever, despite receipt of the letter, :alle3 did not settle nor even send a response to petitioner=s clai3. #" Conse<uentl4, petitioner instituted an action before the R-C for da3a.es a.ainst respondents for the recover4 ofP'1;,,;1.+1 representin. the actual da3a.es suffered b4 petitioner plus le.al interest thereon co3puted fro3 the ti3e of the filin. of the co3plaint until full4 paid and attorne4=s fees e<uivalent to &"C of the principal clai3 plus costs of suit. In a decision#+ dated ' Nove3ber #11,, the R-C ordered respondents to pa4 petitioner P'1;,,;1.+1 $ith +C interest plus attorne4=s fees and costs of the suit. It attributed the da3a.e and losses sustained b4 the ship3ent to the arrastre operator=s 3ishandlin. in the dischar.e of the ship3ent. Citin. Eastern Shipping Lines, Inc. v. Court of Appeals, #; the R-C held the shippin. co3pan4 and the arrastre operator solidaril4 liable since both the arrastre operator and the carrier are char.ed $ith and obli.ated to deliver the .oods in .ood order condition to the consi.nee. It also ruled that the ship functioned as a co33on carrier and $as obli.ed to observe the de.ree of care re<uired of a co33on carrier in handlin. car.oes. 9urther, it held that a notice of loss or da3a.e in $ritin. is not re<uired in this case because said .oods alread4 under$ent a >oint inspection or surve4 at the ti3e of receipt thereof b4 the consi.nee, $hich dispensed $ith the notice re<uire3ent. -he Court of (ppeals reversed and set aside the R-C=s decision. #, (ccordin. to the appellate court, there is no solidar4 liabilit4 bet$een the carrier and the arrastre operator because it $as clearl4 established b4 the court a quo that the da3a.e and losses of the ship3ent $ere attributed to the 3ishandlin. b4 the arrastre operator in the dischar.e of the ship3ent. -he appellate court ruled that the instant case falls under an e6ception reco.ni@ed inEastern Shipping Lines.#1 Bence, the arrastre operator $as held solel4 liable to the consi.nee. Petitioner raises the follo$in. issuesD #. :hether or not the Court of (ppeals erred in not holdin. that as a co33on carrier, the carrier=s duties e6tend to the obli.ation to safel4 dischar.e the car.o fro3 the vesselE &. :hether or not the carrier should be held liable for the cost of the da3a.ed ship3entE '. :hether or not :alle3=s failure to ans$er the e6tra >udicial de3and b4 petitioner for the cost of the lost7da3a.ed ship3ent is an i3plied ad3ission of the for3er=s liabilit4 for said .oodsE !. :hether or not the courts belo$ erred in .ivin. credence to the testi3on4 of Mr. -alens. It is be4ond <uestion that respondent=s vessel is a co33on carrier. &2 -hus, the standards for deter3inin. the e6istence or absence of the respondent=s liabilit4 $ill be .au.ed on the de.ree of

dili.ence re<uired of a co33on carrier. Moreover, as the ship3ent $as an e6ercise of international trade, the provisions of the Carria.e of *oods b4 Sea (ct&# /CO*S(0, to.ether $ith the Civil Code and the Code of Co33erce, shall appl4. && -he first and second issues raised in the petition $ill be resolved concurrentl4 since the4 are interrelated. It is undisputed that the ship3ent $as da3a.ed prior to its receipt b4 the insured consi.nee. -he da3a.e to the ship3ent $as docu3ented b4 the turn)over surve4 &' and Re<uest for ad Order Surve4.&! -he turn)over surve4, in particular, e6pressl4 stipulates that &,!&+ ba.s of the ship3ent $ere received b4 the arrastre operator in da3a.ed condition. :ith these docu3ents, petitioner insists that the ship3ent incurred da3a.e or losses $hile still in the care and responsibilit4 of :alle3 and before it $as turned over and delivered to the arrastre operator. -he trial court, ho$ever, found throu.h the testi3on4 of Mr. Ma6i3ino Velas<ue@ -alens, a car.o surve4or of Oceanica Car.o Marine Surve4ors Corporation, that the losses and da3a.e to the car.o $ere caused b4 the 3ishandlin. of the arrastre operator. Specificall4, that the torn car.o ba.s resulted fro3 the use of steel hoo%s7spi%es in pilin. the car.o ba.s to the pallet board and in pushin. the ba.s b4 the stevedores of the arrastre operator to the tu. boats then to the ports. &" -he appellate court affir3ed the findin. of 3ishandlin. in the dischar.e of car.o and it served as its basis for e6culpatin. respondents fro3 liabilit4, rationali@in. that $ith the fault of the arrastre operator in the unloadin. of the car.o established it should bear sole liabilit4 for the cost of the da3a.ed7lost car.o. :hile it is established that da3a.e or losses $ere incurred b4 the ship3ent during the unloadin., it is disputed $ho should be liable for the da3a.e incurred at that point of transport. -o address this issue, the pertinent la$s and >urisprudence are e6a3ined. Co33on carriers, fro3 the nature of their business and for reasons of public polic4, are bound to observe e6traordinar4 dili.ence in the vi.ilance over the .oods transported b4 the3. &+ Sub>ect to certain e6ceptions enu3erated under (rticle #;'!&; of the Civil Code, co33on carriers are responsible for the loss, destruction, or deterioration of the .oods. -he e6traordinar4 responsibilit4 of the co33on carrier lasts fro3 the ti3e the .oods are unconditionall4 placed in the possession of, and received b4 the carrier for transportation until the sa3e are delivered, actuall4 or constructivel4, b4 the carrier to the consi.nee, or to the person $ho has a ri.ht to receive the3. &, 9or 3arine vessels, (rticle +#1 of the Code of Co33erce provides that the ship captain is liable for the car.o fro3 the ti3e it is turned over to hi3 at the doc% or afloat alon.side the vessel at the port of loadin., until he delivers it on the shore or on the dischar.in. $harf at the port of unloadin., unless a.reed other$ise. In Standard Oil Co. of New Yor v. Lope! Castelo ,&1 the Court interpreted the ship captain=s liabilit4 as ulti3atel4 that of the shipo$ner b4 re.ardin. the captain as the representative of the ship o$ner. 8astl4, Section & of the CO*S( provides that under ever4 contract of carria.e of .oods b4 sea, the carrier in relation to the loadin., handlin., sto$a.e, carria.e, custod4, care, and dischar.e of such .oods, shall be sub>ect to the responsibilities and liabilities and entitled to the ri.hts and i33unities set forth in the (ct.'2 Section ' /&0 thereof then states that a3on. the carriers= responsibilities are to properl4 and carefull4 load, handle, sto$, carr4, %eep, care for, and dischar.e the .oods carried. -he above doctrines are in fact e6pressl4 incorporated in the bill of ladin. bet$een the shipper Shan.hai 9areast usiness Co., and the consi.nee, to $itD

!. PERIOD O9 RESPONSI I8I-F. -he responsibilit4 of the carrier shall co33ence fro3 the ti3e $hen the .oods are loaded on board the vessel and shall cease $hen the4 are dischar.ed fro3 the vessel. -he Carrier shall not be liable of loss of or da3a.e to the .oods before loadin. and after dischar.in. fro3 the vessel, ho$soever such loss or da3a.e arises.'# On the other hand, the functions of an arrastre operator involve the handlin. of car.o deposited on the $harf or bet$een the establish3ent of the consi.nee or shipper and the shipGs tac%le. '& ein. the custodian of the .oods dischar.ed fro3 a vessel, an arrastre operatorGs dut4 is to ta%e .ood care of the .oods and to turn the3 over to the part4 entitled to their possession. '' Bandlin. car.o is 3ainl4 the arrastre operatorGs principal $or% so its drivers7operators or e3plo4ees should observe the standards and 3easures necessar4 to prevent losses and da3a.e to ship3ents under its custod4.'! In "ire#an$s "und Insurance Co. v. %etro &ort Service, Inc. '" the Court e6plained the relationship and responsibilit4 of an arrastre operator to a consi.nee of a car.o, to <uoteD -he le.al relationship bet$een the consi.nee and the arrastre operator is a%in to that of a depositor and $arehouse3an. -he relationship bet$een the consi.nee and the co33on carrier is si3ilar to that of the consi.nee and the arrastre operator. Since it is the dut4 of the (RR(S-RE to ta%e .ood care of the .oods that are in its custod4 and to deliver the3 in .ood condition to the consi.nee, such responsibilit4 also devolves upon the C(RRIER. oth the (RR(S-RE and the C(RRIER are therefore char.ed $ith and obli.ated to deliver the .oods in .ood condition to the consi.nee. /E3phasis supplied0 /Citations o3itted0 -he liabilit4 of the arrastre operator $as reiterated in Eastern Shipping Lines, Inc. v. Court of Appeals'+ $ith the clarification that the arrastre operator and the carrier are not al$a4s and necessaril4 solidaril4 liable as the facts of a case 3a4 var4 the rule. -hus, in this case the appellate court is correct insofar as it ruled that an arrastre operator and a carrier 3a4 not be held solidaril4 liable at all ti3es. ut the precise <uestion is $hich entit4 had custod4 of the ship3ent durin. its unloadin. fro3 the vesselH -he afore3entioned Section '/&0 of the CO*S( states that a3on. the carriers= responsibilities are to properl4 and carefull4 load, care for and dischar.e the .oods carried. -he bill of ladin. coverin. the sub>ect ship3ent li%e$ise stipulates that the carrier=s liabilit4 for loss or da3a.e to the .oods ceases after its dischar.e fro3 the vessel. (rticle +#1 of the Code of Co33erce holds a ship captain liable for the car.o fro3 the ti3e it is turned over to hi3 until its deliver4 at the port of unloadin.. In a case decided b4 a A.S. Circuit Court, Nichi#en Co#pan' v. %.(). "arland,'; it $as ruled that li%e the dut4 of sea$orthiness, the dut4 of care of the car.o is non)dele.able, ', and the carrier is accordin.l4 responsible for the acts of the 3aster, the cre$, the stevedore, and his other a.ents. It has also been held that it is ordinaril4 the dut4 of the 3aster of a vessel to unload the car.o and place it in readiness for deliver4 to the consi.nee, and there is an i3plied obli.ation that this shall be acco3plished $ith sound 3achiner4, co3petent hands, and in such 3anner that no unnecessar4 in>ur4 shall be done thereto. '1 (nd the fact that a consi.nee is re<uired to furnish persons to assist in unloadin. a ship3ent 3a4 not relieve the carrier of its dut4 as to such unloadin.. !2

-he e6ercise of the carrier=s custod4 and responsibilit4 over the sub>ect ship3ent durin. the unloadin. actuall4 transpired in the instant case durin. the unloadin. of the ship3ent as testified b4 Mr. -alens, the car.o surve4or, to <uoteD (tt4. RepolD ) Do 4ou a.ree $ith 3e that :alle3 Philippines is a shippin. Ico3pan4JH ( Fes, sir. ? (nd, $ho hired the services of the stevedoresH ( -he chec%er of the vessel of :alle3, sir.!# 666 ? Mr. :itness, durin. the dischar.in. operation of this car.o, $here $as the 3aster of the vesselH ( On board the vessel, supervisin., sir. ? (nd, observed the dischar.in. operationH ( Fes, sir. ? (nd, $hat did the 3aster of the vessel do $hen the car.o $as bein. unloaded fro3 the vesselH ( Be $ould report to the head chec%er, sir. ? Be did not send the stevedores to $hat 3anner in the dischar.in. of the car.o fro3 the vesselH ( (nd head chec%er po and si4an. na.papata%bo n. trabaho sa loob n. bar%o, sir. !& 666 ? Is he Ithe head chec%erJ an e3plo4ee of the co3pan4H ( Be is a contractor7chec%er of :alle3 Philippines, sir.!' Moreover, the liabilit4 of :alle3 is hi.hli.hted b4 Mr. -alen=s notes in the ad Order Inspection, to $itD K-he bad order torn ba.s, $as due to stevedoresILJ utili@in. steel hoo%s7spi%es in pilin. the car.o to ItheJ pallet board at the vessel=s car.o holds and at the pier desi.nated area before and after dischar.ed that cause the ba.s to torn IsicJ.K!! /E3phasis supplied0

-he records are replete $ith evidence $hich sho$ that the da3a.e to the ba.s happened before and after their dischar.e!" and it $as caused b4 the stevedores of the arrastre operator $ho $ere then under the supervision of :alle3.
*awphi*.net

It is settled in 3ariti3e la$ >urisprudence that car.oes $hile bein. unloaded .enerall4 re3ain under the custod4 of the carrier. In the instant case, the da3a.e or losses $ere incurred durin. the dischar.e of the ship3ent $hile under the supervision of the carrier. Conse<uentl4, the carrier is liable for the da3a.e or losses caused to the ship3ent. (s the cost of the actual da3a.e to the sub>ect ship3ent has lon. been settled, the trial court=s findin. of actual da3a.es in the a3ount of P'1;,,;1.+1 has to be sustained. On the credibilit4 of Mr. -alens $hich is the fourth issue, the .eneral rule in assessin. credibilit4 of $itnesses is $ell)settledD 6 6 6 the trial courtGs evaluation as to the credibilit4 of $itnesses is vie$ed as correct and entitled to the hi.hest respect because it is 3ore co3petent to so conclude, havin. had the opportunit4 to observe the $itnessesG de3eanor and deport3ent on the stand, and the 3anner in $hich the4 .ave their testi3onies. -he trial >ud.e therefore can better deter3ine if such $itnesses $ere tellin. the truth, bein. in the ideal position to $ei.h conflictin. testi3onies. -herefore, unless the trial >ud.e plainl4 overloo%ed certain facts of substance and value $hich, if considered, 3i.ht affect the result of the case, his assess3ent on credibilit4 3ust be respected. !+ Contrar4 to petitioner=s stance on the third issue, :alle3=s failure to respond to its de3and letter does not constitute an i3plied ad3ission of liabilit4. -o borro$ the $ords of Mr. Mustice Oliver :endell Bol3es, thusD ( 3an cannot 3a%e evidence for hi3self b4 $ritin. a letter containin. the state3ents that he $ishes to prove. Be does not 3a%e the letter evidence b4 sendin. it to the part4 a.ainst $ho3 he $ishes to prove the facts Istated thereinJ. Be no 3ore can i3pose a dut4 to ans$er a char.e than he can i3pose a dut4 to pa4 b4 sendin. .oods. -herefore a failure to ans$er such adverse assertions in the absence of further circu3stances 3a%in. an ans$er re<uisite or natural has no effect as an ad3ission.!; :ith respect to the attorne4=s fees, it is evident that petitioner $as co3pelled to liti.ate this 3atter to protect its interest. -he R-C=s a$ard of P&2,222.22 as attorne4=s fees is reasonable. :BERE9ORE, the petition is *R(N-ED. -he Decision of the Court of (ppeals dated && Mune &22! and its Resolution dated ## October &22! are REVERSED and SE- (SIDE. :alle3 is ordered to pa4 petitioner the su3 of P'1;,,;1.+1, $ith interest thereon at +C per annu3 fro3 the filin. of the co3plaint on ; October #11+ until the >ud.3ent beco3es final and e6ecutor4. -hereafter, an interest rate of #&C per annu3 shall be i3posed.!,Respondents are also ordered to pa4 petitioner the a3ount of P&2,222.22 for and as attorne4=s fees, to.ether $ith the costs of the suit. SO ORDERED.