---

Republic of the Philippines
SUPREME COURT
Manila

THIRD DIVISION

G.R. No. 161539             June 27, 2008

INTERNATIONAL CONTAINERTERMINAL SERVICES, INC., petitioner,
vs.
FGU INSURANCE CORPORATION, respondent.

D E C I S I O N

AUSTRIA-MARTINEZ, J.:

In a Decision dated July 1, 1999 in Civil Case No. 95-73532, the Regional Trial Court (RTC) of Manila, Branch 30, ordered International Container Terminal Services, Inc. (petitioner) to pay FGU Insurance Corporation (respondent) the following sums: (1) P1,875,068.88 with 12% interest per annum from January 3, 1995 until fully paid; (2) P50,000.00 as attorney's fees; and (3) P10,000.00 as litigation expenses.¹

Petitioner's liability arose from a lost shipment of "14 Cardboards 400 kgs. of Silver Nitrate 63.53 FCT Analytically Pure (purity 99.98 PCT)," shipped by Hapag-Lloyd AG through the vessel Hannover Express from Hamburg, Germany on July 10, 1994, with Manila, Philippines as the port of discharge, and Republic Asahi Glass Corporation (RAGC) as consignee. Said shipment was insured by FGU Insurance Corporation (FGU). When RAGC's customs broker, Desma Cargo Handlers, Inc., was claiming the shipment, petitioner, which was the arrastre contractor, could not find it in its storage area. At the behest of petitioner, the National Bureau of Investigation (NBI) conducted an investigation. The AAREMA Marine and Cargo Surveyors, Inc. also conducted an inquiry. Both found that the shipment was lost while in the custody and responsibility of petitioner.

As insurer, FGU paid RAGC the amount of P1,835,068.88 on January 3, 1995.² In turn, FGU sought reimbursement from petitioner, but the latter refused. This constrained FGU to file with the RTC of Manila Civil Case No. 95-73532 for a sum of money.

After trial, the RTC rendered its Decision dated July 1, 1999 finding petitioner liable.

Petitioner appealed to the Court of Appeals (CA), which, in the assailed Decision³ dated October 22, 2003, affirmed the RTC Decision. Petitioner filed a motion for reconsideration which the CA denied in its Resolution dated January 8, 2004.⁴

Hence, the present petition for review on certiorari under Rule 45 of the Rules of Court, with the following assignment of errors:

1. THE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO APPLY THE LIMITATION OF LIABILITY OF P3,5000 PER PACKAGE WHICH LIMITS PETITIONER'S LIABILITY, IF ANY, TO A TOTAL OF ONLY P49,000.00 PURSUANT TO PPA ADMINISTRATIVE ORDER NO. 10-81.

2. THE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE MARINE OPEN POLICY DESPITE THE FACT THAT THE SAME WAS NO LONGER IN FORCE AT THE TIME THE SHIPMENT WAS LOADED ON BOARD THE CARRYING VESSEL.

3. THE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO DISMISS THE COMPLAINT ON THE GROUND OF RESPONDENT'S FAILURE TO OFFER THE INSURANCE POLICY IN EVIDENCE PURSUANT TO THIS HONORABLE COURT'S DECISION IN HOME INSURANCE CORPORATION VS. COURT OF APPEALS (225 SCRA 411) AND THE FAIRLY RECENT DECISION IN WALLEM PHILIPPINES SHIPPING, INC. AND SEACOAST MARITIME CORP. VS. PRUDENTIAL GUARANTEE AND ASSURANCE, INC. AND COURT OF APPEALS, G.R. NO. 152158, 07 FEBRUARY 2003.

4. ASSUMING ARGUENDO THAT PETITIONER IS LIABLE, THE COURT OF APPEALS SERIOUSLY ERRED IN AFFIRMING THE AWARD OF 12% INTEREST DESPITE THE FACT THAT THE OBLIGATION PURPORTEDLY BREACHED DOES NOT CONSTITUTE A LOAN OF FORBEARANCE OF MONEY AND DESPITE THE CLEAR GUIDELINES SET FORTH BY THIS HONORABLE COURT IN EASTERN SHIPPING LINES, INC. VS. COURT OF APPEALS. (234 SCRA 78).⁵

The rule in our jurisdiction is that only questions of law may be entertained by this Court in a petition for review on certiorari. This rule, however, is not ironclad and admits certain exceptions, such as when (1) the conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) there is no citation of specific evidence on which the factual findings are based; (7) the findings of absence of facts are contradicted by the presence of evidence on record; (8) the findings of the CA are contrary to those of the trial court; (9) the CA manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion; (10) the findings of the CA are beyond the issues of the case; and (11) such findings are contrary to the

admissions of both parties.⁶ In the present case, there is nothing on record which will show that it falls within the exceptions. Hence, the petition must be denied.

Petitioner posits that its liability for the lost shipment should be limited to P3,500.00 per package as provided in Philippine Ports Authority Administrative Order No. 10-81 (PPA AO 10-81), under Article VI, Section 6.01 of which provides:

Section 6.01. Responsibility and Liability for Losses and Damages; Exceptions - The CONTRACTOR shall at its own expense handle all merchandise in all work undertaken by it hereunder deligently [sic] and in a skillful, workman-like and efficient manner; that the CONTRACTOR shall be solely responsible as an independent CONTRACTOR, and hereby agrees to accept liability and to promptly pay to the shipping company consignees, consignors or other interested party or parties for the loss, damage, or non-delivery of cargoes to the extent of the actual invoice value of each package which in no case shall be more than THREE THOUSAND FIVE HUNDRED PESOS (P3,500.00) (for import cargo) x x x for each package unless the value of the cargo importation is otherwise specified or manifested or communicated in writing together with the declared bill of lading value and supported by a certified packing list to the CONTRACTOR by the interested party or parties before the discharge x x x of the goods, as well as all damage that may be suffered on account of loss, damage, or destruction of any merchandise while in custody or under the control of the CONTRACTOR in any pier, shed, warehouse facility or other designated place under the supervision of the AUTHORITY x x x.⁷ (Emphasis supplied)

The CA summarily ruled that PPA AO 10-81 is not applicable to this case without laying out the reasons therefor.

PPA AO 10-81 is the management contract between by the Philippine Ports Authority and the cargo handling services providers. In Summa Insurance Corporation v. Court of Appeals,⁸ the Court ruled that:

In the performance of its job, an arrastre operator is bound by the management contract it had executed with the Bureau of Customs. However, a management contract, which is a sort of a stipulation pour autrui within the meaning of Article 1311 of the Civil Code, is also binding on a consignee because it is incorporated in the gate pass and delivery receipt which must be presented by the consignee before delivery can be effected to it. The insurer, as successor-in-interest of the consignee, is likewise bound by the management contract. Indeed, upon taking delivery of the cargo, a consignee (and necessarily its successor-in- interest) tacitly accepts the provisions of the management contract, including those which are intended to limit the liability of one of the contracting parties, the arrastre operator.

However, a consignee who does not avail of the services of the arrastre operator is not bound by the management contract. Such an exception to the rule does not obtain here as the consignee did in fact accept delivery of the cargo from the arrastre operator.⁹

While it appears in the present case that the RAGC availed itself of petitioner's services and therefore, PPA AO 10-81 should apply, the Court finds that the extent of petitioner's liability should cover the actual value of the lost shipment and not the P3,500.00 limit per package as provided in said Order.

It is borne by the records that when Desma Cargo Handlers was negotiating for the discharge of the shipment, it presented Hapag-Lloyd's Bill of Lading,¹⁰ Degussa's Commercial Invoice, which indicates that value of the shipment, including seafreight charges, was DM94.960,00 (CFR Manila);¹¹ and Degussa's Packing List, which likewise notes that the value of the shipment was DM94.960,00.¹² It is highly unlikely that petitioner was not made aware of the actual value of the shipment, since it had to examine the pertinent documents for stripping purposes and, later on, for the discharge of the shipment to the consignee or its representative. In fact, the NBI Report dated September 26, 1994 on the investigation conducted by it regarding the loss of the shipment shows that petitioner's Admeasurer Rosco Esquibal was shown the Bill of Lading by Desma Brokerage's representative, Rey Villanueva.¹³ Esquibal also stated that another representative of Desma Brokerage, Joey Laurente, went to their office and furnished him a copy of the "processed papers of the fourteen cartons of Asahi Glass cargoes."¹⁴

By its own act of not charging the corresponding arrastre fees based on the value of the shipment after it came to know of such declared value from the marine insurance policy, petitioner cannot escape liability for the actual value of the shipment. The value of the merchandise or shipment may be declared or stated not only in the bill of lading or shipping manifest, but also in other documents required by law before the shipment is cleared from the piers.¹⁵

Petitioner insists that Marine Open Policy No. MOP-12763 under which the shipment was insured was no longer in force at the time it was loaded on board the Hannover Express on June 10, 1994, as provided in the Endorsement portion of the policy, which states: "IT IS HEREBY DECLARED AND AGREED that effective June 10, 1994, this policy is deemed CANCELLED."¹⁶ FGU, on the other hand, insists that it was under Marine Risk Note No. 9798, which was executed on May 26, 1994, that said shipment was covered.

It must be emphasized that a marine risk note is not an insurance policy. It is only an acknowledgment or declaration of the insurer confirming the specific shipment covered by its marine open policy, the evaluation of the cargo and the chargeable premium.¹⁷ It is the marine open policy which is the main insurance contract. In other words, the marine open policy is the blanket insurance to be undertaken by FGU on all goods to be shipped by RAGC during the existence of the contract, while the marine risk note specifies the particular goods/shipment insured by FGU on that specific transaction, including the sum insured, the shipment particulars as well as the premium paid for such shipment. In any event, as it stands, it is evident that even prior to the cancellation by FGU of Marine Open Policy No. MOP-12763 on June 10, 1994, it had already undertaken to insure the shipment of the 400 kgs. of silver nitrate, specially since RAGC had already paid the premium on the insurance of said shipment.

Indeed, jurisprudence has it that the marine insurance policy needs to be presented in evidence before the trial court or even belatedly before the appellate court. In Malayan Insurance Co., Inc. v. Regis Brokerage Corp.,¹⁸ the Court stated that the presentation of the marine insurance policy was necessary, as the issues raised therein arose from the very existence of an insurance contract between Malayan Insurance and its consignee, ABB Koppel, even prior to the loss of the shipment. In Wallem Philippines Shipping, Inc. v. Prudential Guarantee and Assurance, Inc.,¹⁹ the Court ruled that the insurance contract must be presented in evidence in order to determine the extent of the coverage. This was also the ruling of the Court in Home Insurance Corporation v. Court of Appeals.²⁰

However, as in every general rule, there are admitted exceptions. In Delsan Transport Lines, Inc. v. Court of Appeals,²¹ the Court stated that the presentation of the insurance policy was not fatal because the loss of the cargo undoubtedly occurred while on board the petitioner's vessel, unlike in Home Insurance in which the cargo passed through several stages with different parties and it could not be determined when the damage to the cargo occurred, such that the insurer should be liable for it.

As in Delsan, there is no doubt that the loss of the cargo in the present case occurred while in petitioner's custody. Moreover, there is no issue as regards the provisions of Marine Open Policy No. MOP-12763, such that the presentation of the contract itself is necessary for perusal, not to mention that its existence was already admitted by petitioner in open court.²² And even though it was not offered in evidence, it still can be considered by the court as long as they have been properly identified by testimony duly recorded and they have themselves been incorporated in the records of the case.²³

Finally, petitioner questions the imposition of a 12% interest rate, instead of 6%, on its adjudged liability. The ruling in Prudential Guarantee and Assurance Inc. v. Trans-Asia Shipping Lines, Inc.,²⁴ to wit:

This Court in Eastern Shipping Lines, Inc. v. Court of Appeals, inscribed the rule of thumb in the application of interest to be imposed on obligations, regardless of their source. Eastern emphasized beyond cavil that when the judgment of the court awarding a sum of money becomes final and executory, the rate of legal interest, regardless of whether the obligation involves a loan or forbearance of money, shall be 12% per annum from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of credit.

We find application of the rule in the case at bar proper, thus, a rate of 12% per annum from the finality of judgment until the full satisfaction thereof must be imposed on the total amount of liability adjudged to PRUDENTIAL. It is clear that the interim period from the finality of judgment until the satisfaction of the same is deemed equivalent to a forbearance of credit, hence, the imposition of the aforesaid interest.²⁵ (Emphasis supplied)

is instructive. The CA did not commit any error in applying the same.

The Court notes, however, an apparent clerical error made in the dispositive portion of the RTC Decision. While it appears that FGU paid RAGC the amount of P1,835,068.88, as shown in the Subrogation Receipt,²⁶ as prayed for in its Complaint,²⁷ the RTC awarded the sum of P1,875,068.88. Thus, a necessary modification should be made on this score.

WHEREFORE, the petition is DENIED. The Decision dated October 22, 2003 and Resolution dated January 8, 2004 of the Court of Appeals are AFFIRMED, with the modification that the award in the RTC Decision dated July 1, 1999 should be P1,835,068.88 instead of P1,875,068.88.

Costs against petitioner.

SO ORDERED.

MA. ALICIA AUSTRIA-MARTINEZ
Associate Justice

WE CONCUR:

CONSUELO YNARES-SANTIAGO Associate Justice Chairperson
MINITA V. CHICO-NAZARIO Associate Justice	ANTONIO EDUARDO B. NACHURA Associate Justice
RUBEN T. REYES Associate Justice

A T T E S T A T I O N

I attest that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

CONSUELO YNARES-SANTIAGO
Associate Justice
Chairperson, Third Division

C E R T I F I C A T I O N

Pursuant to Section 13, Article VIII of the Constitution and the Division Chairperson’s Attestation, I certify that the conclusions in the above Decision had been reached in consultation before the case was assigned to the writer of the opinion of the Court’s Division.

REYNATO S. PUNO
Chief Justice

Footnotes

¹ Records, p. 480.

² Records, p. 18.

³ Penned by Associate Justice Roberto A. Barrios, with the concurrence of associate Justices Juan Q. Enriquez, Jr. and Arsenio J. Magpale, CA rollo, pp. 186-195.

⁴ Id. at 232-233.

⁵ Rollo, p. 35.

⁶ Philippine Charter Insurance Corporation v. Unknown Owner of the Vessel M/V "National Honor,", G.R. No. 161833, July 8, 2005, 463 SCRA 202, 215.

⁷ Records, pp. 440-442.

⁸ 323 Phil. 214 (1996).

⁹ Id. at 223-224.

¹⁰ Records, p. 361.

¹¹ Id. at 362-364.

¹² Id. at 365-367.

¹³ Id. at 343-344.

¹⁴ Id. at 344.

¹⁵ Villaruel v. Manila Port Service, 131 Phil. 438, 444-445 (1968).

¹⁶ Records, p. 395.

¹⁷ Aboitiz Shipping Corporation v. Philippine American General Insurance Co., G.R. No. 77530, October 5, 1989, 178 SCRA 357, 360-361.

¹⁸ G.R. No. 172156, November 23, 2007, 538 SCRA 681, 688.

¹⁹ 445 Phil. 136, 153 (2003).

²⁰ G.R. No. 109293, August 18, 1993, 225 SCRA 411, 416.

²¹ 420 Phil. 824, 835 (2001).

²² See CA Decision, supra note 3, at 192.

²³ People of the Philippines v. Libnao, 443 Phil. 506, 519 (2003); Mato v. Court of Appeals, 320 Phil. 344, 349 (1995).

²⁴ G.R. No. 151890, June 20, 2006, 491 SCRA 411.

²⁵ Id. at 448-450.

²⁶ Records, p. 18.

²⁷ Id. at 5.

The Lawphil Project - Arellano Law Foundation

---