UNION CARBIDE VS MANILA RAILROAD COMPANY

Union Carbide Philippines, Inc. vs. Manila Railroad Co. (1977) FACTS - Dec 18 1961: the vessel Daishin Maru arrived in Manila with a cargo of synthetic resin which was later sold to Union Carbide Philippines, Inc. - Dec 19 1961: that cargo was delivered to the Manila Port Service in good order and condition except for 25 bags which were in bad order - 898 bags of resin out of the 1,000 bags were delivered by the customs broker to the consignee. 102 bags were missing. 25 bags were damaged or pilfered while they were in the custody of the arrastre operator. - The consignee filed with the Manila Port Service, as arrastre operator, and the American Steamship Agencies, Inc., as agent of the carrier, a provisional claim advising them that the shipment in question was "shorthanded, short delivered and/or landed in bad order" - Formal claims were then filed but as the claims were not paid, Union Carbide Philippines, Inc. filed a complaint for the recovery of damages on Dec 21, 1962 - Union Carbide's complaint was a joinder of 2 causes of action. One was an action in admiralty under the Carriage of Goods by Sea Act against the carrier's agent for the value of 25 bags of resin which were damaged before they were landed. The other was an action under the management contract between the Bureau of Customs and the Manila Port Service, a subsidiary of the Manila Railroad Company, for the recovery of the value of the undelivered 102 bags of resin and 25 bags, the contents of which were damaged or pilfered while in the custody of the arrastre operator. - TC dismissed the case as to the carrier's agent on the ground that the action had already prescribed because it was not "brought w/in 1 year after delivery of the goods", as contemplated in section 3(6) of the Carriage of Goods by Sea Act. The 1-year period was counted from December 19, 1961 when the cargo was delivered to the arrastre operator. The action was brought on December 21, 1962 or 2 days late, according to the TC's reckoning. With respect to the consignee's claim against the arrastre operator, TC found that the provisional claim was filed within the 15-day period fixed in the arrastre contract but the TC still dismissed the action against the arrastre operator. - CA elevated the case to court - Union Carbide alleged that the TC erred (1) in finding that its action was barred by the statute of limitations and (2) in not holding that the carrier and the arrastre operator were liable for the value of the undelivered and damaged cargo. ISSUE: 1. WoN the action was barred by the statute of limitations? YES 2. WoN the carrier and the arrastre operator were liable for the value of the undelivered and damaged cargo? YES RATIO 1. Under the Carriage of Goods by Sea Act, the 1-year period within which the consignee should sue the carrier is computed from "the delivery of the goods or the date when the goods should have been delivered". TC construed delivery as referring to the discharge or landing of the cargo. Union Carbide contends that "delivery" does not mean the discharge of goods or the delivery to the arrastre operator but the actual delivery of the goods to the consignee by the customs broker. The carrier contends that delivery means discharge from the vessel into the custody of the customs arrastre operator because under sections 1201 and 1206 of the Tariff and Customs Code merchandise cannot be directly delivered by the carrier to the consignee but should first pass through the customhouse at a port of entry for the collection of customs duties. What is the meaning of "delivery" in section 3(6) of the Carriage of Goods by Sea Act? Tariff and Customs Code allows the delivery of imported merchandise to the arrastre operator. Delivery within the meaning of section 3(6) of the Carriage of Goods by Sea Law means delivery to the arrastre operator.

That delivery is evidenced by tally sheets which show whether the goods were landed in good order or in bad order, a fact which the consignee or shipper can easily ascertain through the customs broker. To use as basis for computing the one-year period the delivery to the consignee would be unrealistic and might generate confusion between the loss or damage sustained by the goods while in the carrier's custody and the loss or damage caused to the goods while in the arrastre operator's possession. Section 3(6) adheres to the common-law rule that the duty imposed water carriers was merely to transport from wharf to wharf and that the carrier was not bound to deliver the goods at the warehouse of the consignee. The common-law requirements as to the proper delivery of goods by water carrier apply only when customs regulations at the port of destination do not otherwise provide. The delivery must be in accordance with the usages of the port in order that such delivery would discharge the carrier of responsibility. In this case, we held that the one-year period was correctly reckoned by the trial court from December 19, 1961. Inasmuch as the action was filed on December 21, 1962, it was barred by the statute of limitations. Defendant American Steamship Agencies, Inc., as agent of the carrier, has no more liability to the consignee's assignee, Union Carbide Philippines, Inc., in connection with the damaged twenty-five bags of resin. 2. The liability of the arrastre contractor has a factual and legal basis different from that of the carrier's. The management contract between the Manila Port Service and the Bureau of Customs provides that the action against the arrastre operator to enforce liability for loss of the cargo or damage thereto should be filed within 1 year from the date of the discharge of the goods or from the date when the claim for the value of such goods has been rejected or denied by the arrastre operator. But before the action can be filed, a condition precedent should be complied with-- that a claim (provisional or final) shall have been previously filed with the arrastre operator w/in 15-days from the date of the discharge of the last package from the carrying vessel. In this case, the consignee's customs broker filed with the Manila Port Service a provisional claim on January 3, 1962 or on the 15th day following December 19, 1961, the date of the discharge of the last package from the carrying vessel. That claim was never formally rejected or denied by the Manila Port Service. Having complied with the condition precedent for the filing of a claim within the 15-day period, Union Carbide could file the court action within 1 year, either from December 19, 1961 or from December 19, 1962. This second date is regarded as the expiration of the period within which the Manila Port Service should have acted on the claim. Thus, the claimant or consignee has a 2-year prescriptive period, counted from the date of the discharge of the goods, within which to file the action in the event that the arrastre contractor, as in this case, has not rejected nor admitted liability. The arrastre operator is responsible for the value of 102 bags of resin which were not delivered, and twenty-five bags, which were damaged, or a total of one hundred twenty-seven bags valued at P6,185.22. Dispositive: TC's judgment is affirmed insofar as it dismissed plaintiff-appellant's claim against defendant American Steamship Agencies, Inc. on the ground of prescription BUT reversed insofar as it dismissed plaintiff's claim against the Manila Railroad Company, as arrastre operator. ---------------------

Delsan vs CA

Facts: Caltex entered into a contract of affreightment with Delsan Transport Lines, Inc., for a period of one year whereby the said common carrier agreed to transport Caltex’s industrial fuel oil from the Batangas-Bataan Refinery to different parts of the country. Under the contract, petitioner took on board its vessel, MT Maysun, 2,277.314 kiloliters of industrial fuel oil of Caltex to be delivered to the Caltex Oil Terminal in Zamboanga City. The shipment was insured with the private respondent, American Home Assurance Corporation. On August 14, 1986, MT Maysun set sail from Batangas for Zamboanga City. Unfortunately, the vessel sank in the early morning of August 16, 1986 near Panay Gulf in the Visayas taking with it the entire cargo of fuel oil. The Respondent (insurance) paid the Caltex the amount of P5,096,635.57 representing the amount of the value of the lost cargo. Issue: 1. Whether or not the payment made by the private respondent to Caltex for the insured value of the lost cargo amounted to an admission that the vessel was seaworthy, thus precluding any action for recovery against the petitioner. 2. Whether or not the non-presentation of the marine insurance policy bars the complaint for recovery of sum of money for lack of cause of action Held: No, under the law, extra ordinary diligence is required by the common carrier in taking good care of the goods. The common carrier is presumed negligent unless the contrary provides otherwise. The right of subrogation has its roots in equity. It is designed to promote and to accomplish justice and is the mode which equity adopts to compel the ultimate payment of a debt by one who in justice and good conscience ought to pay. It is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment by the insurance company of the insurance claim. The presentation in evidence of the marine insurance policy is not indispensable in this case before the insurer may recover from the common carrier the insured value of the lost cargo in the exercise of its subrogatory right. The subrogation receipt, by itself, is sufficient to establish not only the relationship of herein private respondent as insurer and Caltex, as the assured shipper of the lost cargo of industrial fuel oil, but

also the amount paid to settle the insurance claim. The right of subrogation accrues simply upon payment by the insurance company of the insurance claim. -----------------------------

Filipino Merchants Insurance Company, Inc. vs Judge Jose Alejandro on March 20, 2012

Insurance Law – The Policy – Prescription of Filing of Insurance Cases In 1976, Choa Tiek Seng contracted Frota Oceanica Brasiliera for the latter to deliver goods. Choa Tiek Seng insured the goods with Filipino Merchants Insurnace Company. The goods left the port of Manila on December 13, 1976 and reached its point of destination on December 17, 1976. The goods were however damaged. Choa Tiek Seng then filed an insurance claim. Filipino Merchants refused to pay so in August 1977, it was sued by Choa Tiek Seng. In January 1978, Filipino Merchants filed a third party complaint against the carrier Frota Oceanica Brasiliera as it alleged that it is the carrier who is liable to pay damages to Choa Tiek Seng. Judge Jose Alejandro of the trial court ruled against Filipino Merchants. The Court of Appeals affirmed the ruling of the judge. The lower courts ruled that Filipino Merchants is already barred from filing a claim 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” or one year from December 17, 1976. The insurance company is already barred for it filed its third party complaint only in January 1978. ISSUE: Whether or not Filipino Merchants is precluded by the said time-bar rule. HELD: Yes. The pertinent provision of the Carriage of Goods by Sea Act does not only apply to the shipper but also applies to the insurer. The coverage of the Carriage of Goods by Sea Act includes the insurer of the goods. Otherwise, what the Act intends to prohibit after the lapse of the one year prescriptive period can be done indirectly by the shipper or owner of the goods by simply filing a claim against the insurer even after the lapse of one year. This would be the result if the insurer can, at any time, proceed against the carrier and the ship since it is not bound by the time-bar provision. In this situation, the one year limitation will be practically useless. This could not have been the intention of the law which has also for its purpose the protection of the carrier and the ship from fraudulent claims by having “matters affecting transportation of goods by sea be decided in as short a time as possible” and

by avoiding incidents which would “unnecessarily extend the period and permit delays in the settlement of questions affecting the transportation.” ------------------------------

Mayer Steel Pipe Corporation vs Court of Appeals on March 20, 2012

Insurance Law – The Policy – Prescription of Filing of Insurance Cases In 1983, Hongkong Government Supplies Department (HGSD) contracted Mayer Steel Pipe Corporation for the latter to manufacture and deliver various steel pipes and fittings. Before Mayer Steel shipped the said pipes, it insured them with two insurance companies namely, South Sea Surety and Insurance Co., Inc. and Charter Insurance Corporation – each insurer covering different portions of the shipment. The insurance policies cover “all risks” which include all causes of conceivable loss or damage. When the pipes reached Hongkong, the pipes were discovered to have been damaged. The insurance companies refused to make payment. On April 17 1986, Mayer Steel sued the insurance companies. The case reached the Court of Appeals. The CA ruled that the case filed by Mayer Steel should be dismissed. 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.” The CA ruled that this provision applies not only to the carrier but also to the insurer, citing the case of Filipino Merchants

Insurance Co., Inc. vs Alejandro. ISSUE: Whether or not the Court of Appeals is correct. HELD: No. 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. 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 the insurers to Mayer Steel. The ruling in Filipino Merchants should apply only to suits against the carrier filed either by the shipper, the consignee or the insurer.

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Caltex [Philippines], Inc. vs. Sulpicio Lines, Inc. Facts: On December 20, 1987, motor tanker MV Vector, carrying petroleum products of Caltex, collided in the open sea with passenger ship MV Doña Paz, causing the death of all but 25 of the latter’s passengers. Among those who died were Sebastian Canezal and his daughter Corazon Canezal. On March 22, 1988, the board of marine inquiry found that Vector Shipping Corporation was at fault. On February 13, 1989, Teresita Cañezal and Sotera E. Cañezal, Sebastian Cañezal’s wife and mother respectively, filed with the Regional Trial Court of Manila a complaint for damages arising from breach of contract of carriage against Sulpicio Lines. Sulpicio filed a third-party complaint against Vector and Caltex. The trial court dismissed the complaint against Caltex, but the Court of Appeals included the same in the liability. Hence, Caltex filed this petition. Issue: Is the charterer of a sea vessel liable for damages resulting from a collision between the chartered vessel and a passenger ship? Held: First: The charterer has no liability for damages under Philippine Maritime laws. Petitioner and Vector entered into a contract of affreightment, also known as a voyage charter. A charter party is a contract by which an entire ship, or some principal part thereof, is let by the owner to another person for a specified time or use; a contract of affreightment is one by which the owner of a ship or other vessel lets the whole or part of her to a merchant or other person for the conveyance of goods, on a particular voyage, in consideration of the payment of freight. A contract of affreightment may be either time charter, wherein the leased vessel is leased to the charterer for a fixed period of time, or voyage charter, wherein the ship is leased for a single voyage. In both cases, the charter-party provides for the hire of the vessel only, either for a determinate period of time or for a single or consecutive voyage, the ship owner to supply the ship’s store, pay for the wages of the master of the crew, and defray the expenses for the maintenance of

the ship. If the charter is a contract of affreightment, which leaves the general owner in possession of the ship as owner for the voyage, the rights and the responsibilities of ownership rest on the owner. The charterer is free from liability to third persons in respect of the ship. Second: MT Vector is a common carrier The charter party agreement did not convert the common carrier into a private carrier. The parties entered into a voyage charter, which retains the character of the vessel as a common carrier. It is imperative that a public carrier shall remain as such, notwithstanding the charter of the whole or portion of a vessel by one or more persons, provided the charter is limited to the ship only, as in the case of a time-charter or voyage charter. It is only when the charter includes both the vessel and its crew, as in a bareboat or demise that a common carrier becomes private, at least insofar as the particular voyage covering the charter-party is concerned. Indubitably, a ship-owner in a time or voyage charter retains possession and control of the ship, although her holds may, for the moment, be the property of the charterer. A common carrier is a person or corporation whose regular business is to carry passengers or property for all persons who may choose to employ and to remunerate him. 16 MT Vector fits the definition of a common carrier under Article 1732 of the Civil Code. The public must of necessity rely on the care and skill of common carriers in the vigilance over the goods and safety of the passengers, especially because with the modern development of science and invention, transportation has become more rapid, more complicated and somehow more hazardous. For these reasons, a passenger or a shipper of goods is under no obligation to conduct an inspection of the ship and its crew, the carrier being obliged by law to impliedly warrant its seaworthiness. Third: Is Caltex liable for damages under the Civil Code? The charterer of a vessel has no obligation before transporting its cargo to ensure that the vessel it chartered complied with all legal requirements. The duty rests upon the common carrier simply for being engaged in "public service." The relationship between the parties in this case is governed by special laws. Because of the implied warranty of seaworthiness, shippers of goods, when transacting with common carriers, are not expected to inquire into the vessel’s seaworthiness, genuineness of its licenses and compliance with all maritime laws. To demand more from shippers and hold them liable in case of failure exhibits nothing but the futility of our maritime laws insofar as the protection of the public in general is concerned. Such a practice would be an absurdity in a business where time is always of the essence. Considering the nature of transportation business, passengers and shippers alike customarily presume that common carriers possess all the legal requisites in its operation. ------------

NEGROS NAVIGATION CO. vs. CA

Facts: Private respondent Ramon Miranda purchased from the Negros Navigation Co., Inc. four special cabin tickets for his wife, daughter, son and niece who were going to Bacolod City to attend a family reunion boarding the Don Juan. Don Juan collided off the Tablas Strait in Mindoro, with the M/T Tacloban City, an oil tanker owned by the Philippine National Oil Company (PNOC) and the PNOC Shipping and Transport Corporation (PNOC/STC). As a result, the M/V Don Juan sank. Several of her passengers perished in the sea tragedy. The bodies of some of the victims were found and brought to shore, but the four members of private respondents' families were never found. Issue: Whether or not the petitioners exercised the extraordinary diligence required? Held: No. As with the Mecenas case, this Court found petitioner guilty of negligence in (1) allowing or tolerating the ship captain and crew members in playing mahjong during the voyage, (2) in failing to maintain the vessel seaworthy and (3) in allowing the ship to carry more passengers than it was allowed to carry. Also, the duty to exercise due diligence includes the duty to take passengers or cargoes that are within the carrying capacity of the vessel.