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PHILIPPINE CHARTER INSURANCE CORPORATION v. UNKNOWN OWNER OF VESSEL M/V 'NATIONAL R

FACTS:

The case involves a dispute over a shipment of parts and accessories from Korea to Manila, Philippines. The shipment was loaded on board the vessel M/V "National Honor" and was represented in the Philippines by its agent, National Shipping Corporation of the Philippines (NSCP). The shipment was consigned to the order of Metropolitan Bank and Trust Company with arrival notice to Blue Mono International Company, Incorporated (BMICI). A bill of lading was issued by NSCP, containing provisions that limit the carrier's responsibility in relation to the description and particulars of the goods. During the unloading process at the Manila International Container Terminal (MICT), one of the crates containing the goods snapped, causing significant damage to the shipment. BMICI filed claims against NSCP, International Container Terminal Services, Incorporated (ICTSI), and Philippine Charter Insurance Corporation (PCIC). PCIC paid the claim and was issued a subrogation receipt, after which it filed a complaint for damages in the Regional Trial Court (RTC) of Manila as the subrogee.

In this Complaint for Damages, PCIC named the "Unknown owner of the vessel M/V National Honor," NSCP, and ICTSI as defendants, alleging that the loss of the shipment was due to their fault and negligence. ICTSI filed an Answer with Counterclaim and Cross-claim against NSCP, arguing that the loss/damage was caused by the defective material of the wooden battens of the shipment or acts of the shipper. A safety inspector of ICTSI testified at trial that the loss/damage was caused by the shipper's failure to use strong wooden battens and to place a sign in the mid-term section of the crate for attaching sling cables. The trial court ruled in favor of the defendants, finding that the loss was due to an internal defect in the crates' materials. PCIC appealed the decision to the Court of Appeals (CA), which upheld the trial court's ruling. PCIC then filed a petition for review with the Supreme Court, arguing that the CA committed serious errors in holding the common carrier not liable for the damage sustained by the shipment and in miscomprehending the facts.

ISSUES:

  1. Whether or not the common carrier, ICTSI, is liable for the loss of the shipment.

  2. Whether or not the loss of the shipment was caused by the inherent defect and weakness of the materials used in the fabrication of the crate.

  3. Whether or not the respondents were negligent in handling the cargo.

RULING:

  1. No, the common carrier, ICTSI, is not liable for the loss of the shipment. The loss was not imputable to any fault or negligence on the part of ICTSI in handling the unloading of the cargo. The loss was solely due to the inherent defect and weakness of the materials used in the fabrication of the crate.

  2. Yes, the loss of the shipment was caused by the inherent defect and weakness of the materials used in the fabrication of the crate. The wooden batten used as support for the flooring was not made of good materials, causing its collapse when lifted. The shipper also failed to indicate signs to notify the stevedores of the need for extra care in handling the shipment.

  3. The respondents were not negligent in handling the cargo. The shipper failed to properly pack the cargo and failed to indicate an arrow in the middle portion of the cargo where additional slings should be attached. The appellant failed to provide evidence to counter the testimony of the respondent's witness regarding the sealed crates. The Bill of Lading did not indicate any defects in the merchandise. The absence of signs on the shipment requiring the placement of a sling cable in the mid-portion of the crate relieved the respondents from the obligation to do so. The courts below ruled in favor of the respondents and the petition was denied for lack of merit.

PRINCIPLES:

  • Common carriers are mandated to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them. (Referenced case law: Eastern Shipping Lines, Inc. v. Court of Appeals)

  • Extraordinary diligence in the vigilance over goods tendered for shipment requires the common carrier to know and follow the required precautions to avoid damage or destruction of the goods. This includes using all reasonable means to ascertain the nature and characteristics of the goods and exercising due care in handling and stowage.

  • The common carrier's duty of diligence lasts from the time the goods are surrendered to the carrier until they are delivered or until a reasonable time for their acceptance has lapsed.

  • The common carrier is presumed to be negligent when goods shipped are lost or arrive in damaged condition, and it must prove that it exercised extraordinary diligence to overcome this presumption.

  • Article 1734 of the New Civil Code provides a closed list of causes that exempt the common carrier from liability for loss or damage to cargo, and the carrier bears the burden of proving any of these causes.

  • "Defect" refers to the want or absence of something necessary for completeness or perfection, while "inferior" means of poor quality or second-rate. Defectiveness is not synonymous with inferiority.

  • Factual findings of the lower courts are accorded great weight and respect on appeal when supported by substantial evidence.

  • The shipper has a duty to properly pack the cargo and use materials of stronger quality to support heavy machines.

  • The carrier is only responsible for external defects in the merchandise unless otherwise indicated in the Bill of Lading.

  • The absence of signs requiring special handling relieves the carrier of any obligation to provide such handling.