View full case

PHILAM INSURANCE COMPANY v. HEUNG-A SHIPPING CORPORATION

FACTS:

The case involves a dispute concerning the damage to a shipment of pharmaceutical products owned by Novartis and insured by Philam. The shipment was transported from Korea to the Philippines through a Slot Charter Agreement between Heung-A and Novartis. Wallem acted as the agent of Heung-A, while Sagawa, ATI, and Stephanie were also involved in the shipment process.

During the transport, the shipment suffered damage, prompting Philam to pay the insurance claims of Novartis. Philam then filed a complaint against Protop, Heung-A, and Wallem to recover the amount it paid in insurance claims. Sagawa, ATI, and Stephanie filed counterclaims against Philam for attorney's fees.

The RTC held Protop, Heung-A, and Wallem solidarily liable to pay Philam the amount claimed. The RTC ruled that Heung-A, despite not being a party to the bill of lading, still entered into a contract of carriage with Novartis and assumed the obligations of a common carrier. The failure of Heung-A to inspect and examine the sea van's condition and to adopt proper measures in handling and stowage were considered the proximate cause of the damage.

The CA upheld the ruling of the RTC, holding that Protop, Heung-A, and Wallem are liable for the damaged shipment. The absence of a bill of lading did not negate the existence of a contract of carriage between Heung-A and/or Wallem and Novartis. Moreover, the CA rejected the argument of Heung-A and Wallem that Novartis failed to comply with Article 366 of the Code of Commerce.

ISSUES:

  1. Whether the shipment sustained damage while in the possession and custody of HEUNG-A, and if so, whether HEUNG-A's liability can be limited to US$500 per package pursuant to the COGSA.

  2. Whether or not NOVARTIS/PHILAM failed to file a timely claim against HEUNG-A and/or WALLEM.

  3. Whether the factual finding of the lower courts that the goods inside the container van were damaged by sea water while in transit on board HEUNG-A's vessel is reviewable in a petition filed under Rule 45 of the Rules of Court.

  4. Whether HEUNG-A is liable for the damages incurred by the goods received for transportation.

  5. Whether PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment.

  6. Whether the provisions of the Carriage of Goods by Sea Act (COGSA) apply in determining the liability of the carriers.

  7. Whether the liability of the carriers is limited to $500 per package or pallet.

  8. Whether the carriers are liable only for the lost/damaged 17 pallets instead of 19 pallets stated in the bill of lading.

RULING:

  1. The Court affirmed the ruling of the Court of Appeals that HEUNG-A is liable for the damage to the shipment. The Court found that HEUNG-A failed to exercise extraordinary diligence in inspecting and examining the condition of the sea van before loading it on the vessel. HEUNG-A's liability can be limited to US$500 per package pursuant to the provisions of the COGSA.

  2. The Court rejected the argument that NOVARTIS/PHILAM failed to file a timely claim against HEUNG-A and/or WALLEM. The Court held that Article 366 of the Code of Commerce requiring a claim to be made within 24 hours from receipt of the merchandise does not apply to the present case, as it only applies to inter-island shipments within the Philippines. Therefore, NOVARTIS/PHILAM did not fail to comply with the requirement for timely claim.

  3. The question on whether the subject shipment sustained damaged while in the possession and custody of HEUNG-A is a factual matter which has already been determined by the RTC and the CA. Being a factual question, it is not reviewable in the petition filed under Rule 45. However, there are certain circumstances when the Court can deviate from this rule and conduct a probe into the factual questions at issue. None of these circumstances are extant in the present case, and the Court finds that the factual findings of the lower courts are supported by evidence on record.

  4. HEUNG-A is liable for the damages incurred by the goods received for transportation because common carriers are bound to observe extraordinary diligence in transporting goods.

  5. PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment because PROTOP breached its contract with the shipper.

  6. The provisions of the COGSA apply in determining the liability of the carriers.

  7. The liability of the carriers is limited to $500 per package or pallet.

  8. The carriers are liable only for the lost/damaged 17 pallets instead of 19 pallets stated in the bill of lading because the carrier cannot be held responsible for any discrepancy if the description in the bill of lading is different from the actual contents of the container.

PRINCIPLES:

  • A bill of lading is not indispensable for the creation of a contract of carriage. By agreeing to transport the goods, the carrier enters into a contract of carriage and assumes the obligations of a common carrier.

  • A common carrier is required to observe extraordinary diligence in the vigilance over the goods transported.

  • The carrier's liability can be limited pursuant to the provisions of the COGSA if the shipper fails to declare the value of the cargo in the bill of lading.

  • The Court will not interfere with the factual findings of the lower courts if they are supported by substantial evidence and affirmed by the CA.

  • The presence of certain circumstances, such as grave abuse of discretion or misapprehension of facts, may allow the Court to deviate from the general rule and review the factual findings.

  • Common carriers are bound to observe extraordinary diligence and vigilance with respect to the safety of the goods they transport.

  • Common carriers are presumed to have been at fault or negligent if the goods they transported deteriorated, got lost, or were destroyed, unless they prove that they exercised extraordinary diligence in transporting the goods.

  • Common carriers must exercise due diligence to forestall or lessen the loss even if the loss, destruction, or deterioration of the goods is caused by the faulty nature of the containers.

  • A bill of lading operates both as a receipt and as a contract.

  • The liability of a common carrier for loss, destruction, or deterioration of goods is governed by the law of the country to which the goods are transported.

  • The liability of a common carrier for loss or misplacement of goods shall be determined in accordance with the value declared in the bill of lading, unless the shipper fails to declare the value of the goods.

  • In the absence of a shipper's declaration of the value of the goods in the bill of lading, the liability of the carrier is limited to $500 per package or pallet.

  • The prescriptive period for filing an action for lost/damaged goods governed by contracts of carriage by sea to and from Philippine ports in foreign trade is governed by paragraph 6, Section 3 of the COGSA.

  • The notice in writing need not be given if the state of the goods has been the subject of joint survey or inspection at the time of their receipt.

  • Failure to comply with the notice requirement shall not affect or prejudice the right of the shipper to bring suit within one year after delivery of the goods.

  • The amount entitled to receive shall earn a legal interest at the rate of six percent (6%) per annum from the date of finality of the judgment until its full satisfaction.