PhilAm Insurance Vs Heung A 730 SCRA 512

Philam Insurance Company, Inc. (now Chartis Philippines Insurance, Inc.) vs.
Heung-A
Shipping Corporation, 730 SCRA 512, G.R. No. 187812 July 23, 2014
Facts:
Novartis Consumer Health Philippines, Inc. (NOVARTIS) imported from Jinsuk Trading
Co. Ltd., (JINSUK) in South Korea, 19 pallets of 200 rolls of Ovaltine Power 18 G laminated plastic
packaging material. JINSUK engaged the services of PROTOP (a freight forwarder) to send said
goods to the consignee, NOVARTIS. Based on Bill of Lading No. PROTAS 200387 issued by
PROTOP, the cargo was on freight prepaid basis and on “shipper’s load and count” which means
that the “container [was] packed with cargo by one shipper where the quantity, description and
condition of the cargo is the sole responsibility of the shipper.” Likewise stated in the bill of lading
is the name Sagawa Express Phils., Inc., (SAGAWA) designated as the entity in the Philippines
which will obtain the delivery contract. PROTOP shipped the same to DONGNAMA Shipping
which in turn loaded the same to M/V Heung-A Bangkok V-019 owned and operated by Heung-
A Shipping Corporation, (HEUNG-A) Philam Insurance Company, Inc. pursuant to a “slot charter
agreement”. WALLEM Shipping is HEUNG-A’s shipping agent in the Philippines. NOVARTIS
insured the shipment with Philam Insurance Company, Inc. (PHILAM, now Chartis Philippines
Insurance, Inc.) against all loss, damage, liability, or expense before, during transit and even after
the discharge of the shipment from the carrying vessel until its complete delivery to the
consignee’s premises. The vessel arrived in Manila and the container of the goods in question
was discharged without exception into the possession, custody and care of Asian Terminals, Inc.
(ATI) as the customs arrastre operator. The shipment was thereafter withdrawn on January 4,
2001, by NOVARTIS’ appointed broker, Stephanie Customs Brokerage Corporation
(STEPHANIE) from ATI’s container yard. The goods reached the premises of NOVARTIS.
However, it was observed that the boxes on one side of the van were in disarray while others
were opened or damaged due to the dampness. It was further observed that parts of the container
van were damaged and rusty. There were also water droplets on the walls and the floor was wet.
Since the damaged packaging materials might contaminate the product, the shipment was
rejected. Aggrieved, NOVARTIS demanded indemnification for the lost/damaged shipment from
PROTOP, SAGAWA, ATI and STEPHANIE but was denied. Insurance claims were, thus, filed
with PHILAM which paid the insured value of the shipment. Subrogated to said rights, PHILAM
filed a complaint for damages against PROTOP, SAGAWA, ATI and STEPHANIE. WALLEM and
HEUNG-A were later impleaded as additional defendants.
Issues:
1. Whether or not the shipment sustained damage while in the possession and custody of
HEUNG-A.
2. Whether or not HEUNG-A’s liability can be limited to US$500 per package pursuant to the
COGSA.
3. Whether or not NOVARTIS/PHILAM failed to file a timely claim against HEUNG-A and/or
WALLEM.
Ruling:
1. Yes, the shipment sustained damage while in the possession and custody of HEUNG-A.
It must be stressed that 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 herein
petition filed under Rule 45 of the Rules of Court. Also, none of the exceptions to said rule are
present in the instant case.
As the carrier of the subject shipment, HEUNG-A was bound to exercise extraordinary diligence
in conveying the same and its slot charter agreement with DONGNAMA did not divest it of such
characterization nor relieve it of any accountability for the shipment. Based on the testimony of
Gonzales, WALLEM’s employee and witness, the charter party between HEUNG-A and
DONGNAMA was a contract of affreightment and not a bare boat or demise charter.
Common carriers, as a general rule, are presumed to have been at fault or negligent if the goods
they transported deteriorated or got lost or destroyed. Here, HEUNG-A failed to rebut this prima
facie presumption when it failed to give adequate explanation as to how the shipment inside the
container van was handled, stored and preserved to forestall or prevent any damage or loss while
the same was in its possession, custody and control.
PROTOP is solidarily liable with HEUNG-A for the lost/damaged shipment in view of the bill of
lading the former issued to NOVARTIS. “A bill of lading is a written acknowledgment of the receipt
of goods and an agreement to transport and to deliver them at a specified place to a person
named or on his or her order. It operates both as a receipt and as a contract. It is a receipt for the
goods shipped and a contract to transport and deliver the same as therein stipulated.” PROTOP
breached its contract with NOVARTIS when it failed to deliver the goods in the same quantity,
quality and description as stated in Bill of Lading No. PROTAS 200387.
2. Yes, HEUNG-A’s liability can be limited to US$500 per package pursuant to the COGSA.
Under Article 1753 of the Civil Code, the law of the country to which the goods are to be
transported shall govern the liability of the common carrier for their loss, destruction or
deterioration. Since the subject shipment was being transported from South Korea to the
Philippines, the Civil Code provisions shall apply. In all matters not regulated by the Civil Code,
the rights and obligations of common carriers shall be governed by the Code of Commerce and
by special laws, such as the COGSA.
Article 372 of the Code of Commerce provides that the value to be paid by the carrier in case of
loss shall be determined by the value declared in the bill of lading. In case, however, of the
shipper’s failure to declare the value of the goods in the bill of lading, Section 4, paragraph 5 of
the COGSA provides that neither the carrier nor the ship shall in any event be or become liable
for any loss or damage to or in connection with the transportation of goods in an amount
exceeding $500 per package.
Hence, when there is a loss/damage to goods covered by contracts of carriage from a foreign
port to a Philippine port and in the absence a shipper’s declaration of the value of the goods in
the bill of lading, as in the present case, the foregoing provisions of the COGSA shall apply.
Philam Insurance Company, Inc.
3. Yes, NOVARTIS/PHILAM failed to file a timely claim against HEUNG-A and/or WALLEM.
COGSA provides for a one-year prescriptive period for suits of loss and damages. It also provides
that that notice of loss or damages be given within 3 days of delivery if said loss or damage is not
apparent.
However, the Supreme Court in the Asian Terminal Case held that 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 consignee, NOVARTIS, received the subject shipment on January 5, 2001. PHILAM, as the
subrogee of NOVARTIS, filed a claim against PROTOP on June 4, 2001, against WALLEM on
October 12, 2001 and against HEUNG-A on December 11, 2001, or all within the one-year
prescriptive period. Verily then, despite NOVARTIS’ failure to comply with the three-day notice
requirement, its subrogee PHILAM is not barred from seeking reimbursement from PROTOP,
HEUNG-A and WALLEM because the demands for payment were timely filed.

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