Cua vs. Wallem Philippines Shipping, Inc.

A carrier's agreement extending the one-year prescriptive period under Section 3(6) of the COGSA is deemed admitted when the defendant fails to specifically deny the allegation of such extension in its pleadings, and the admission dispenses with the need for the plaintiff to present documentary proof of the agreement.

Benjamin Cua was the consignee of a shipment of Brazilian Soyabean carried by M/V Argo Trader, a vessel owned and managed by Advance Shipping Corporation, a foreign corporation. Wallem Philippines Shipping, Inc. served as the local agent of Advance Shipping. The cargo was transported from Brazil to the Philippines, making the Carriage of Goods by Sea Act (COGSA) the applicable law governing the contract of carriage. Cua sought damages for loss of and damage to the cargo, invoking the respondents' alleged failure to observe extraordinary diligence.

On November 12, 1990, Benjamin Cua filed a civil action for damages against Wallem Philippines Shipping, Inc. and Advance Shipping Corporation before the RTC of Manila, seeking payment of P2,030,303.52 for damage to 218 tons and shortage of 50 tons of a shipment of Brazilian Soyabean consigned to him under Bill of Lading No. 10. Advance Shipping, a foreign corporation, owned and managed M/V Argo Trader, the vessel that carried the cargo, while Wallem acted as its local agent. Cua attributed the loss to the respondents' failure to observe extraordinary diligence in the carriage of the cargo.

Advance Shipping moved to dismiss the complaint, assailing the RTC's jurisdiction and arguing that Cua's claim should first have been brought to arbitration pursuant to the Charter Party Agreement between the ship owner and the charterers. Cua opposed, contending that as consignee he was not bound by that agreement. The RTC initially deferred ruling on jurisdiction until after trial but later held that Cua was not bound by the arbitration clause. Meanwhile, Wallem filed its own motion to dismiss on the sole ground of prescription under Section 3(6) of the COGSA, which requires suit to be brought within one year after delivery of the goods. Wallem alleged that the goods were delivered on August 16, 1989, and the suit was filed on November 12, 1990 — beyond the one-year period.

Cua opposed Wallem's motion, referring to an August 10, 1990 telex message from Mr. A.R. Filder of Thomas Miller, manager of the UK P&I Club, stating that Advance Shipping had agreed to extend the commencement of suit for 90 days, from August 14, 1990 to November 12, 1990, with the concurrence of the vessel's insurer. A copy of the telex was supposedly attached to the opposition. On February 11, 1992, Wallem withdrew its motion to dismiss and adopted the arguments in Advance Shipping's motion, while expressly reserving the defense of prescription and/or laches for its Answer. The RTC issued an order on June 5, 1992, noting that it need not act on Wallem's motion to dismiss and requiring the defendants to file their Answer.

After trial on the merits, the RTC rendered judgment on December 28, 1995, ordering the respondents jointly and severally liable to pay Cua P2,030,000.00 plus interest until fully paid, P100,000.00 as attorney's fees, and costs of suit, and dismissing the respondents' counterclaims. The respondents appealed to the CA, reiterating that Cua's claim was arbitrable and barred by prescription and/or laches. The CA found the prescription claim meritorious, noting that the August 10, 1990 telex message was neither attached to Cua's opposition nor presented during trial, and thus concluded there was no basis for the RTC to find that the prescriptive period had been extended. The CA set aside the RTC decision and dismissed Cua's complaint. Cua's motion for reconsideration was denied, prompting the present petition.

• Admission by Withdrawal: Cua contended that Wallem's withdrawal of its motion to dismiss — which had raised solely the issue of prescription — constituted an admission of the existence of the August 10, 1990 telex message extending the prescriptive period, since the withdrawal immediately followed his opposition referencing that telex.
• Dispensation from Evidentiary Burden: Cua argued that because Wallem withdrew its motion to dismiss and the RTC ruled there was no need to act on it, he was dispensed from presenting the telex message as evidence during trial.
• Judicial Admission in Memorandum: Cua pointed to the respondents' own Statement of the Case in their Memorandum filed with the RTC, which stated that the complaint was filed "within the extended period agreed upon by the parties to file suit," as a clear judicial admission negating prescription.

• No Admission by Withdrawal: Respondents denied that Wallem's withdrawal of its motion to dismiss amounted to an admission of the existence of the telex message or a waiver of the defense of prescription, citing the RTC's June 5, 1992 order noting the withdrawal was made "without waiving the defense of prescription."
• Telex Never Presented: Respondents pointed out that the telex message was never attached to Cua's opposition to Wallem's motion to dismiss and was never presented during trial, giving them no occasion to deny its existence.
• Prescription and Laches: Respondents maintained that Cua's complaint was barred by prescription and/or laches, as the suit was filed beyond the one-year period under Section 3(6) of the COGSA.

• Prescription: Whether Cua's claim for damages against the respondents has prescribed under Section 3(6) of the COGSA, notwithstanding his allegation that the prescriptive period was extended by agreement.
• Deemed Admission: Whether the respondents' failure to specifically deny Cua's allegation of an extension agreement in their pleadings constitutes a deemed admission under Section 11, Rule 8 of the Rules of Court.
• Motu Proprio Dismissal: Whether the CA committed reversible error in considering prescription motu proprio despite Wallem's supposed waiver of the defense.

• Prescription: No. Cua's claim had not prescribed because the one-year prescriptive period under Section 3(6) of the COGSA was extended by agreement of the parties to November 12, 1990, the date the complaint was filed.
• Deemed Admission: Yes. The respondents' failure to specifically deny Cua's material averment of an extension agreement in their pleadings resulted in a deemed admission under Section 11, Rule 8 of the Rules of Court, further bolstered by their express admission in their Memorandum.
• Motu Proprio Dismissal: No reversible error. Courts may consider prescription motu proprio when the facts supporting it are apparent from the pleadings or evidence on record, but the CA erred in its appreciation of the facts because it failed to recognize the respondents' admissions negating prescription.

• Prescription: Section 3(6) of the COGSA provides that the carrier and the ship are discharged from liability unless suit is brought within one year after delivery of the goods. Jurisprudence recognizes the validity of agreements between the carrier and the shipper or consignee extending this one-year period. The vessel arrived in Manila on July 8, 1989, and the complaint was filed on November 12, 1990 — clearly beyond one year. However, Cua alleged in paragraph 11 of his complaint that the defendants agreed to extend the time for filing the action up to November 12, 1990. This allegation, if admitted, rendered the filing timely. The decisive question was therefore whether the extension was established as a fact.

• Deemed Admission: Under Section 11, Rule 8 of the Rules of Court, material averments in the complaint other than those as to unliquidated damages are deemed admitted when not specifically denied. A specific denial under Section 10, Rule 8 requires the defendant to specify each material allegation of fact the truth of which he does not admit and, whenever practicable, to set forth the substance of the matters upon which he relies to support the denial. A review of the respondents' pleadings showed that Wallem's motion to dismiss referred only to the fact that the complaint was filed more than one year after the vessel's arrival but did not deny the extension. Advance Shipping's motion to dismiss focused solely on arbitration. Their joint answer denied Cua's allegation of extension but provided no factual basis other than a bare assertion that the complaint was barred by prescription and/or laches. Their discussion on prescription in their Memorandum was based on Article 366 of the Code of Commerce, not on Section 3(6) of the COGSA, and thus did not constitute a refutation of the extension allegation. Because the COGSA was the applicable law, arguments premised on the Code of Commerce were irrelevant. The deemed admission was further bolstered by the respondents' own express admission in their Memorandum, which stated that the complaint was filed "within the extended period agreed upon by the parties to file suit." This express admission rendered it unnecessary for Cua to present a copy of the August 10, 1990 telex message to prove the agreement.

• Motu Proprio Dismissal: Section 1, Rule 9 of the Rules of Court allows courts to dismiss actions motu proprio on grounds including prescription when the facts supporting the ground are apparent from the pleadings or evidence on record. No reversible error was attributable to the CA for considering prescription despite Wallem's supposed waiver. However, the CA erred in its factual appreciation because it failed to recognize the admissions made by the respondents in their pleadings that negated a finding of prescription. The decisive factor was not whether Wallem waived the defense, but whether the pleadings and evidence supported a finding of prescription — and they did not, because the extension was deemed and expressly admitted.

• Deemed Admission of Material Averments — Under Section 11, Rule 8 of the Rules of Court, material averments in the complaint, other than those as to the amount of unliquidated damages, are deemed admitted when not specifically denied. A specific denial requires the defendant to specify each material allegation of fact the truth of which he does not admit and, whenever practicable, to set forth the substance of the matters upon which he relies to support the denial. In this case, the respondents' failure to specifically deny Cua's allegation of an extension agreement resulted in a deemed admission of that fact.
• Validity of Extension Agreements Under COGSA — Jurisprudence recognizes the validity of agreements between the carrier and the shipper or consignee extending the one-year prescriptive period under Section 3(6) of the COGSA. Such extensions are binding and effective to toll the statutory period.
• Motu Proprio Dismissal for Prescription — Under Section 1, Rule 9 of the Rules of Court, courts may dismiss actions motu proprio on the ground of prescription when the facts supporting it are apparent from the pleadings or evidence on record, even if the defendant has not raised or has waived the defense. Prescription is among the four grounds (along with lack of jurisdiction over the subject matter, litis pendentia, and res judicata) that may be considered motu proprio.

• "A review of the pleadings submitted by the respondents discloses that they failed to specifically deny Cua's allegation of an agreement extending the period to file an action to November 12, 1990." — This passage identifies the ratio decidendi: the respondents' failure to comply with the specific denial requirement of Rule 8 resulted in a deemed admission of the extension agreement, which was the decisive fact negating prescription.
• "This case was filed by [the] plaintiff on 11 November 1990 within the extended period agreed upon by the parties to file suit." — This is the respondents' own express admission in their Memorandum, quoted verbatim by the Court, which independently established the extension agreement and rendered unnecessary the presentation of the telex message as evidence.
• "Prescription may be considered by the courts motu proprio if the facts supporting the ground are apparent from the pleadings or the evidence on record." — This passage articulates the doctrinal basis for the Court's ruling that the CA committed no procedural error in considering prescription despite Wallem's supposed waiver, while also framing the limits of that authority.

• Universal Shipping Lines, Inc. vs. Intermediate Appellate Court, G.R. No. 74125, July 31, 1990, 188 SCRA 170 — Followed. Cited for the proposition that agreements between the carrier and the shipper or consignee extending the one-year prescriptive period under COGSA are valid and recognized in jurisprudence.
• Philippine National Bank vs. Court of Appeals, 464 Phil. 331 (2004) — Followed. Cited for the purpose of the specific denial requirement under Rule 8, namely to make the defendant disclose the matters alleged in the complaint which he intends to disprove at trial, together with the matter relied upon to support the denial.
• Insurance Company of North America vs. Asian Terminals, Inc., G.R. No. 180784, February 15, 2012 — Cited in support of the applicability of the COGSA to contracts for the carriage of goods by sea to and from Philippine ports in foreign trade.

• Section 3(6), Carriage of Goods by Sea Act (COGSA) — 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. Applied as the governing prescriptive period, with the Court recognizing that the period may be extended by agreement of the parties.
• Section 11, Rule 8, Rules of Court — Provides that material averments in the complaint, other than those as to the amount of unliquidated damages, shall be deemed admitted when not specifically denied. Applied to hold that the respondents' failure to specifically deny Cua's allegation of an extension agreement resulted in a deemed admission.
• Section 10, Rule 8, Rules of Court — Defines the requirements of a specific denial: the defendant must specify each material allegation of fact the truth of which he does not admit and, whenever practicable, set forth the substance of the matters upon which he relies to support the denial. Applied to evaluate the sufficiency of the respondents' denials, which were found deficient.
• Section 1, Rule 9, Rules of Court — Allows courts to dismiss actions motu proprio on grounds including prescription when the facts supporting the ground are apparent from the pleadings or evidence on record. Applied to uphold the CA's authority to consider prescription despite Wallem's supposed waiver.
• Section 1, Rule 16, Rules of Court — Enumerates the grounds for a motion to dismiss, including prescription under paragraph (f). Cited as the procedural basis for raising prescription as a ground for dismissal.
• Commonwealth Act No. 65, Section 1 — Made the COGSA applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade. Cited to establish the COGSA as the applicable law in this case.
• Article 366, Code of Commerce — Requires that a claim be made with the carrier within 24 hours from delivery of the cargo. Discussed but found inapplicable because the COGSA, not the Code of Commerce, governed the prescriptive period for filing suit in this case.

Senior Associate Justice Antonio T. Carpio (Chairperson), Associate Justice Jose Portugal Perez, Associate Justice Maria Lourdes P.A. Sereno, and Associate Justice Bienvenido L. Reyes concurred.