Eastern Shipping Lines, Inc. vs. BPI/MS Insurance Corp.

A common carrier remains solidarily liable with the arrastre operator for cargo damage where the goods were already damaged prior to turnover to the arrastre contractor and both entities were negligent during discharging operations, and the carrier's liability is a question of fact that may not be reviewed in a petition for review on certiorari under Rule 45 absent any established exception.

Eastern Shipping Lines, Inc. is a domestic shipping company that operates vessels transporting cargo to and from the Philippines. Asian Terminals, Inc. (ATI) is the arrastre operator mandated to conduct discharging operations at the South Harbor in Manila. Sumitomo Corporation shipped steel coils through petitioner's vessels to consignee Calamba Steel Center Inc., insuring each shipment against all risk with respondent Mitsui Sumitomo Insurance Co., Ltd., with BPI/MS Insurance Corporation acting as settling agent. When the shipments arrived damaged, Calamba Steel rejected the damaged portions, and respondents paid the insurance claims, thereafter filing a subrogation action for damages against both petitioner and ATI.

On August 29, 2003, Sumitomo Corporation shipped 31 steel sheets in coil weighing 271,828 kilograms through MV Eastern Challenger V-9-S, a vessel owned by petitioner Eastern Shipping Lines, Inc., from Yokohama, Japan to consignee Calamba Steel Center Inc. The cargo had a declared value of US$125,417.26 and was insured against all risk by Sumitomo with respondent Mitsui Sumitomo Insurance Co., Ltd. The shipment arrived at the Port of Manila on or about September 6, 2003. Upon unloading, nine coils were observed to be in bad condition as evidenced by Turn Over Survey of Bad Order Cargo (TOSBOC) No. 67327. The cargo was then turned over to Asian Terminals, Inc. (ATI) for stevedoring, storage, and safekeeping pending Calamba Steel's withdrawal. When ATI delivered the cargo, Calamba Steel rejected the damaged portion, valued at US$7,751.15, as unfit for its intended purpose.

A second shipment followed on September 13, 2003, consisting of 28 steel sheets in coil weighing 215,817 kilograms, transported through petitioner's MV Eastern Challenger V-10-S, also from Sumitomo to Calamba Steel. Insured with Mitsui, the shipment had a declared value of US$121,362.59 and arrived at the Port of Manila on or about September 23, 2003. Upon unloading, 11 coils were found damaged as evidenced by TOSBOC No. 67393. The cargo was transferred to ATI for stevedoring, storage, and safekeeping. When ATI delivered the goods, Calamba Steel rejected the damaged portion, valued at US$7,677.12, as unfit for its intended purpose.

A third shipment was made on September 29, 2003, comprising 117 steel sheets in coil weighing 930,718 kilograms, transported through petitioner's MV Eastern Venus V-17-S, again from Sumitomo to Calamba Steel. The shipment had a declared value of US$476,416.90 and was likewise insured with Mitsui. It arrived at the Port of Manila on or about October 11, 2003. Upon discharge, six coils were observed to be in bad condition. The cargo was turned over to ATI for stevedoring, storage, and safekeeping. Calamba Steel rejected the damaged portion, valued at US$14,782.05, upon ATI's delivery.

Calamba Steel filed an insurance claim with Mitsui through the latter's settling agent, respondent BPI/MS Insurance Corporation, and was paid US$7,677.12, US$14,782.05, and US$7,751.15 for the damage suffered by all three shipments, totaling US$30,210.32. On August 31, 2004, as insurer and subrogee of Calamba Steel, respondents filed a Complaint for Damages against petitioner and ATI. During pre-trial, the parties established the fact of the three shipments, their declared values, the insurance coverage, the dates of arrival, and respondents' payment of Calamba Steel's total claim of US$30,210.32.

The RTC, sitting as a special commercial court, found that the TOSBOCs and Requests for Bad Order Survey showed that the coils were already in bad order condition prior to turnover to ATI, indicating damage sustained during the sea voyage. The RTC also found, based on the testimony of plaintiff's witness Mario Manuel, that employees and forklift operators of both petitioner and ATI were negligent during discharging operations — coils were dropped, dragged, bumped against one another, and scratched by pointed forklift tines. The CA affirmed these findings, likewise concluding that both petitioner and ATI were negligent in handling the cargoes, but deleted the award of attorney's fees for the RTC's failure to justify the award in the body of its decision.

• Sole Liability of ATI: Petitioner argued that the survey reports submitted by respondents themselves and the evidence presented by petitioner clearly showed that the cause of the damage was the rough handling of the goods by ATI during discharging operations, not during the sea voyage.
• Non-Participation in Discharging: Petitioner maintained that it had no participation whatsoever in the discharging operations and that it did not have a choice in selecting the stevedore, since ATI is the only arrastre operator mandated to conduct discharging operations in the South Harbor.
• Prayer for Exoneration: Petitioner prayed that it be absolved from any liability relative to the damage incurred by the goods.

• Pre-Turnover Damage: Respondents countered that, as found by both the RTC and the CA, the goods suffered damage while still in petitioner's possession, as evidenced by the various TOSBOCs which were jointly executed by petitioner's own surveyor, Rodrigo Victoria, together with ATI's representative.
• Evidentiary Significance of TOSBOCs: Respondents asserted that petitioner would not have executed such documents if the goods had not suffered any damage prior to their turnover to ATI.
• Extraordinary Diligence Required: Respondents averred that petitioner, being a common carrier, is required by law to observe extraordinary diligence in the vigilance over the goods it carries.

• Reviewability of Factual Findings: Whether the issue of who between petitioner and ATI should be liable for the damage to the goods is a question of law reviewable under Rule 45, or a question of fact beyond the Court's purview.
• Solidary Liability of Common Carrier and Arrastre Operator: Whether the CA committed reversible error in finding petitioner solidarily liable with ATI for the damage to the goods.

• Reviewability of Factual Findings: No. The resolution of who between petitioner and ATI should be liable is indubitably a question of fact, requiring examination and calibration of the probative value of evidence, which is not within the office of a petition for review on certiorari under Rule 45.
• Solidary Liability of Common Carrier and Arrastre Operator: No reversible error was found. The CA correctly affirmed the RTC's finding of solidary liability, the goods having been damaged before turnover to ATI and both entities having been negligent during discharging operations.

• Reviewability of Factual Findings: Under Section 1, Rule 45 of the 1997 Rules of Civil Procedure, only questions of law may be raised in a petition for review on certiorari. A question of law exists when the controversy concerns the correct application of law or jurisprudence to a certain set of facts, with the truth or falsehood of facts being admitted. A question of fact exists when the query invites calibration of the whole evidence, considering the credibility of witnesses, the existence and relevancy of specific circumstances, and the probability of the situation. Here, determining who between petitioner and ATI was liable for the damage would require reviewing, examining, and weighing the probative value of the evidence presented — a task not within the Court's functions under Rule 45. While exceptions to this rule exist, none were found applicable. The Court accorded respect to the factual findings of the RTC, a special commercial court with expertise in maritime and admiralty matters, which findings were unanimously affirmed by the CA.

• Solidary Liability of Common Carrier and Arrastre Operator: The RTC found, based on the TOSBOCs and Requests for Bad Order Survey jointly executed by ATI, the vessel's representative, and the consignee's representative, that the coils were already in bad order condition prior to turnover to ATI, indicating damage sustained during the sea voyage. This finding was corroborated by Damage Reports and Turn Over Survey Reports. Additionally, the RTC found negligence on the part of both petitioner's and ATI's employees during discharging operations, as observed by witness Mario Manuel: coils were lifted and not carefully laid down, sometimes dropped, dragged by forklifts, and bumped against one another. Under maritime law jurisprudence, cargoes while being unloaded generally remain under the custody of the carrier. As a common carrier, petitioner is bound to observe extraordinary diligence in the vigilance over goods transported, and is presumed at fault or negligent if the goods deteriorated, unless it proves extraordinary diligence. Petitioner failed to discharge this burden. The goods were damaged before turnover to ATI, and such damage was compounded by the negligent acts of both petitioner and ATI during discharging. No reversible error was shown in the CA's affirmation of the RTC ruling.

• Extraordinary Diligence of Common Carriers — Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them. Subject to the exceptions enumerated under Article 1734 of the Civil Code (flood, storm, earthquake, or other natural disaster; act of the public enemy in war; act or omission of the shipper or owner of the goods; character of the goods or defects in packing or containers; order or act of competent public authority), common carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of, and received by, the carrier for transportation until the same are delivered, actually or constructively, to the consignee or the person who has a right to receive them. In this case, petitioner failed to prove it exercised extraordinary diligence, and was thus held liable.

• Presumption of Negligence Against Common Carriers — Common carriers are presumed to have been at fault or negligent if the goods they transported deteriorated or got lost or destroyed. To avoid responsibility, they bear the burden of proving that they observed extraordinary diligence. Petitioner failed to hurdle this burden.

• Custody of Cargo During Unloading — Cargoes while being unloaded generally remain under the custody of the carrier. This principle was applied to establish that damage occurring during discharging operations, before formal turnover to the arrastre contractor, is attributable to the carrier.

• Distinction Between Questions of Law and Questions of Fact — A question of law exists when the doubt or controversy concerns the correct application of law or jurisprudence to a certain set of facts, or when the issue does not call for examination of the probative value of evidence. A question of fact exists when the doubt arises as to the truth or falsehood of facts or when the query invites calibration of the whole evidence. The determination of who between the carrier and the arrastre operator was liable for cargo damage was held to be a question of fact.

• Factual Findings of Special Commercial Courts — The factual findings of a special commercial court, which has expertise and specialized knowledge on maritime and admiralty matters, are accorded credence and respect, particularly when affirmed by the CA.

• "Verily, it is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier." — This passage states a principle of maritime law establishing that the carrier's custody and responsibility over cargo extends through the unloading process, supporting the finding of solidary liability.

• "common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods." — This passage articulates the foundational standard of extraordinary diligence required of common carriers and the statutory basis for their liability, central to the ruling against petitioner.

• "Owing to this high degree of diligence required of them, 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. That is, unless they prove that they exercised extraordinary diligence in transporting the goods." — This passage defines the presumption of negligence that attaches to common carriers and the burden they must overcome, which petitioner failed to discharge.

• Philippine National Railways Corporation vs. Vizcara, G.R. No. 190022, Feb. 15, 2012 — Cited for the proposition that only questions of law may be raised in a petition for review on certiorari under Rule 45; questions of fact cannot be entertained.

• Santos vs. Committee on Claims Settlement, G.R. No. 158071, Apr. 2, 2009 — Cited for the distinction between questions of law and questions of fact.

• Asian Terminals, Inc. vs. Malayan Insurance Co., Inc., G.R. No. 171406, Apr. 4, 2011 — Cited to support the principle that resolving who is liable for cargo damage requires weighing the probative value of evidence, which is not within the Court's function under Rule 45.

• International Container Terminal Services, Inc. vs. FGU Insurance Corporation, 578 Phil. 751 (2008) — Cited for the enumeration of exceptions to the rule that factual questions may not be raised in a Rule 45 petition; the Court found none applicable here.

• Philippines First Insurance Co., Inc. vs. Wallem Phils. Shipping, Inc., G.R. No. 165647, Mar. 26, 2009 — Cited for the maritime law principle that cargoes while being unloaded generally remain under the custody of the carrier.

• Asian Terminals, Inc. vs. Philam Insurance Co., Inc., G.R. Nos. 181163, 181262 & 181319, July 24, 2013 — Cited for the proposition that the extraordinary responsibility of the common carrier lasts from receipt of goods until delivery to the consignee.

• Belgian Overseas Chartering and Shipping N.V. vs. Philippine First Insurance Co., Inc., 432 Phil. 567 (2002) — Cited for the presumption of negligence against common carriers and their burden to prove extraordinary diligence.

• Bank of the Philippine Islands vs. Sarabia Manor Hotel Corporation, G.R. No. 175844, July 29, 2013 — Cited for the principle that factual findings of a special commercial court with expertise and specialized knowledge are accorded respect.

• Section 1, Rule 45, 1997 Rules of Civil Procedure, as amended — Provides that a petition for review on certiorari before the Supreme Court shall raise only questions of law. Applied to bar petitioner's factual challenge to the CA's finding of solidary liability.

• Article 1734, Civil Code — Enumerates the exceptions to a common carrier's liability for loss, destruction, or deterioration of goods: (1) natural disaster or calamity; (2) act of the public enemy in war; (3) act or omission of the shipper or owner of the goods; (4) character of the goods or defects in packing or containers; (5) order or act of competent public authority. None of these exceptions was shown to apply, so petitioner remained liable.

• Article 1733, Civil Code (implied) — Establishes the extraordinary diligence required of common carriers in the vigilance over goods transported, the standard against which petitioner's conduct was measured and found wanting.

Sereno, C.J. (Chairperson), Leonardo-De Castro, J., Bersamin, J., and Reyes, J. concurred. No separate concurring opinions were written.