National Development Company vs. Court of Appeals

The Court held that for goods transported to the Philippines, the liability of the common carrier for loss or damage is governed primarily by the Civil Code, and suppletorily by the Code of Commerce, pursuant to Articles 1753 and 1766 of the Civil Code. Where a collision is imputable to both vessels, Article 827 of the Code of Commerce applies, rendering each vessel's owner and agent solidarily liable for the losses suffered by the cargoes. The Court further held that the one-year prescriptive period under the Carriage of Goods by Sea Act commences from the date the cargo "should have been delivered," which, in cases of delay due to trans-shipment, is not the originally scheduled arrival date.

NDC, as the first preferred mortgagee of the vessel "Dona Nati," appointed MCP as its agent to manage and operate the vessel. In 1964, the vessel loaded cargo in San Francisco and Tokyo for carriage to Manila. En route, the vessel collided with the "SS Yasushima Maru" in Ise Bay, Japan, resulting in the loss and damage of the insured cargo. Development Insurance & Surety Corporation (DISC), as insurer, paid the consignees a total of P364,915.86 and filed a subrogation claim against NDC and MCP.

• NDC owned the vessel "Dona Nati" and, via a Memorandum Agreement dated September 13, 1962, appointed MCP as its agent to manage and operate the vessel.
• In February and March 1964, the vessel loaded cargo in San Francisco, USA, and Tokyo, Japan, for carriage to Manila.
• On April 15, 1964, while en route to Manila, the vessel collided with the "SS Yasushima Maru" in Ise Bay, Japan.
• The collision resulted in the loss or damage of 550 bales of American raw cotton and the total loss of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil.
• DISC, as insurer, paid the consignees (Riverside Mills Corporation and Guilcon, Manila) a total of P364,915.86 for the losses.
• DISC filed a subrogation complaint against NDC and MCP on April 22, 1965.
• Both the trial court and the Court of Appeals found that the collision was caused by the fault or negligence of the pilots of both vessels.

• NDC argued: The Carriage of Goods by Sea Act (COGSA), not the Code of Commerce, should govern liability. Under COGSA, the carrier is exempt from liability for loss resulting from the negligence of the master or mariners in the navigation of the ship. Since both pilots were at fault, NDC should be relieved of liability.
• MCP argued: (1) DISC had no cause of action because it failed to prove its subrogor's ownership or interest in the cargo or the transfer of the bills of lading. (2) MCP was merely a managing agent, not a ship agent (naviero), and thus not solidarily liable. (3) Its liability, if any, should be limited to P200 per package under the bills of lading. (4) The law on general average should apply. (5) The action had prescribed under COGSA's one-year limitation period.

• DISC countered: It had a valid cause of action as subrogee, having paid the consignees who were the holders of duly endorsed bills of lading. The trial and appellate courts correctly found MCP to be a ship agent solidarily liable under the Code of Commerce. The limitation of liability was inapplicable due to the carrier's negligence, and the action was filed within the prescriptive period.

• Procedural Issues: Whether the action had prescribed.
• Substantive Issues:
  1. Which law governs the liability for loss of cargo due to a collision occurring outside Philippine territorial waters.
  2. Whether MCP is a ship agent solidarily liable with the shipowner.
  3. Whether the carrier's liability is limited to P200 per package under the bills of lading or the law on general average applies.

• Procedural: The Court ruled the action had not prescribed. The one-year prescriptive period under COGSA runs from the date the cargo "should have been delivered." Given the trans-shipment clause and the actual delay caused by the collision, the complaint was timely filed before the lapse of one year from the possible delivery dates.
• Substantive:
  1. Philippine law governs. Pursuant to Article 1753 of the Civil Code, the law of the country to which the goods are to be transported (the Philippines) governs the carrier's liability. The Civil Code is the primary law, and the Code of Commerce applies suppletorily. COGSA is merely suppletory and does not repeal or limit the application of the Code of Commerce (Section 1, COGSA).
  2. MCP is a ship agent solidarily liable. The Memorandum Agreement appointed MCP as "Agent," a term encompassing the concept of a naviero or ship agent under maritime law. Under Article 827 of the Code of Commerce, where collision is imputable to both vessels, the owner and agent are solidarily liable for losses to cargo. This liability arises from tort, not contract.
  3. The limitation of liability and general average provisions are inapplicable. The declared value of the goods was stated in the bills of lading and invoices. A common carrier cannot limit its liability where the loss was caused by its own negligence. The law on general average (Articles 806-818, Code of Commerce) did not apply because the cargo was not jettisoned for the common safety.

• Governing Law for Cargo Liability (Articles 1753 & 1766, Civil Code) — The law of the country to which the goods are to be transported governs the liability of the common carrier. For matters not regulated by the Civil Code, the Code of Commerce and other laws apply suppletorily. The Carriage of Goods by Sea Act is a special law that is suppletory to the Civil Code and does not repeal provisions of the Code of Commerce.
• Solidary Liability for Collision (Article 827, Code of Commerce) — If a collision is imputable to both vessels, each shall suffer its own damages, and both shall be solidarily responsible for the losses and damages suffered by their cargoes. This liability extends to the shipowner and the ship agent (naviero).
• Inapplicability of Limitation of Liability for Carrier's Negligence — A common carrier cannot limit its liability for injury to or loss of goods where such injury or loss was caused by its own negligence.

• "The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration." — The Court, citing Article 1753 of the Civil Code and its ruling in Eastern Shipping Lines, Inc. v. IAC.
• "If the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes." — The Court, quoting Article 827 of the Code of Commerce.
• "Common carriers... cannot limit its liability for injury to a loss of goods where such injury or loss was caused by its own negligence." — The Court, citing Juan Ysmael & Co., Inc. v. Barrette.

• Eastern Shipping Lines, Inc. v. Intermediate Appellate Court, 150 SCRA 469 (1987) — Cited as controlling precedent establishing that Philippine law governs the liability of a common carrier for goods transported to the Philippines, even if the loss occurs in foreign waters.
• Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 (1909) — Cited for the doctrine that the shipmaster is the representative of the owner, making the owner primarily liable for the master's acts.
• Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 (1906) — Cited for the principle that both the owner and agent of the offending vessel are liable for damages where both are impleaded.
• Juan Ysmael & Co., Inc. v. Barrette, 51 Phil. 90 (1927) — Cited for the rule that a common carrier cannot limit its liability when the loss is caused by its negligence.

• Article 1753, Civil Code — Establishes that the law of the destination country governs the carrier's liability for goods.
• Article 1766, Civil Code — Provides that matters not regulated by the Civil Code shall be governed by the Code of Commerce and other laws.
• Articles 826-839, Code of Commerce (Book Three) — Deal exclusively with collision of vessels.
• Article 827, Code of Commerce — Specifically provides for solidary liability when collision is imputable to both vessels.
• Article 1733, Civil Code — Imposes extraordinary diligence on common carriers for the vigilance over goods.
• Article 1735, Civil Code — Establishes the presumption of fault or negligence on the part of the common carrier in case of loss, unless it proves extraordinary diligence.
• Section 1, Carriage of Goods by Sea Act (Commonwealth Act No. 65) — Limits the Act's application to contracts for carriage to and from Philippine ports in foreign trade and states it does not repeal existing provisions of the Code of Commerce.
• Section 3(6), Carriage of Goods by Sea Act — Provides for a one-year period for filing suit after delivery or the date when the goods should have been delivered.