Wallem Philippines Shipping Inc. vs. Prudential Guarantee & Assurance Inc.

An insurer-subrogee cannot recover from a carrier for an alleged cargo shortage where it fails to prove the shortage by competent evidence and fails to present the insurance contract; a bill of lading marked "said to weigh" is not conclusive against the carrier as to the weight of bulk cargo.

Prudential Guarantee & Assurance Inc. insured General Milling Corporation's shipment of Indian Toasted Soyabean Extraction Meal, Yellow, which was carried aboard M/V Gao Yang. Wallem Philippines Shipping, Inc. and Seacoast Maritime Corporation were sued in connection with that shipment, with Wallem denying liability and asserting, among other defenses, that it acted as a mere agent of a disclosed principal. The dispute implicated the Carriage of Goods by Sea Act and the rules governing an insurer's subrogation to the rights of its insured.

Prudential Guarantee & Assurance Inc. insured General Milling Corporation's shipment of Indian Toasted Soyabean Extraction Meal, Yellow, which arrived aboard M/V Gao Yang. In March 1991, Prudential's claims processor, Josephine Suarez, received GMC's claim in connection with that shipment. The claim was supported by papers including Bill of Lading BEDI/1, Commercial Invoice No. 1401, SGS Certificate of Quality, SGS Certificate of Weight, and a report by Tan-Gatue Adjustment Company, Inc. Upon Suarez's recommendation, Prudential paid GMC ₱995,677.09, as evidenced by receipts and a voucher; GMC then issued a subrogation receipt to Prudential, which sent a demand letter to Wallem. On cross-examination, Suarez admitted that she had no participation in preparing the documents and did not verify the genuineness of the bill of lading and commercial invoice; she also stated that GMC had been paid 20% more than its alleged loss.

Alfredo Cunanan, senior cargo surveyor of Tan-Gatue, conducted in March 1990 a survey of the shipment on board M/V Gao Yang at GMC's warehouse in Tabangao, Batangas. He was present during the unloading and saw the cargo discharged from the vessel by a suction device, passed into a conveyor, and weighed on GMC's automatic scale. The quantity recorded on GMC's scale was compared with that indicated in the bill of lading, and a shortage was discovered. Cunanan's survey report recapitulated that the shipment per stowage plan was 4,417.000 metric tons, the outturn per consignee's scale was 4,121.318 metric tons, and the shortage was 295.682 metric tons; per bill of lading, the shipment was 4,415.350 metric tons, the outturn was 4,121.318 metric tons, and the shortage was 294.032 metric tons.

On cross-examination, Cunanan testified that no cargo was left on M/V Gao Yang after the discharging process. He admitted that his basis for determining the weight of the shipment prior to unloading was the Certificate of Weight furnished by GMC, in whose preparation he did not participate. He explained that, as per the Certificate of Weight, the cargo had been packed in bags at the port of origin; the bags were conveyed to midstream in barges alongside the vessel and hauled up onto the steamer; and the bags were later cut open at their mouths and their contents emptied into the ship's storage areas, specifically Hatch Nos. One Lower Hold, One Tween Deck, Five Lower Hold, Five Tween Deck, Two Tween Deck, and Four Tween Deck. He also admitted that the lack of a draft survey due to the absence of a surveyor appointed by Wallem was based merely on information gathered from one of his surveyors.

During the discharging and weighing operations, one of Tan-Gatue's assigned surveyors registered a protest because there were blurred notations on GMC's weighing scale. They found that the scale had not been properly calibrated and showed a discrepancy of approximately 130 metric tons. Upon Tan-Gatue's recommendation, a reweighing was done on April 26, 1990 with another scale. Wallem's representative was not notified of the reweighing, which was made by loading the cargo onto trucks for delivery to the consignee's receivers; reloading onto the trucks was also done through a suction tube. An alleged shortage of 164.4 metric tons was found, significantly lower than the shortage stated in the recapitulation. Part of Cunanan's report opined that the shortage may be attributed to spillage incurred during transit and loading of the shipment to the vessel at the port of origin because the shipment was originally packed in bags, the weighing prior to loading became the basis of the bill of lading quantity, and the bagged shipment was conveyed to midstream, hauled up, cut open, and emptied into the ship's hatches. After weighing in Batangas, the bagged shipment was delivered to GMC's warehouse in Bo. Ugong, Pasig, Metro Manila, and to Filstream and Universal Robina Corp. as direct receivers of GMC. Because of the shortage, GMC filed a claim against Prudential as its insurer.

Wallem presented Romualdo De Belen, its claims supervisor, who collected documents including the bill of lading, general statement of facts, survey certificate, and inward foreign manifest. He found that the weight stated in the bill of lading was less than what was actually discharged: the bill of lading stated 4,415 metric tons, while the actual weight discharged was 4,418 metric tons, an overage. The bill of lading declared the bulk cargo as "said to weigh" 4,415.35 metric tons; De Belen explained that "said to weigh" means nobody really knows the actual weight, because the weight written on the bill of lading and manifest was based only on the shipper's declaration. On cross-examination, he admitted that he collected the documents respecting GMC's claim only upon receipt of the summons and that he based his finding of overage on the survey certificate. Rio Puriran, an employee of Oceanica, described the procedure for preparing a draft survey and identified signatures on the survey certificate, but admitted he had no participation in conducting the survey. Edilberto Mendoza, Wallem's operations manager, declared that a representative was sent to oversee the discharging of the cargo when M/V Gao Yang arrived in Batangas; he tendered a Notice of Readiness to GMC and assigned Oceanica to conduct a draft survey and issue a survey certificate. The unloading was undertaken by GMC per the "free out" notation on the bill of lading, which Mendoza explained meant the vessel was free from expenses and discharging operations and that the cargo receiver had the responsibility to get the cargo. After discharge, Wallem's representative prepared a general statement of facts. On cross-examination, Mendoza admitted he was not present when the cargo was discharged and had no participation in preparing the general statement of facts and notice of readiness.

The trial court found that Prudential failed to prove by clear, convincing, and competent evidence that there was a shortage in the shipment. It also found that Prudential failed to establish the genuineness and due execution of the bill of lading and the true and exact weight of the shipment when it was loaded onto the vessel, so there was no way by which a shortage could be determined. The trial court ruled that the shortage, if any, could only have been incurred either before the loading of the shipment, as stated in the final report, or after the unloading of the shipment from the vessel, the latter instance being admitted by Prudential's own witness, Cunanan. The Court of Appeals reversed, finding a shortage based on the bill of lading and attributing the loss to the loading operations.

• Conclusiveness of the Bill of Lading: Petitioner argued that the Court of Appeals erred in holding that the quantity of cargo reflected in the bill of lading was conclusive as to the actual cargo notwithstanding the shipment being on a "said to weigh" basis, contrary to established maritime law and Section 11 of the Carriage of Goods by Sea Act.
• Burden of Proof: Petitioner maintained that the burden of proof rested on Prudential to show that the weight or quantity alleged had in fact been shipped; absent such proof, Wallem had no obligation to prove its exceptions or defenses, citing Belen vs. Belen.
• Presumed Negligence: Petitioner argued that the principle of presumed negligence was inapplicable because the fact of shortage was never duly proven; under Planters Products, Inc. vs. Court of Appeals, the burden shifts to the carrier only after the shipper has established loss of cargo while in the vessel's custody.
• Attribution of Shortage: Petitioner contended that the Court of Appeals erred in attributing the shortage to Wallem contrary to the evidence and in stating that no loss occurred during discharging operations; the trial court correctly found that any shortage occurred during discharging, based on Prudential's own witness.
• Failure to Present the Insurance Contract: Petitioner argued that the Court of Appeals erred in granting relief to Prudential when the latter failed to establish its right of action through convincing and competent evidence because the original insurance policy was never presented in court, citing Home Insurance Corporation vs. Court of Appeals.

• Proof of Shortage: Whether the Court of Appeals erred in finding that a shortage occurred and that Wallem was liable for the alleged loss.
• Conclusiveness of the Bill of Lading: Whether the quantity stated in the bill of lading is conclusive against the carrier despite the "said to weigh" clause and Section 11 of the Carriage of Goods by Sea Act.
• Subrogation and Insurance Contract: Whether Prudential, as subrogee, established its right of action against Wallem despite not presenting the insurance contract or a copy thereof.

• Proof of Shortage: No. The Court of Appeals erred in finding a shortage; Prudential failed to prove by clear, convincing, and competent evidence that the shipment weighed 4,415.35 metric tons when loaded, and its witnesses had no personal knowledge of the documents.
• Conclusiveness of the Bill of Lading: No. The "said to weigh" clause and the evidence of spillage, defective weighing scale, and reweighing cast doubt on the bill of lading's stated weight; the shipper was responsible for loading and the carrier was oblivious of the contents.
• Subrogation and Insurance Contract: No. Prudential failed to present the insurance contract, so it did not establish the extent of its subrogation rights; the subrogation receipt alone was insufficient.

• Proof of Shortage: Although review under Rule 45 is limited to errors of law, the Court reviewed the evidence because the trial court and the Court of Appeals had conflicting factual findings. The RTC found no shortage, while the CA found one based on the bill of lading. The Supreme Court held that the CA erred. Josephine Suarez, Prudential's claims processor, merely identified documents and had no personal knowledge of their contents; she admitted no participation in preparing them. Her testimony on the contents was hearsay. The genuineness and due execution of the documents were not established. Without competent evidence that the shipment weighed 4,415.35 metric tons at the port of origin when loaded on M/V Gao Yang, no shortage upon arrival could be determined. Wallem's evidence cast doubt: Cunanan admitted no cargo was left on the vessel after discharging; the final report opined that the shortage may be attributed to spillage during transit and loading at the port of origin; the hatches were closed, so there could have been no spillage on board; GMC's scale was defective with a 130-metric-ton discrepancy; the reweighing on April 26, 1990, five days after storage, used open trucks and a suction tube, likely causing further spillage; and the reweighed shortage was only 164.4 metric tons. Thus, no shortage was proven.
• Conclusiveness of the Bill of Lading: The Court of Appeals erred in ruling that the contents of the bill of lading could not be controverted by contrary evidence. Wallem's evidence cast doubt on the documents upon which Prudential based its claim. The bill of lading indicated that the contract of carriage was under a "said to weigh" clause; under such a clause, the shipper is solely responsible for the loading while the carrier is oblivious of the contents of the shipment. The Court cited Keng Hua Paper Products Co., Inc. vs. Court of Appeals in this regard. The stated weight was therefore not conclusive against the carrier. The final report's explanation of spillage and the defective scale and reweighing further undermined the claim that the bill of lading established a shortage.
• Subrogation and Insurance Contract: Even if the shortage could be definitively determined, Wallem could not be held liable because Prudential failed to present the contract of insurance or a copy thereof. Prudential claimed it was subrogated to GMC's rights under their insurance contract and submitted a subrogation receipt and a marine cargo risk note. However, as GMC's subrogee, Prudential could exercise only those rights granted to GMC under the insurance contract. The contract of insurance had to be presented in evidence to indicate the extent of its coverage. As there was no determination of rights under the insurance contract, the Court's ruling in Home Insurance Corporation vs. Court of Appeals applied: the subrogation receipt alone was not sufficient to prove the claim, and failure to present the original insurance contract was fatal.

• Subrogation and the necessity of presenting the insurance contract — An insurer that pays its insured is subrogated to the insured's rights against the carrier, but it can exercise only those rights granted by the insurance contract. The contract itself must be presented in evidence to establish the extent of coverage; a subrogation receipt alone does not prove the insurer's claim. In this case, Prudential's failure to present the insurance contract or a copy was fatal to its action against Wallem.
• "Said to weigh" clause in a bill of lading — Where a bill of lading for bulk cargo states that the goods are "said to weigh" a certain amount, the stated weight is not conclusive against the carrier. The shipper is solely responsible for loading, and the carrier is oblivious of the contents of the shipment. The Court applied this principle to reject the CA's ruling that the bill of lading's stated weight conclusively established a shortage.
• Burden of proof in cargo shortage claims — The claimant must prove by clear, convincing, and competent evidence that a shortage occurred while the goods were in the carrier's custody before the carrier may be held liable. The Court found Prudential failed to discharge this burden because its witnesses had no personal knowledge of the documents and the evidence showed possible spillage during loading, unloading, and reweighing.
• Hearsay testimony on documents — A witness who merely identifies documents prepared by others and has no personal knowledge of their contents cannot establish the truth of those contents; such testimony is hearsay. The Court applied this to Josephine Suarez's testimony regarding the bill of lading and related documents.

• "We find petitioner’s contentions to be meritorious." — The Court's conclusion after reviewing the assignments of error, signaling that the Court of Appeals decision would be reversed.
• "The trial court ruled that private respondent Prudential failed to prove by clear, convincing, and competent evidence that there was a shortage in the shipment." — Summarizes the RTC finding that the Supreme Court ultimately reinstated.
• "Indeed, as the bill of lading indicated that the contract of carriage was under a "said to weigh" clause, the shipper is solely responsible for the loading while the carrier is oblivious of the contents of the shipment." — States the ratio on why the bill of lading's stated weight was not conclusive against the carrier.
• "As GMC’s subrogee, Prudential can exercise only those rights granted to GMC under the insurance contract. The contract of insurance must be presented in evidence to indicate the extent of its coverage." — States the ratio on subrogation and why failure to present the insurance contract defeated Prudential's claim.

• Home Insurance Corporation vs. Court of Appeals, 225 SCRA 411 (1993) — Controlling precedent applied by the Court; held that a subrogation receipt alone is insufficient to prove the insurer's claim and that failure to present the original insurance contract is fatal.
• Keng Hua Paper Products Co., Inc. vs. Court of Appeals, 286 SCRA 257 (1998) — Cited in relation to the "said to weigh" clause and the carrier's lack of knowledge of the shipment's contents.
• Concepcion vs. Court of Appeals, 324 SCRA 85 (2000) — Cited to support the Court's review of evidence despite Rule 45 where the trial court and appellate court made conflicting factual findings.
• Benguet Exploration, Inc. vs. Court of Appeals, 351 SCRA 445 (2001) — Cited in support of the rule that testimony based on documents the witness did not prepare and had no personal knowledge of is hearsay.

• Section 11, Carriage of Goods by Sea Act — Petitioner invoked this provision, which states that where the weight of bulk cargo inserted in the bill of lading is a weight ascertained or accepted by a third party other than the carrier or the shipper, the bill of lading shall not be deemed prima facie evidence against the carrier of the receipt of goods of the weight so inserted, and the accuracy thereof at the time of shipment shall not be deemed guaranteed by the shipper. The Court's ruling that the "said to weigh" bill of lading was not conclusive against Wallem is consistent with this provision, though the Court rested primarily on the "said to weigh" clause and the evidence casting doubt on the stated weight.
• Rule 45, 1997 Rules of Civil Procedure — The petition for review on certiorari is limited to review of errors of law, but the Court reviewed the evidence because the trial court and the Court of Appeals made conflicting findings of fact.

Justice Bellosillo (Chairman), Justice Quisumbing, Justice Austria-Martinez, and Justice Callejo, Sr., concurred.