Source: http://elibrary.judiciary.gov.ph/thebookshelf/showdocs/1/46985
Timestamp: 2019-04-19 16:32:12+00:00

Document:
LORENZO SHIPPING CORP., PETITIONER, VS. CHUBB AND SONS, INC., GEARBULK, LTD. AND PHILIPPINE TRANSMARINE CARRIERS, INC., RESPONDENTS.
On appeal is the Court of Appeals’ August 14, 2000 Decision in CA-G.R. CV No. 61334 and March 28, 2001 Resolution affirming the March 19, 1998 Decision of the Regional Trial Court of Manila which found petitioner liable to pay respondent Chubb and Sons, Inc. attorney's fees and costs of suit.
Petitioner Lorenzo Shipping Corporation (Lorenzo Shipping, for short), a domestic corporation engaged in coastwise shipping, was the carrier of 581 bundles of black steel pipes, the subject shipment, from Manila to Davao City. From Davao City, respondent Gearbulk, Ltd., a foreign corporation licensed as a common carrier under the laws of Norway and doing business in the Philippines through its agent, respondent Philippine Transmarine Carriers, Inc. (Transmarine Carriers, for short), a domestic corporation, carried the goods on board its vessel M/V San Mateo Victory to the United States, for the account of Sumitomo Corporation. The latter, the consignee, is a foreign corporation organized under the laws of the United States of America. It insured the shipment with respondent Chubb and Sons, Inc., a foreign corporation organized and licensed to engage in insurance business under the laws of the United States of America.
On November 21, 1987, Mayer Steel Pipe Corporation of Binondo, Manila, loaded 581 bundles of ERW black steel pipes worth US$137,912.84 on board the vessel M/V Lorcon IV, owned by petitioner Lorenzo Shipping, for shipment to Davao City. Petitioner Lorenzo Shipping issued a clean bill of lading designated as Bill of Lading No. T-3 for the account of the consignee, Sumitomo Corporation of San Francisco, California, USA, which in turn, insured the goods with respondent Chubb and Sons, Inc.
The M/V Lorcon IV arrived at the Sasa Wharf in Davao City on December 2, 1987. Respondent Transmarine Carriers received the subject shipment which was discharged on December 4, 1987, evidenced by Delivery Cargo Receipt No. 115090. It discovered seawater in the hatch of M/V Lorcon IV, and found the steel pipes submerged in it. The consignee Sumitomo then hired the services of R.J. Del Pan Surveyors to inspect the shipment prior to and subsequent to discharge. Del Pan’s Survey Report dated December 4, 1987 showed that the subject shipment was no longer in good condition, as in fact, the pipes were found with rust formation on top and/or at the sides. Moreover, the surveyor noted that the cargo hold of the M/V Lorcon IV was flooded with seawater, and the tank top was “rusty, thinning, and with several holes at different places.” The rusty condition of the cargo was noted on the mate’s receipts and the checker of M/V Lorcon IV signed his conforme thereon.
Please be advised that the merchandise herein below noted has been landed in bad order ex-Manila voyage No. 87-19 under B/L No. T-3 which arrived at the port of Davao City on December 2, 1987.
The extent of the loss and/or damage has not yet been determined but apparently all bundles are corroded. We reserve the right to claim as soon as the amount of claim is determined and the necessary supporting documents are available.
Please find herewith a copy of the survey report which we had arranged for after unloading of our cargo from your vessel in Davao.
We trust that you shall make everything in order.
We entered the hold for a close examination of the pipe, which revealed moderate to heavy amounts of patchy and streaked dark red/orange rust on all lifts which were visible. Samples of the shipment were tested with a solution of silver nitrate revealing both positive and occasional negative chloride reactions, indicating pipe had come in contact with salt water. In addition, all tension applied metal straps were very heavily rusted, and also exhibited chloride reactions on testing with silver nitrate.
It should be noted that subject bills of lading bore the following remarks as to conditions of goods: “ALL UNITS HEAVILY RUSTED.” Attached herein is a copy of a survey report issued by Del Pan Surveyors of Davao City, Philippines dated, December 4, 1987 at Davao City, Philippines, which describes conditions of the cargo as sighted aboard the vessel “LORCON IV,” prior to and subsequent to discharge at Davao City. Evidently, the aforementioned rust damages were apparently sustained while the shipment was in the custody of the vessel “LORCON IV,” prior to being laden on board the vessel “SAN MATEO VICTORY” in Davao.
Due to its heavily rusted condition, the consignee Sumitomo rejected the damaged steel pipes and declared them unfit for the purpose they were intended. It then filed a marine insurance claim with respondent Chubb and Sons, Inc. which the latter settled in the amount of US$104,151.00.
On December 2, 1988, respondent Chubb and Sons, Inc. filed a complaint for collection of a sum of money, docketed as Civil Case No. 88-47096, against respondents Lorenzo Shipping, Gearbulk, and Transmarine. Respondent Chubb and Sons, Inc. alleged that it is not doing business in the Philippines, and that it is suing under an isolated transaction.
On February 21, 1989, respondents Gearbulk and Transmarine filed their answer with counterclaim and cross-claim against petitioner Lorenzo Shipping denying liability on the following grounds: (a) respondent Chubb and Sons, Inc. has no capacity to sue before Philippine courts; (b) the action should be dismissed on the ground of forum non conveniens; (c) damage to the steel pipes was due to the inherent nature of the goods or to the insufficiency of packing thereof; (d) damage to the steel pipes was not due to their fault or negligence; and, (e) the law of the country of destination, U.S.A., governs the contract of carriage.
Petitioner Lorenzo Shipping filed its answer with counterclaim on February 28, 1989, and amended it on May 24, 1989. It denied liability, alleging, among others: (a) that rust easily forms on steel by mere exposure to air, moisture and other marine elements; (b) that it made a disclaimer in the bill of lading; (c) that the goods were improperly packed; and, (d) prescription, laches, and extinguishment of obligations and actions had set in.
WHEREFORE, the judgment is hereby rendered ordering Defendant Lorenzo Shipping Corporation to pay the plaintiff the sum of US$104,151.00 or its equivalent in Philippine peso at the current rate of exchange with interest thereon at the legal rate from the date of the institution of this case until fully paid, the attorney’s fees in the sum of P50,000.00, plus the costs of the suit, and dismissing the plaintiff’s complaint against defendants Gearbulk, Ltd. and Philippine Transmarine Carriers, Inc., for lack of merit, and the two defendants’ counterclaim, there being no showing that the plaintiff had filed this case against said defendants in bad faith, as well as the two defendants’ cross-claim against Defendant Lorenzo Shipping Corporation, for lack of factual basis.
Petitioner Lorenzo Shipping appealed to the Court of Appeals insisting that: (a) respondent Chubb and Sons does not have capacity to sue before Philippine courts; and, (b) petitioner Lorenzo Shipping was not negligent in the performance of its obligations as carrier of the goods. The appellate court denied the petition and affirmed the decision of the trial court.
The Court of Appeals likewise denied petitioner Lorenzo Shipping’s Motion for Reconsideration dated September 3, 2000, in a Resolution promulgated on March 28, 2001.
Assuming that Lorenzo Shipping was guilty of some lapses in transporting the steel pipes, whether or not Gearbulk and Transmarine, as common carriers, are to share liability for their separate negligence in handling the cargo.
(2) whether petitioner Lorenzo Shipping is negligent in carrying the subject cargo.
Petitioner argues that respondent Chubb and Sons is a foreign corporation not licensed to do business in the Philippines, and is not suing on an isolated transaction. It contends that because the respondent Chubb and Sons is an insurance company, it was merely subrogated to the rights of its insured, the consignee Sumitomo, after paying the latter’s policy claim. Sumitomo, however, is a foreign corporation doing business in the Philippines without a license and does not have capacity to sue before Philippine courts. Since Sumitomo does not have capacity to sue, petitioner then concludes that, neither the subrogee-respondent Chubb and Sons could sue before Philippine courts.
In the first place, petitioner failed to raise the defense that Sumitomo is a foreign corporation doing business in the Philippines without a license. It is therefore estopped from litigating the issue on appeal especially because it involves a question of fact which this Court cannot resolve. Secondly, assuming arguendo that Sumitomo cannot sue in the Philippines, it does not follow that respondent, as subrogee, has also no capacity to sue in our jurisdiction.
Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities. The principle covers the situation under which an insurer that has paid a loss under an insurance policy is entitled to all the rights and remedies belonging to the insured against a third party with respect to any loss covered by the policy. It contemplates full substitution such that it places the party subrogated in the shoes of the creditor, and he may use all means which the creditor could employ to enforce payment.
The rights to which the subrogee succeeds are the same as, but not greater than, those of the person for whom he is substituted – he cannot acquire any claim, security, or remedy the subrogor did not have. In other words, a subrogee cannot succeed to a right not possessed by the subrogor. A subrogee in effect steps into the shoes of the insured and can recover only if insured likewise could have recovered.
However, when the insurer succeeds to the rights of the insured, he does so only in relation to the debt. The person substituted (the insurer) will succeed to all the rights of the creditor (the insured), having reference to the debt due the latter. In the instant case, the rights inherited by the insurer, respondent Chubb and Sons, pertain only to the payment it made to the insured Sumitomo as stipulated in the insurance contract between them, and which amount it now seeks to recover from petitioner Lorenzo Shipping which caused the loss sustained by the insured Sumitomo. The capacity to sue of respondent Chubb and Sons could not perchance belong to the group of rights, remedies or securities pertaining to the payment respondent insurer made for the loss which was sustained by the insured Sumitomo and covered by the contract of insurance. Capacity to sue is a right personal to its holder. It is conferred by law and not by the parties. Lack of legal capacity to sue means that the plaintiff is not in the exercise of his civil rights, or does not have the necessary qualification to appear in the case, or does not have the character or representation he claims. It refers to a plaintiff’s general disability to sue, such as on account of minority, insanity, incompetence, lack of juridical personality, or any other disqualifications of a party. Respondent Chubb and Sons who was plaintiff in the trial court does not possess any of these disabilities. On the contrary, respondent Chubb and Sons has satisfactorily proven its capacity to sue, after having shown that it is not doing business in the Philippines, but is suing only under an isolated transaction, i.e., under the one (1) marine insurance policy issued in favor of the consignee Sumitomo covering the damaged steel pipes.
Doing business without a license. – No foreign corporation transacting business in the Philippines without a license, or its successors or assigns, shall be permitted to maintain or intervene in any action, suit or proceeding in any court or administrative agency of the Philippines; but such corporation may be sued or proceeded against before Philippine courts or administrative tribunals on any valid cause of action recognized under Philippine laws.
The object of the statute (Secs. 68 and 69, Corporation Law) was not to prevent the foreign corporation from performing single acts, but to prevent it from acquiring a domicile for the purpose of business without taking the steps necessary to render it amenable to suit in the local courts . . . the implication of the law (being) that it was never the purpose of the legislature to exclude a foreign corporation which happens to obtain an isolated order for business for the Philippines, from seeking redress in the Philippine courts.
. . . The private respondent may sue in the Philippine courts upon the marine insurance policies issued by it abroad to cover international-bound cargoes shipped by a Philippine carrier, even if it has no license to do business in this country, for it is not the lack of the prescribed license (to do business in the Philippines) but doing business without such license, which bars a foreign corporation from access to our courts.
Furthermore, respondent insurer Chubb and Sons, by virtue of the right of subrogation provided for in the policy of insurance, is the real party in interest in the action for damages before the court a quo against the carrier Lorenzo Shipping to recover for the loss sustained by its insured. Rule 3, Section 2 of the 1997 Rules of Civil Procedure defines a real party in interest as one who is entitled to the avails of any judgment rendered in a suit, or who stands to be benefited or injured by it. Where an insurance company as subrogee pays the insured of the entire loss it suffered, the insurer-subrogee is the only real party in interest and must sue in its own name to enforce its right of subrogation against the third party which caused the loss. This is because the insurer in such case having fully compensated its insured, which payment covers the loss in full, is subrogated to the insured’s claims arising from such loss. The subrogated insurer becomes the owner of the claim and, thus entitled to the entire fruits of the action. It then, thus possesses the right to enforce the claim and the significant interest in the litigation. In the case at bar, it is clear that respondent insurer was suing on its own behalf in order to enforce its right of subrogation.
On the second issue, we affirm the findings of the lower courts that petitioner Lorenzo Shipping was negligent in its care and custody of the consignee’s goods.
The steel pipes, subject of this case, were in good condition when they were loaded at the port of origin (Manila) on board petitioner Lorenzo Shipping’s M/V Lorcon IV en route to Davao City. Petitioner Lorenzo Shipping issued clean bills of lading covering the subject shipment. A bill of lading, aside from being a contract and a receipt, is also a symbol of the goods covered by it. A bill of lading which has no notation of any defect or damage in the goods is called a “clean bill of lading.” A clean bill of lading constitutes prima facie evidence of the receipt by the carrier of the goods as therein described.
The case law teaches us that mere proof of delivery of goods in good order to a carrier and the subsequent arrival in damaged condition at the place of destination raises a prima facie case against the carrier. In the case at bar, M/V Lorcon IV of petitioner Lorenzo Shipping received the steel pipes in good order and condition, evidenced by the clean bills of lading it issued. When the cargo was unloaded from petitioner Lorenzo Shipping’s vessel at the Sasa Wharf in Davao City, the steel pipes were rusted all over. M/V San Mateo Victory of respondent Gearbulk, Ltd, which received the cargo, issued Bills of Lading Nos. DAV/OAK 1 to 7 and Nos. DAV/SEA 1 to 6 covering the entire shipment, all of which were marked “ALL UNITS HEAVILY RUSTED.” R.J. Del Pan Surveyors found that the cargo hold of the M/V Lorcon IV was flooded with seawater, and the tank top was rusty, thinning and perforated, thereby exposing the cargo to sea water. There can be no other conclusion than that the cargo was damaged while on board the vessel of petitioner Lorenzo Shipping, and that the damage was due to the latter’s negligence. In the case at bar, not only did the legal presumption of negligence attach to petitioner Lorenzo Shipping upon the occurrence of damage to the cargo. More so, the negligence of petitioner was sufficiently established. Petitioner Lorenzo Shipping failed to keep its vessel in seaworthy condition. R.J. Del Pan Surveyors found the tank top of M/V Lorcon IV to be “rusty, thinning, and with several holes at different places.” Witness Captain Pablo Fernan, Operations Manager of respondent Transmarine Carriers, likewise observed the presence of holes at the deck of M/V Lorcon IV. The unpatched holes allowed seawater, reaching up to three (3) inches deep, to enter the flooring of the hatch of the vessel where the steel pipes were stowed, submerging the latter in sea water. The contact with sea water caused the steel pipes to rust. The silver nitrate test, which Toplis and Harding employed, further verified this conclusion. Significantly, petitioner Lorenzo Shipping did not even attempt to present any contrary evidence. Neither did it offer any proof to establish any of the causes that would exempt it from liability for such damage. It merely alleged that the: (1) packaging of the goods was defective; and (2) claim for damages has prescribed.
On the issue of prescription of respondent Chubb and Sons’ claim for damages, we rule that it has not yet prescribed at the time it was made.
Within the twenty-four hours following the receipt of the merchandise, the claim against the carrier for damage or average, which may be found therein upon the opening of the packages, may be made, provided that the indications of the damage or average which gives rise to the claim cannot be ascertained from the outside part of such package, in which case the claim shall be admitted only at the time of the receipt.
After the periods mentioned have elapsed, or transportation charges have been paid, no claim shall be admitted against the carrier with regard to the condition in which the goods transported were delivered.
NOTE: No claim for damage or loss shall be honored twenty-four (24) hours after delivery.
The twenty-four-hour period prescribed by Art. 366 of the Code of Commerce within which claims must be presented does not begin to run until the consignee has received such possession of the merchandise that he may exercise over it the ordinary control pertinent to ownership. In other words, there must be delivery of the cargo by the carrier to the consignee at the place of destination. In the case at bar, consignee Sumitomo has not received possession of the cargo, and has not physically inspected the same at the time the shipment was discharged from M/V Lorcon IV in Davao City. Petitioner Lorenzo Shipping failed to establish that an authorized agent of the consignee Sumitomo received the cargo at Sasa Wharf in Davao City. Respondent Transmarine Carriers as agent of respondent Gearbulk, Ltd., which carried the goods from Davao City to the United States, and the principal, respondent Gearbulk, Ltd. itself, are not the authorized agents as contemplated by law. What is clear from the evidence is that the consignee received and took possession of the entire shipment only when the latter reached the United States’ shore. Only then was delivery made and completed. And only then did the 24-hour prescriptive period start to run.
Finally, we find no merit to the contention of respondents Gearbulk and Transmarine that American law governs the contract of carriage because the U.S.A. is the country of destination. Petitioner Lorenzo Shipping, through its M/V Lorcon IV, carried the goods from Manila to Davao City. Thus, as against petitioner Lorenzo Shipping, the place of destination is Davao City. Hence, Philippine law applies.
IN VIEW THEREOF, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 61334 dated August 14, 2000 and its Resolution dated March 28, 2001 are hereby AFFIRMED. Costs against petitioner.
 Records, vol. 2, pp. 591-593.
 Exhibit “D,” Records, vol. 2, p. 108.
 Exhibit “F,” Records, vol. 2, p. 109.
 Exhibits “J” to “J-1-A,” Chubb Marine Policy No. JO 37000, Records, vol. 2, pp. 32-37.
 Exhibit “5,” Records, vol. 2, p. 347.
 Exhibit “Y,” Records, vol. 3, p. 50.
 Records, vol. 2, pp. 551- 552.
 Exhibits “G-1” to “G-7,” Records, vol. 2, pp. 9-15.
 Exhibits “N” to “N-5,” Records, vol. 3, pp. 323-328.
 Exhibit “1,” Records, vol. 2, p. 342.
 Exhibit “I,” Records, vol. 2, pp. 28-32.
 Records, vol. 1, p. 4.
 Exhibits “A” and “B,” Records, vol. 2, pp. 6-7.
 Records, vol. 1, pp. 1-4.
 Records, vol. 1, pp. 25-30.
 Records, vol. 2, p. 596.
 Black's Law Dictionary (6th ed., 1990).
 Riemer vs. Columbia Medical Plan, Inc., 358 Md. 222, 747 A.2d 677 (2000).
 Heritage Mut. Ins. Co. vs. Truck Ins. Exchange, 184 Wis. 2d 247, 516 N.W.2d 8 (Ct. App. 1994).
 Ohio Mut. Ins. Assn., United Ohio Ins. Co. v. Warlaumont, 124 Ohio App. 3d 473, 706 N.E.2d 793 (12th Dist. Brown County 1997).
 Home Owners' Loan Corp. vs. Henson, 217 Ind. 554, 29 N.E.2d 873 (1940).
 Columbia Pictures, Inc. vs. Court of Appeals, 261 SCRA 144 (1996).
 Eastboard Navigation Ltd. vs. Juan Ismael & Co., Inc., 102 Phil 1 (1957); Aetna Casualty & Surety Co. vs. Pacific Star Lines, 80 SCRA 635 (1977); Facilities Management Corp. vs. De la Osa, 89 SCRA 131 (1979); Hatibhai Bulakhidas vs. Navarro, 142 SCRA 1 (1986).
 46 Phil. 70, 74 (1924).
 267 SCRA 567 (1997); 13 Words and Phrases, Permanent Edition 195 citing Brandtjen & Kluge vs. Nanson, 115 P2d 731, 733, 9 Wash. 2d 362.
 180 SCRA 254 (1989), citing Antam Consolidated, Inc. v. Court of Appeals, 143 SCRA 288 (1986).
 Exhibit “J,” Records, vol. 2, p. 55.
Frank Briscoe Co. v Georgia Sprinkler Co. (1983, CA11 Ga) 713 F2d 1500; Royal Ins. Co. of America v. U.S., 998 F. Supp. 351 (S.D.N.Y. 1998).
 Land v. Tall House Bldg. Co., 563 S.E.2d 8 (N.C.App. 2002), citing Burgess v. Trevathan, 236 N.C. 157, 160, 72 S.E.2d 231, 233 (1952); Metropolitan Property & Cas. v. Harper, 7 P.3d 541, 168 Or.App. 358 (Or.App. 2000); Shambley v. Jobe-Blackley Plumbing and Heating Co., 142 S.E.2d 18, 264 N.C. 456, 13 A.L.R.3d 224 (N.C. 1965).
 Virginia Elec. & Power Co. v. Westinghouse Elec. Corp., 485 F.2d 78, 83 (4th Cir.1973).
 Aguedo F. Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, vol. IV, 1987 ed., p. 119, citing Government vs. Ynchausti & Co., 40 Phil. 219 (1919).
 28 Am Jur 2d 264.
 Aguedo F. Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, vol. IV, 1987 ed., p. 119, citing Williston on Contracts, Sec. 405 b.
 Id., p. 121, citing 2 Williston on Sales, Sec. 405 c.
 Westway Coffee Corp. vs. M/V Netuno, 675 F.2d 30, 32 (1982).
 Coastwise Lighterage Corp. vs. Court of Appeals, 245 SCRA 796 (1995).
 Article 1735, Civil Code. In all cases other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in article 1733.
 Deposition, Pablo M. Fernan, 16 April 1996, pp. 94-95.
 Deposition, Edgar C. Aduna, 20 February 1990, pp. 7-8, 32; Deposition, Segundo Grande, 15 April 1996, pp. 8-10.
 Deposition, Bernard Wormgoor, 05 December 1989, pp. 16-17, 33-34.
 Deposition, John M. Graff, 05 December 1989, pp. 12-13, 36.
 Exhibit “2,” Records, vol. 2, p. 343.
 Aguedo F. Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, vol. IV, 1987 ed., p. 138, citing Cordoba vs. Warner, Barnes and Co., 1 Phil 7, 10 (1901).
 Ibid., citing New Zealand Ins. Co., Ltd. vs. Choa Joy, 97 Phil. 646 (1955).

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