G.R. No. 161833. July 8, 2005.
PHILIPPINE CHARTER INSURANCE CORPORATION, Petitioner, vs. UNKNOWN OWNER OF THE VESSEL M/V “NATIONAL HONOR,” NATIONAL SHIPPING CORPORATION OF THE PHILIPPINES and INTERNATIONAL CONTAINER SERVICES, INC., Respondents.

FACTS

J. Trading Co. Ltd. shipped machinery parts from Korea to Manila on board the M/V “National Honor,” consigned to Blue Mono International Company, Inc. (BMICI). The shipment, insured by petitioner Philippine Charter Insurance Corporation (PCIC), was contained in two crates. Upon arrival at the Manila International Container Terminal, the cargo was discharged by respondent International Container Terminal Services, Inc. (ICTSI), the exclusive arrastre operator. While Crate No. 1 was being hoisted using two sling cables placed on each end, its mid-portion snapped, causing the contents to crash and sustain extensive damage. BMICI’s claim was paid by PCIC, which was subsequently subrogated to BMICI’s rights.
PCIC, as subrogee, filed a complaint for damages against the vessel owner, its agent National Shipping Corporation of the Philippines (NSCP), and ICTSI, alleging fault and negligence in the handling of the cargo. The Regional Trial Court dismissed the complaint, a decision affirmed by the Court of Appeals. The courts found that the shipper failed to disclose the inherent nature and insufficient packing of the cargo, which necessitated special handling.

ISSUE

Whether respondents NSCP (as carrier) and ICTSI (as arrastre operator) are liable for the damage to the cargo caused during discharge.

RULING

The Supreme Court denied the petition and upheld the dismissal of the complaint. The legal logic centers on the nature of the liability of a common carrier and the shipper’s warranties. Under Article 1733 of the Civil Code, common carriers are bound to observe extraordinary diligence. However, this liability is not absolute. Pursuant to Article 1734, carriers are not responsible for loss or damage due to the inherent nature or defect of the goods.
The Bill of Lading issued by NSCP contained a clause where the shipper represented and warranted that the goods were properly packed and disclosed any condition that may cause damage. The evidence, including the survey report procured by PCIC itself, established that the damage was due to the insufficiency of the crate’s packing and its inherent weakness to support the heavy machinery, not due to improper handling. The snapping of the mid-portion, where no sling was placed, was a direct result of this inherent defect, which was not marked or disclosed externally. ICTSI, as arrastre operator, was not negligent as it followed standard procedure in the absence of any special markings or instructions on the crate requiring a mid-sling. The statement in the Bill of Lading that the goods were in “apparent good order and condition” created only a prima facie presumption as to external condition, which was rebutted by proof of the internal packing defect not open to ordinary inspection. Thus, the loss was attributable to the shipper’s breach of warranty, exempting the respondents from liability.