G.R. No. 187701 & G.R. No. 187812, July 23, 2014
PHILAM INSURANCE COMPANY, INC. (now CHARTIS PHILIPPINES INSURANCE, INC.), Petitioner, vs. HEUNG-A SHIPPING CORPORATION and WALLEM PHILIPPINES SHIPPING, INC., Respondents. [and the consolidated case] HEUNG-A SHIPPING CORPORATION and WALLEM PHILIPPINES SHIPPING, INC., Petitioners, vs. PHILAM INSURANCE COMPANY, INC. (now CHARTIS PHILIPPINES INSURANCE, INC.), Respondent.

FACTS

Novartis Consumer Health Philippines, Inc. (NOVARTIS) imported packaging materials from South Korea. The shipper, Jinsuk Trading Co. Ltd., engaged the services of freight forwarder Protop Shipping Corporation (PROTOP). PROTOP shipped the cargo via Dongnama Shipping Co. Ltd. (DONGNAMA), which loaded it onto the M/V Heung-A Bangkok V-019, owned by Heung-A Shipping Corporation (HEUNG-A), under a slot charter agreement. Wallem Philippines Shipping, Inc. (WALLEM) is HEUNG-A’s ship agent in the Philippines. NOVARTIS insured the shipment with Philam Insurance Company, Inc. (PHILAM). The vessel arrived in Manila on December 27, 2000, and the shipment was discharged to arrastre operator Asian Terminals, Inc. (ATI). NOVARTIS’ broker withdrew the shipment on January 4, 2001. Upon inspection at NOVARTIS’ premises on January 5, 2001, the shipment was found wet and damaged. A survey indicated the wetting was due to saltwater seepage through a minute hole in the container van’s roof. PHILAM paid NOVARTIS’ insurance claim and, as subrogee, filed a complaint for damages against various parties, including HEUNG-A and WALLEM. The Regional Trial Court (RTC) held HEUNG-A liable as the common carrier. The Court of Appeals (CA) affirmed but limited HEUNG-A’s liability pursuant to the Carriage of Goods by Sea Act (COGSA).

ISSUE

The primary issue is whether HEUNG-A, as the vessel owner, is liable as a common carrier for the damage to the shipment sustained during transit, and if so, whether its liability is limited under COGSA.

RULING

Yes, HEUNG-A is liable as a common carrier. The Supreme Court affirmed the CA’s ruling that HEUNG-A, despite the slot charter agreement with DONGNAMA, was the common carrier that undertook to transport the goods from Korea to the Philippines for a fee. The slot charter agreement did not bind the consignee, NOVARTIS, which was not a party thereto. As a common carrier, HEUNG-A is bound to observe extraordinary diligence. It failed to overcome the presumption of fault for the damage that occurred while the goods were in its custody. The damage was caused by saltwater ingress due to the defective condition of the container van (a minute hole in the roof), which constitutes a breach of its duty to ensure the vessel’s seaworthiness and the containers’ fitness. The defense of “shipper’s load and count” is unavailing as the damage was not due to improper packing but to the carrier’s failure to provide a watertight container. Furthermore, HEUNG-A’s liability is not limited under COGSA. The package limitation under COGSA applies only if the bill of lading declares the number of packages or units. The bill of lading in this case did not declare the number of cartons or rolls inside the container; it only described the shipment as “19 PALLETS” of “200 ROLLS.” Since the number of packages was not stated, the container itself is considered the COGSA package for limitation purposes. However, the carrier loses the right to limit liability if the damage resulted from its own fault or negligence. Here, the damage was due to HEUNG-A’s failure to provide a seaworthy container, constituting fault or negligence, thus disqualifying it from availing of the liability limit. HEUNG-A and WALLEM (as its agent) are solidarily liable to PHILAM for the full amount of the insurance claim paid.