G.R. No. 182864 January 12, 2015
EASTERN SHIPPING LINES, INC., Petitioner, vs. BPI/MS INSURANCE CORP., & MITSUI SUMITOMO INSURANCE CO., LTD., Respondents.

FACTS

On February 2, 2004, Sumitomo Corporation shipped 22 coils of steel sheets on board petitioner Eastern Shipping Lines, Inc.’s (ESLI) vessel M/V “Eastern Venus 22” from Yokohama, Japan, to Manila, Philippines, in favor of consignee Calamba Steel Center, Inc. The shipment was insured with respondents BPI/MS Insurance Corporation and Mitsui Sumitomo Insurance Company Limited. Upon arrival on February 11, 2004, the shipment was turned over to Asian Terminals, Inc. (ATI) for safekeeping. Upon withdrawal, part of the shipment was found damaged and was rejected by Calamba Steel. On May 12, 2004, a second shipment of 50 coils was shipped via ESLI’s M/V “Eastern Venus 25” from Kashima, Japan, to Manila, also insured by respondents. Upon arrival on May 21, 2004, the coils were found partly damaged and sustained further damage during discharge from the vessel to shore until turnover to ATI’s custody. Calamba Steel again rejected the damaged shipment. Calamba Steel filed claims against ESLI and ATI, which were refused. Calamba Steel then filed an insurance claim with respondents, who paid and were subrogated to Calamba Steel’s rights. Respondents filed a complaint for damages against ESLI and ATI before the Regional Trial Court (RTC). The RTC held both ESLI and ATI jointly and severally liable. On appeal, the Court of Appeals modified the decision, absolving ATI from liability and deleting the award of attorney’s fees, but upholding ESLI’s liability. ESLI filed a Petition for Review before the Supreme Court, failing to implead ATI as a party.

ISSUE

Whether the Court of Appeals erred in upholding the liability of petitioner Eastern Shipping Lines, Inc. for the damage to the insured shipments.

RULING

The Supreme Court denied the petition and affirmed the Court of Appeals’ decision. The Court held that ESLI, as a common carrier, failed to overcome the presumption of fault for the damage to the cargo under Article 1735 of the Civil Code. The evidence, including the survey reports, established that the damage occurred while the shipments were in ESLI’s custody. The “Turn Over Survey of Bad Order Cargoes” indicated the damage was sustained on board the vessel. ESLI’s defense that the damage was due to ATI’s rough handling during discharge was unsubstantiated. Furthermore, ESLI cannot limit its liability under the Carriage of Goods by Sea Act (COGSA) or the Bill of Lading because the damage was due to its own negligence in failing to exercise extraordinary diligence. The Bill of Lading’s package limitation clause was also deemed inapplicable as the damage was not caused by an excepted peril under COGSA. The Court found no reversible error in the appellate court’s decision.