G.R. No. 77530 October 5, 1989
ABOITIZ SHIPPING CORPORATION, petitioner, vs. PHILIPPINE AMERICAN GENERAL INSURANCE CO., respondent.

FACTS

Marinduque Mining Industrial Corporation shipped carton parts from Boston, USA, to Manila. Upon arrival, the cargo was received and deposited by Aboitiz Shipping Corporation at its Pier 4 terminal for transshipment. On the night of July 3, 1980, the shipment was extensively pilfered while in Aboitiz’s custody. Marinduque filed a claim against Aboitiz for the value of the lost cargo. As the insurer, Philippine American General Insurance Co. (Phil-Am) paid Marinduque under its insurance policy and was subrogated to Marinduque’s rights. Phil-Am then sued Aboitiz for recovery.
The Regional Trial Court dismissed the complaint, finding that the specific Marine Risk Note was issued after the pilferage occurred, suggesting the insurance coverage did not attach. The Court of Appeals reversed this decision, holding Aboitiz liable. Aboitiz appealed to the Supreme Court, arguing the trial court’s findings should prevail and that it was not liable as the pilferage occurred before the cargo was loaded onto its vessel.

ISSUE

Whether Aboitiz Shipping Corporation is liable to Phil-Am for the value of the pilfered cargo that was under its custody.

RULING

Yes, Aboitiz is liable. The Supreme Court affirmed the Court of Appeals’ decision. The trial court erred in treating the Marine Risk Note as the insurance policy itself. The Note was merely a confirmatory declaration for a specific shipment under a pre-existing, continuous Marine Open Policy (No. 100184) that was effective at the time of shipment. Therefore, the cargo was insured from its point of origin, and Phil-Am’s payment to Marinduque was valid, perfecting its right of subrogation.
Regarding Aboitiz’s liability, the Court ruled that as a common carrier, it is responsible for the goods from the time it accepts them for transport until their delivery. Aboitiz received the cargo at its terminal, and the pilferage occurred while the goods were in its exclusive possession and custody for safekeeping pending transshipment. Its duty of extraordinary diligence attached upon receipt, and its failure to secure the cargo constituted a breach. The defense that the loss occurred before loading is irrelevant, as custody for the purpose of the transport had already commenced. The proceedings were also regular, as Aboitiz was declared in default for failing to answer. Hence, Aboitiz is ordered to pay Phil-Am the claim amount plus attorney’s fees.