Consolidated Full Text Cases

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G.R. No. 171092 March 15, 2010EDNA DIAGO LHUILLIER, Petitioner,vs.BRITISH AIRWAYS, Respondent.

D E C I S I O N

DEL CASTILLO,J.:

Jurisdictio est potestas de publico introducta cumnecessitate juris dicendi. Jurisdiction is a powerintroduced for the public good, on account of thenecessity of dispensing justice.1

Factual Antecedents

On April 28, 2005, petitioner Edna Diago Lhuillierfiled a Complaint2 for damages againstrespondent British Airways before the Regional

Trial Court (RTC) of Makati City. She alleged thaton February 28, 2005, she took respondentsflight 548 from London, United Kingdom to Rome,Italy. Once on board, she allegedly requested

Julian Halliday (Halliday), one of the respondentsflight attendants, to assist her in placing herhand-carried luggage in the overhead bin.However, Halliday allegedly refused to help andassist her, and even sarcastically remarked that"If I were to help all 300 passengers in this flight,I would have a broken back!"

Petitioner further alleged that when the planewas about to land in Rome, Italy, another flightattendant, Nickolas Kerrigan (Kerrigan), singledher out from among all the passengers in thebusiness class section to lecture on plane safety.Allegedly, Kerrigan made her appear to the otherpassengers to be ignorant, uneducated, stupid,and in need of lecturing on the safety rules andregulations of the plane. Affronted, petitionerassured Kerrigan that she knew the planessafety regulations being a frequent traveler.

Thereupon, Kerrigan allegedly thrust his face amere few centimeters away from that of thepetitioner and menacingly told her that "We dontlike your attitude."

Upon arrival in Rome, petitioner complained torespondents ground manager and demanded anapology. However, the latter declared that theflight stewards were "only doing their job."

Thus, petitioner filed the complaint for damages,praying that respondent be ordered to pay P5million as moral damages, P2 million as nominaldamages, P1 million as exemplary damages,P300,000.00 as attorneys fees, P200,000.00 aslitigation expenses, and cost of the suit.

On May 16, 2005, summons, together with a copy

of the complaint, was served on the respondentthrough Violeta Echevarria, General Manager ofEuro-Philippine Airline Services, Inc.3

On May 30, 2005, respondent, by way of specialappearance through counsel, filed a Motion toDismiss4 on grounds of lack of jurisdiction overthe case and over the person of the respondent.Respondent alleged that only the courts ofLondon, United Kingdom or Rome, Italy, have

jurisdiction over the complaint for damages

pursuant to the Warsaw Convention,5 Article28(1) of which provides:

An action for damages must be brought at theoption of the plaintiff, either before the court ofdomicile of the carrier or his princ

ipal place of business, or where he has a place ofbusiness through which the contract has beenmade, or before the court of the place ofdestination.

Thus, since a) respondent is domiciled in London;b) respondents principal place of business is inLondon; c) petitioner bought her ticket in Italy(through Jeepney Travel S.A.S, in Rome);6 and d)Rome, Italy is petitioners place of destination,

then it follows that the complaint should only befiled in the proper courts of London, UnitedKingdom or Rome, Italy.

Likewise, it was alleged that the case must bedismissed for lack of jurisdiction over the personof the respondent because the summons waserroneously served on Euro-Philippine AirlineServices, Inc. which is not its resident agent inthe Philippines.

On June 3, 2005, the trial court issued an Orderrequiring herein petitioner to file herComment/Opposition on the Motion to Dismisswithin 10 days from notice thereof, and forrespondent to file a Reply thereon.7 Instead offiling a Comment/Opposition, petitioner filed on

June 27, 2005, an Urgent Ex-Parte Motion toAdmit Formal Amendment to the Complaint andIssuance of Alias Summons.8 Petitioner allegedthat upon verification with the Securities andExchange Commission, she found out that theresident agent of respondent in the Philippines isAlonzo Q. Ancheta. Subsequently, on September9, 2005, petitioner filed a Motion to ResolvePending Incident and Opposition to Motion toDismiss.9

Ruling of the Regional Trial Court

On October 14, 2005, the RTC of Makati City,Branch 132, issued an Order10 grantingrespondents Motion to Dismiss. It ruled that:

The Court sympathizes with the alleged ill-treatment suffered by the plaintiff. However, ourCourts have to apply the principles ofinternational law, and are bound by treatystipulations entered into by the Philippines whichform part of the law of the land. One of this is theWarsaw Convention. Being a signatory thereto,

the Philippines adheres to its stipulations and isbound by its provisions including the place whereactions involving damages to plaintiff is to beinstituted, as provided for under Article 28(1)thereof. The Court finds no justifiable reason todeviate from the indicated limitations as it willonly run counter to the provisions of the WarsawConvention. Said adherence is in consonancewith the comity of nations and deviation from itcan only be effected through proper denunciationas enunciated in the Santos case (ibid). Since thePhilippines is not the place of domicile of the
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defendant nor is it the principal place of business,our courts are thus divested of jurisdiction overcases for damages. Neither was plaintiffs ticketissued in this country nor was her destinationManila but Rome in Italy. It bears stressinghowever, that referral to the court of proper

jurisdiction does not constitute constructivedenial of plaintiffs right to have access to ourcourts since the Warsaw Convention itselfprovided for jurisdiction over cases arising frominternational transportation. Said treatystipulations must be complied with in good faithfollowing the time honored principle of pacta suntservanda.

The resolution of the propriety of service ofsummons is rendered moot by the Courts wantof jurisdiction over the instant case.

WHEREFORE, premises considered, the presentMotion to Dismiss is hereby GRANTED and thiscase is hereby ordered DISMISSED.

Petitioner filed a Motion for Reconsideration butthe motion was denied in an Order11 dated

January 4, 2006.

Petitioner now comes directly before us on aPetition for Review on Certiorari on purequestions of law, raising the following issues:

Issues

I. WHETHER X X X PHILIPPINE COURTs HAVE JURISDICTION OVER A TORTIOUS CONDUCTCOMMITTED AGAINST A FILIPINO CITIZEN ANDRESIDENT BY AIRLINE PERSONNEL OF A FOREIGNCARRIER TRAVELLING BEYOND THE TERRITORIALLIMIT OF ANY FOREIGN COUNTRY; AND THUS ISOUTSIDE THE AMBIT OF THE WARSAWCONVENTION.

II. WHETHER x x x RESPONDENT AIR CARRIER OFPASSENGERS, IN FILING ITS MOTION TO DISMISSBASED ON LACK OF JURISDICTION OVER THESUBJECT MATTER OF THE CASE AND OVER ITSPERSON MAY BE DEEMED AS HAVING IN FACT

AND IN LAW SUBMITTED ITSELF TO THE JURISDICTION OF THE LOWER COURT,ESPECIALLY SO, WHEN THE VERY LAWYERARGUING FOR IT IS HIMSELF THE RESIDENTAGENT OF THE CARRIER.

Petitioners Arguments

Petitioner argues that her cause of action arosenot from the contract of carriage, but from thetortious conduct committed by airline personnelof respondent in violation of the provisions of theCivil Code on Human Relations. Since her cause

of action was not predicated on the contract ofcarriage, petitioner asserts that she has theoption to pursue this case in this jurisdictionpursuant to Philippine laws.

Respondents Arguments

In contrast, respondent maintains thatpetitioners claim for damages fell within theambit of Article 28(1) of the Warsaw Convention.

As such, the same can only be filed before thecourts of London, United Kingdom or Rome, Italy.

Our Ruling

The petition is without merit.

The Warsaw Convention has the force and effectof law in this country.

It is settled that the Warsaw Convention has theforce and effect of law in this country. In SantosIII v. Northwest Orient Airlines,12 we held that:

The Republic of the Philippines is a party to theConvention for the Unification of Certain RulesRelating to International Transportation by Air,otherwise known as the Warsaw Convention. Ittook effect on February 13, 1933. The Conventionwas concurred in by the Senate, through itsResolution No. 19, on May 16, 1950. ThePhilippine instrument of accession was signed byPresident Elpidio Quirino on October 13, 1950,and was deposited with the Polish government onNovember 9, 1950. The Convention becameapplicable to the Philippines on February 9, 1951.On September 23, 1955, President RamonMagsaysay issued Proclamation No. 201,declaring our formal adherence thereto, "to theend that the same and every article and clausethereof may be observed and fulfilled in goodfaith by the Republic of the Philippines and thecitizens thereof."

The Convention is thus a treaty commitmentvoluntarily assumed by the Philippinegovernment and, as such, has the force andeffect of law in this country.13

The Warsaw Convention applies because the airtravel, where the alleged tortious conductoccurred, was between the United Kingdom andItaly, which are both signatories to the WarsawConvention.

Article 1 of the Warsaw Convention provides:

1. This Convention applies to allinternational carriage of persons, luggageor goods performed by aircraft for reward.It applies equally to gratuitous carriage byaircraft performed by an air transportundertaking.

2. For the purposes of this Convention theexpression "

international carriage"

meansany carriage in which, according to thecontract made by the parties, the place of

departure and the place of destination

,whether or not there be a break in the

carriage or a transhipment, are situatedeither within the territories of two High

Contracting Parties

, or within the territoryof a single High Contracting Party, if thereis an agreed stopping place within aterritory subject to the sovereignty,suzerainty, mandate or authority ofanother Power, even though that Power isnot a party to this Convention. A carriagewithout such an agreed stopping placebetween territories subject to thesovereignty, suzerainty, mandate or
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authority of the same High ContractingParty is not deemed to be international forthe purposes of this Convention.(Emphasis supplied)

Thus, when the place of departure and the placeof destination in a contract of carriage aresituated within the territories of two HighContracting Parties, said carriage is deemed an

"international carriage". The High ContractingParties referred to herein were the signatories tothe Warsaw Convention and those whichsubsequently adhered to it.14

In the case at bench, petitioners place ofdeparture was London, United Kingdom while herplace of destination was Rome, Italy.15 Both theUnited Kingdom16 and Italy17 signed and ratifiedthe Warsaw Convention. As such, the transport ofthe petitioner is deemed to be an "internationalcarriage" within the contemplation of the WarsawConvention.

Since the Warsaw Convention applies in theinstant case, then the jurisdiction over thesubject matter of the action is governed by theprovisions of the Warsaw Convention.

Under Article 28(1) of the Warsaw Convention,the pl

aintiff may bring the action for damages before

1. the court where the carrier is domiciled;

2. the court where the carrier has itsprincipal place of business;

3. the court where the carrier has anestablishment by which the contract hasbeen made; or

4. the court of the place of destination.

In this case, it is not disputed that respondent is aBritish corporation domiciled in London, UnitedKingdom with London as its principal place ofbusiness. Hence, under the first and second

jurisdictional rules, the petitioner may bring hercase before the courts of London in the UnitedKingdom. In the passenger ticket and baggagecheck presented by both the petitioner andrespondent, it appears that the ticket was issuedin Rome, Italy. Consequently, under the third

jurisdictional rule, the petitioner has the option tobring her case before the courts of Rome in Italy.Finally, both the petitioner and respondent averthat the place of destination is Rome, Italy, whichis properly designated given the routingpresented in the said passenger ticket andbaggage check. Accordingly, petitioner may bringher action before the courts of Rome, Italy. Wethus find that the RTC of Makati correctly ruledthat it does not have jurisdiction over the casefiled by the petitioner.

Santos III v. Northwest Orient Airlines18 applies inthis case.

Petitioner contends that Santos III v. NorthwestOrient Airlines19 cited by the trial court isinapplicable to the present controversy since thefacts thereof are not similar with the instant case.

We are not persuaded.

In Santos III v. Northwest Orient Airlines,20

Augusto Santos III, a resident of the Philippines,purchased a ticket from Northwest Orient Airlinesin San Francisco, for transport between SanFrancisco and Manila via Tokyo and back to SanFrancisco. He was wait-listed in the Tokyo toManila segment of his ticket, despite his priorreservation. Contending that Northwest OrientAirlines acted in bad faith and discriminatedagainst him when it canceled his confirmedreservation and gave his seat to someone whohad no better right to it, Augusto Santos III sued

the carrier for damages before the RTC.Northwest Orient Airlines moved to dismiss thecomplaint on ground of lack of jurisdiction citingArticle 28(1) of the Warsaw Convention. The trialcourt granted the motion which ruling wasaffirmed by the Court of Appeals. When the casewas brought before us, we denied the petitionholding that under Article 28(1) of the WarsawConvention, Augusto Santos III must prosecutehis claim in the United States, that place beingthe (1) domicile of the Northwest Orient Airlines;(2) principal office of the carrier; (3) place wherecontract had been made (San Francisco); and (4)

place of destination (San Francisco).21

We further held that Article 28(1) of the WarsawConvention is jurisdictional in character. Thus:

A number of reasons tends to support thecharacterization of Article 28(1) as a jurisdictionand not a venue provision. First, the wording ofArticle 32, which indicates the places where theaction for damages "must" be brought,underscores the mandatory nature of Article28(1). Second, this characterization is consistentwith one of the objectives of the Convention,

which is to "regulate in a uniform manner theconditions of international transportation by air."

Third, the Convention does not contain anyprovision prescribing rules of jurisdiction otherthan Article 28(1), which means that the phrase"rules as to jurisdiction" used in Article 32 mustrefer only to Article 28(1). In fact, the lastsentence of Article 32 specifically deals with theexclusive enumeration in Article 28(1) as"jurisdictions," which, as such, cannot be left tothe will of the parties regardless of the time whenthe damage occurred.

x x x x

In other words, where the matter is governed bythe Warsaw Convention, jurisdiction takes on adual concept. Jurisdiction in the internationalsense must be established in accordance withArticle 28(1) of the Warsaw Convention, followingwhich the jurisdiction of a particular court mustbe established pursuant to the applicabledomestic law. Only after the question of whichcourt has jurisdiction is determined will the issue
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of venue be taken up. This second question shallbe governed by the law of the court to which thecase is submitted.22

Contrary to the contention of petitioner, Santos IIIv. Northwest Orient Airlines23 is analogous to theinstant case because (1) the domicile ofrespondent is London, United Kingdom;24 (2) theprincipal office of respondent airline is likewise in

London, United Kingdom;25

(3) the ticket waspurchased in Rome, Italy;26 and (4) the place ofdestination is Rome, Italy.27In addition, petitionerbased her complaint on Article 217628of the CivilCode on quasi-delictand Articles 1929 and 2130 ofthe Civil Code on Human Relations. In Santos III v.Northwest Orient Airlines,31 Augusto Santos IIIsimilarly posited that Article 28 (1) of the WarsawConvention did not apply if the action is based ontort. Hence, contrary to the contention of thepetitioner, the factual setting of Santos III v.Northwest Orient Airlines32 and the instant caseare parallel on the material points.

Tortious conduct as ground for the petitionerscomplaint is within the purview of the WarsawConvention.

Petitioner contends that in Santos III v. NorthwestOrient Airlines,33 the cause of action was basedon a breach of contract while her cause of actionarose from the tortious conduct of the airlinepersonnel and violation of the Civil Codeprovisions on Human Relations.34 In addition, sheclaims that our pronouncement in Santos III v.Northwest Orient Airlines35that "the allegation of

willful misconduct resulting in a tort is insufficientto exclude the case from the comprehension ofthe Warsaw Convention," is more of an obiterdictum rather than the ratio decidendi.36 Shemaintains that the fact that said acts occurredaboard a plane is merely incidental, if notirrelevant.37

We disagree with the position taken by thepetitioner. Black defines obiter dictum as "anopinion entirely unnecessary for the decision ofthe case" and thus "are not binding asprecedent."38 In Santos III v. Northwest Orient

Airlines,39 Augusto Santos III categorically put inissue the applicability of Article 28(1) of theWarsaw Convention if the action is based on tort.

In the said case, we held that the allegation ofwillful misconduct resulting in a tort is insufficientto exclude the case from the realm of the WarsawConvention. In fact, our ruling that a cause ofaction based on tort did not bring the caseoutside the sphere of the Warsaw Conventionwas our ratio decidendi in disposing of thespecific issue presented by Augusto Santos III.Clearly, the contention of the herein petitioner

that the said ruling is an obiter dictum is withoutbasis.

Relevant to this particular issue is the case ofCarey v. United Airlines,40 where the passengerfiled an action against the airline arising from anincident involving the former and the airlinesflight attendant during an international flightresulting to a heated exchange which includedinsults and profanity. The United States Court ofAppeals (9th Circuit) held that the "passenger's

action against the airline carrier arising fromalleged confrontational incident betweenpassenger and flight attendant on internationalflight was governed exclusively by the WarsawConvention, even though the incident allegedlyinvolved intentional misconduct by the flightattendant."41

In Bloom v. Alaska Airlines,42 the passenger

brought nine causes of action against the airlinein the state court, arising from a confrontationwith the flight attendant during an internationalflight to Mexico. The United States Court ofAppeals (9th Circuit) held that the "WarsawConvention governs actions arising frominternational air travel and provides the exclusiveremedy for conduct which falls within itsprovisions." It further held that the saidConvention "created no exception for an injurysuffered as a result of intentional conduct" 43

which in that case involved a claim for intentionalinfliction of emotional distress.

It is thus settled that allegations of tortiousconduct committed against an airline passengerduring the course of the international carriage donot bring the case outside the ambit of theWarsaw Convention.

Respondent, in seeking remedies from the trialcourt through special appearance of counsel, isnot deemed to have voluntarily submitted itselfto the jurisdiction of the trial court.

Petitioner argues that respondent has effectively

submitted itself to the jurisdiction of the trialcourt when the latter stated in itsComment/Opposition to the Motion forReconsideration that "Defendant [is at a loss] x xx how the plaintiff arrived at her erroneousimpression that it is/was Euro-Philippines AirlinesServices, Inc. that has been making a specialappearance since x x x British Airways x x x hasbeen clearly specifying in all the pleadings that ithas filed with this Honorable Court that it is theone making a special appearance."44

In refuting the contention of petitioner,

respondent cited La Naval Drug Corporation v.Court of Appeals45 where we held that even if aparty "challenges the jurisdiction of the courtover his person, as by reason of absence ordefective service of summons, and he alsoinvokes other grounds for the dismissal of theaction under Rule 16, he is not deemed to be inestoppel or to have waived his objection to the

jurisdiction over his person."46

This issue has been squarely passed upon in therecent case of Garcia v. Sandiganbayan,47 wherewe reiterated our ruling in La Naval Drug

Corporation v. Court of Appeals48 and elucidatedthus:

Special Appearance to Question a CourtsJurisdiction Is Not

Voluntary Appearance

The second sentence of Sec. 20, Rule 14 of theRevised Rules of Civil Procedure clearly provides:
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Sec. 20. Voluntary appearance. The defendantsvoluntary appearance in the action shall beequivalent to service of summons. The inclusionin a motion to dismiss of other grounds asidefrom lack of jurisdiction over the person of thedefendant shall not be deemed a voluntaryappearance.

Thus, a defendant who files a motion to dismiss,

assailing the jurisdiction of the court over hisperson, together with other grounds raisedtherein, is not deemed to have appearedvoluntarily before the court. What the rule onvoluntary appearance the first sentence of theabove-quoted rule means is that the voluntaryappearance of the defendant in court is withoutqualification, in which case he is deemed to havewaived his defense of lack of jurisdiction over hisperson due to improper service of summons.

The pleadings filed by petitioner in the subjectforfeiture cases, however, do not show that she

voluntarily appeared without qualification.Petitioner filed the following pleadings inForfeiture I: (a) motion to dismiss; (b) motion forreconsideration and/or to admit answer; (c)second motion for reconsideration; (d) motion toconsolidate forfeiture case with plunder case; and(e) motion to dismiss and/or to quash Forfeiture I.And in Forfeiture II: (a) motion to dismiss and/orto quash Forfeiture II; and (b) motion for partialreconsideration.

The foregoing pleadings, particularly the motionsto dismiss, were filed by petitioner solely for

special appearance with the purpose ofchallenging the jurisdiction of the SB over herperson and that of her three children. Petitionerasserts therein that SB did not acquire jurisdictionover her person and of her three children for lackof valid service of summons through improvidentsubstituted service of summons in both ForfeitureI and Forfeiture II. This stance the petitionernever abandoned when she filed her motions forreconsideration, even with a prayer to admit theirattached Answer Ex Abundante Ad Cautelamdated January 22, 2005 setting forth affirmativedefenses with a claim for damages. And the other

subsequent pleadings, likewise, did not abandonher stance and defense of lack of jurisdiction dueto improper substituted services of summons inthe forfeiture cases. Evidently, from the foregoingSec. 20, Rule 14 of the 1997 Revised Rules onCivil Procedure, petitioner and her sons did notvoluntarily appear before the SB constitutive of orequivalent to service of summons.

Moreover, the leading La Naval Drug Corp. v.Court of Appeals applies to the instant case. Saidcase elucidates the current view in our

jurisdiction that a special appearance before the

courtchallenging its jurisdiction over the personthrough a motion to dismiss even if the movantinvokes other groundsis not tantamount toestoppel or a waiver by the movant of hisobjection to jurisdiction over his person; and suchis not constitutive of a voluntary submission tothe jurisdiction of the court.1avvphi1

Thus, it cannot be said that petitioner and herthree children voluntarily appeared before the SBto cure the defective substituted services ofsummons. They are, therefore, not estopped from

questioning the jurisdiction of the SB over theirpersons nor are they deemed to have waivedsuch defense of lack of jurisdiction. Consequently,there being no valid substituted services ofsummons made, the SB did not acquire

jurisdiction over the persons of petitioner and herchildren. And perforce, the proceedings in thesubject forfeiture cases, insofar as petitioner andher three children are concerned, are null andvoid for lack of jurisdiction. (Emphasis supplied)

In this case, the special appearance of thecounsel of respondent in filing the Motion toDismiss and other pleadings before the trial courtcannot be deemed to be voluntary submission tothe jurisdiction of the said trial court. We hencedisagree with the contention of the petitioner andrule that there was no voluntary appearancebefore the trial court that could constituteestoppel or a waiver of respondents objection to

jurisdiction over its person.

WHEREFORE, the petition is DENIED. The October14, 2005 Order of the Regional Trial Court ofMakati City, Branch 132, dismissing the complaintfor lack of jurisdiction, is AFFIRMED.

SO ORDERED.

G.R. No. 165647 March 26, 2009

PHILIPPINES FIRST INSURANCE CO., INC.,Petitioner,vs.WALLEM PHILS. SHIPPING, INC., UNKNOWN

OWNER AND/OR UNKNOWN CHARTERER OFTHE VESSEL M/S "OFFSHORE MASTER" AND"SHANGHAI FAREAST SHIP BUSINESSCOMPANY," Respondents.

D E C I S I O N

TINGA,J.:

Before us is a Rule 45 petition1 which seeks thereversal of the Decision2 and Resolution3 of theCourt of Appeals in CA-G.R. No. 61885. The Court

of Appeals reversed the Decision4

of the RegionalTrial Court (RTC) of Manila, Branch 55 in CivilCase No. 96-80298, dismissing the complaint forsum of money.

The facts of the case follow.5

On or about 2 October 1995, Anhui ChemicalsImport & Export Corporation loaded on board M/SOffshore Master a shipment consisting of 10,000bags of sodium sulphate anhydrous 99 PCT Min.(shipment), complete and in good order fortransportation to and delivery at the port of

Manila for consignee, L.G. Atkimson Import-Export, Inc. (consignee), covered by a Clean Billof Lading. The Bill of Lading reflects the grossweight of the total cargo at 500,200 kilograms.6

The Owner and/or Charterer of M/V OffshoreMaster is unknown while the shipper of theshipment is Shanghai Fareast Ship BusinessCompany. Both are foreign firms doing businessin the Philippines, thru its local ship agent,respondent Wallem Philippines Shipping, Inc.(Wallem).7
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On or about 16 October 1995, the shipmentarrived at the port of Manila on board the vesselM/S Offshore Master from which it wassubsequently discharged. It was disclosed duringthe discharge of the shipment from the carrierthat 2,426 poly bags (bags) were in bad orderand condition, having sustained various degreesof spillages and losses. This is evidenced by the

Turn Over Survey of Bad Order Cargoes (turn-over survey) of the arrastre operator, Asian

Terminals, Inc. (arrastre operator).8 The bad stateof the bags is also evinced by the arrastreoperators Request for Bad Order Survey.9

Asia Star Freight Services, Inc. undertook thedelivery of the subject shipment from the pier tothe consignees warehouse in Quezon City,10

while the final inspection was conducted jointlyby the consignees representative and the cargosurveyor. During the unloading, it was found andnoted that the bags had been discharged indamaged and bad order condition. Upon

inspection, it was discovered that 63,065.00kilograms of the shipment had sustainedunrecovered spillages, while 58,235.00 kilogramshad been exposed and contaminated, resulting inlosses due to depreciation and downgrading.11

On 29 April 1996, the consignee filed a formalclaim with Wallem for the value of the damagedshipment, to no avail. Since the shipment wasinsured with petitioner Philippines First InsuranceCo., Inc. against all risks in the amount ofP2,470,213.50,12 the consignee filed a formalclaim13with petitioner for the damage and losses

sustained by the shipment. After evaluating theinvoices, the turn-over survey, the bad ordercertificate and other documents,14 petitionerfound the claim to be in order and compensableunder the marine insurance policy. Consequently,petitioner paid the consignee the sum ofP397,879.69 and the latter signed a subrogationreceipt.

Petitioner, in the exercise of its right ofsubrogation, sent a demand letter to Wallem forthe recovery of the amount paid by petitioner tothe consignee. However, despite receipt of the

letter, Wallem did not settle nor even send aresponse to petitioners claim.15

Consequently, petitioner instituted an actionbefore the RTC for damages against respondentsfor the recovery of P397,879.69 representing theactual damages suffered by petitioner plus legalinterest thereon computed from the time of thefiling of the complaint until fully paid andattorneys fees equivalent to 25% of the principalclaim plus costs of suit.

In a decision16 dated 3 November 1998, the RTC

ordered respondents to pay petitionerP397,879.69 with 6% interest plus attorneys feesand costs of the suit. It attributed the damageand losses sustained by the shipment to thearrastre operators mishandling in the dischargeof the shipment. Citing Eastern Shipping Lines,Inc. v. Court of Appeals,17 the RTC held theshipping company and the arrastre operatorsolidarily liable since both the arrastre operatorand the carrier are charged with and obligated todeliver the goods in good order condition to theconsignee. It also ruled that the ship functioned

as a common carrier and was obliged to observethe degree of care required of a common carrierin handling cargoes. Further, it held that a noticeof loss or damage in writing is not required in thiscase because said goods already underwent a

joint inspection or survey at the time of receiptthereof by the consignee, which dispensed withthe notice requirement.

The Court of Appeals reversed and set aside theRTCs decision.18 According to the appellate court,there is no solidary liability between the carrierand the arrastre operator because it was clearlyestablished by the court a quo that the damageand losses of the shipment were attributed to themishandling by the arrastre operator in thedischarge of the shipment. The appellate courtruled that the instant case falls under anexception recognized in Eastern

Shipping Lines.19 Hence, the arrastre operatorwas held solely liable to the consignee.

Petitioner raises the following issues:

1. Whether or not the Court of Appealserred in not holding that as a commoncarrier, the carriers duties extend to theobligation to safely discharge the cargofrom the vessel;

2. Whether or not the carrier should beheld liable for the cost of the damagedshipment;

3. Whether or not Wallems failure toanswer the extra judicial demand bypetitioner for the cost of the lost/damagedshipment is an implied admission of theformers liability for said goods;

4. Whether or not the courts below erredin giving credence to the testimony of Mr.

Talens.

It is beyond question that respondents vessel is acommon carrier.20 Thus, the standards for

determining the existence or absence of therespondents liability will be gauged on thedegree of diligence required of a common carrier.Moreover, as the shipment was an exercise ofinternational trade, the provisions of the Carriageof Goods

by Sea Act21 (COGSA), together with the CivilCode and the Code of Commerce, shall apply.22

The first and second issues raised in the petitionwill be resolved concurrently since they areinterrelated.

It is undisputed that the shipment was damagedprior to its receipt by the insured consignee. Thedamage to the shipment was documented by theturn-over survey23 and Request for Bad OrderSurvey.24 The turn-over survey, in particular,expressly stipulates that 2,426 bags of theshipment were received by the arrastre operatorin damaged condition. With these documents,petitioner insists that the shipment incurreddamage or losses while still in the care and
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responsibility of Wallem and before it was turnedover and delivered to the arrastre operator.

The trial court, however, found through thetestimony of Mr. Maximino Velasquez Talens, acargo surveyor of Oceanica Cargo MarineSurveyors Corporation, that the losses anddamage to the cargo were caused by themishandling of the arrastre operator. Specifically,

that the torn cargo bags resulted from the use ofsteel hooks/spikes in piling the cargo bags to thepallet board and in pushing the bags by thestevedores of the arrastre operator to the tugboats then to the ports.25 The appellate courtaffirmed the finding of mishandling in thedischarge of cargo and it served as its basis forexculpating respondents from liability,rationalizing that with the fault of the arrastreoperator in the unloading of the cargo establishedit should bear sole liability for the cost of thedamaged/lost cargo.

While it is established that damage or losseswere incurred by the shipment during theunloading, it is disputed who should be liable forthe damage incurred at that point of transport. Toaddress this issue, the pertinent laws and

jurisprudence are examined.

Common carriers, from the nature of theirbusiness and for reasons of public policy, arebound to observe extraordinary diligence in thevigilance over the goods transported by them.26

Subject to certain exceptions enumerated underArticle 173427 of the Civil Code, common carriers

are responsible for the loss, destruction, ordeterioration of the goods. The extraordinaryresponsibility of the common carrier lasts fromthe time the goods are unconditionally placed inthe possession of, and received by the carrier fortransportation until the same are delivered,actually or constructively, by the carrier to theconsignee, or to the person who has a right toreceive them.28

For marine vessels, Article 619 of the Code ofCommerce provides that the ship captain is liablefor the cargo from the time it is turned over to

him at the dock or afloat alongside the vessel atthe port of loading, until he delivers it on theshore or on the discharging wharf at the port ofunloading, unless agreed otherwise. In StandardOil Co. of New York v. Lopez Castelo,29 the Courtinterpreted the ship captains liability asultimately that of the shipowner by regarding thecaptain as the representative of the ship owner.

Lastly, Section 2 of the COGSA provides thatunder every contract of carriage of goods by sea,the carrier in relation to the loading, handling,stowage, carriage, custody, care, and discharge

of such goods, shall be subject to theresponsibilities and liabilities and entitled to therights and immunities set forth in the Act.30

Section 3 (2) thereof then states that among thecarriers responsibilities are to properly andcarefully load, handle, stow, carry, keep, care for,and discharge the goods carried.

The above doctrines are in fact expresslyincorporated in the bill of lading between the

shipper Shanghai Fareast Business Co., and theconsignee, to wit:

4. PERIOD OF RESPONSIBILITY. The responsibilityof the carrier shall commence from the timewhen the goods are loaded on board the vesseland shall cease when they are discharged fromthe vessel.

The Carrier shall not be liable of loss of ordamage to the goods before loading and afterdischarging from the vessel, howsoever such lossor damage arises.31

On the other hand, the functions of an arrastreoperator involve the handling of cargo depositedon the wharf or between the establishment of theconsignee or shipper and the ship's tackle.32

Being the custodian of the goods discharged froma vessel, an arrastre operator's duty is to takegood care of the goods and to turn them over tothe party entitled to their possession.33

Handling cargo is mainly the arrastre operator'sprincipal work so its drivers/operators oremployees should observe the standards andmeasures necessary to prevent losses anddamage to shipments under its custody.34

In Firemans Fund Insurance Co. v. Metro PortService, Inc.35 the Court explained therelationship and responsibility of an arrastreoperator to a consignee of a cargo, to quote:

The legal relationship between the consignee andthe arrastre operator is akin to that of a depositorand warehouseman. The relationship betweenthe consignee and the common carrier is similarto that of the consignee and the arrastreoperator. Since it is the duty of the ARRASTRE totake good care of the goods that are in itscustody and to deliver them in good condition tothe consignee, such responsibility also devolvesupon the CARRIER. Both the ARRASTRE and theCARRIER are therefore charged with andobligated to deliver the goods in good conditionto the consignee.(Emphasis supplied) (Citationsomitted)

The liability of the arrastre operator wasreiterated in Eastern Shipping Lines, Inc. v. Courtof Appeals36 with the clarification that the arrastreoperator and the carrier are not always andnecessarily solidarily liable as the facts of a casemay vary the rule.

Thus, in this case the appellate court is correctinsofar as it ruled that an arrastre operator and acarrier may not be held solidarily liable at alltimes. But the precise question is which entity

had custody of the shipment during its unloadingfrom the vessel?

The aforementioned Section 3(2) of the COGSAstates that among the carriers responsibilitiesare to properly and carefully load, care for anddischarge the goods carried. The bill of ladingcovering the subject shipment likewise stipulatesthat the carriers liability for loss or damage tothe goods ceases after its discharge from thevessel. Article 619 of the Code of Commerceholds a ship captain liable for the cargo from the
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time it is turned over to him until its delivery atthe port of unloading.

In a case decided by a U.S. Circuit Court,Nichimen Company v. M./V. Farland,37it was ruledthat like the duty of seaworthiness, the duty ofcare of the cargo is non-delegable,38 and thecarrier is accordingly responsible for the acts ofthe master, the crew, the stevedore, and his

other agents. It has also been held that it isordinarily the duty of the master of a vessel tounload the cargo and place it in readiness fordelivery to the consignee, and there is an impliedobligation that this shall be accomplished withsound machinery, competent hands, and in suchmanner that no unnecessary injury shall be donethereto.39 And the fact that a consignee isrequired to furnish persons to assist in unloadinga shipment may not relieve the carrier of its dutyas to such unloading.40

The exercise of the carriers custody and

responsibility over the subject shipment duringthe unloading actually transpired in the instantcase during the unloading of the shipment astestified by Mr. Talens, the cargo surveyor, toquote:

Atty. Repol:

- Do you agree with me that WallemPhilippines is a shipping [company]?

A Yes, sir.

Q And, who hired the services of thestevedores?

A The checker of the vessel of Wallem,sir.41

x x x

Q Mr. Witness, during the dischargingoperation of this cargo, where was themaster of the vessel?

A On board the vessel, supervising, sir.

Q And, observed the dischargingoperation?

A Yes, sir.

Q And, what did the master of the vesseldo when the cargo was being unloadedfrom the vessel?

A He would report to the head checker, sir.

Q He did not send the stevedores to whatmanner in the discharging of the cargofrom the vessel?

A And head checker po and siyangnagpapatakbo ng trabaho sa loob ngbarko, sir.42

x x x

Q Is he [the head checker] an employee ofthe company?

A He is a contractor/checker of WallemPhilippines, sir.43

Moreover, the liability of Wallem is highlighted byMr. Talens notes in the Bad Order Inspection, towit:

"The bad order torn bags, was due tostevedores[] utilizing steel hooks/spikes in pilingthe cargo to [the] pallet board at the vesselscargo holds and at the pier designated areabefore and after discharged that cause the bagsto torn [sic]."44 (Emphasis supplied)

The records are replete with evidence which showthat the damage to the bags happened beforeand after their discharge45 and it was caused bythe stevedores of the arrastre operator who werethen under the supervision of

Wallem.1awphi1.net

It is settled in maritime law jurisprudence thatcargoes while being unloaded generally remainunder the custody of the carrier. In the instantcase, the damage or losses were incurred duringthe discharge of the shipment while under thesupervision of the carrier. Consequently, thecarrier is liable for the damage or losses causedto the shipment. As the cost of the actual damageto the subject shipment has long been settled,the trial courts finding of actual damages in theamount of P397,879.69 has to be sustained.

On the credibility of Mr. Talens which is the fourthissue, the general rule in assessing credibility ofwitnesses is well-settled:

x x x the trial court's evaluation as to thecredibility of witnesses is viewed as correct andentitled to the highest respect because it is morecompetent to so conclude, having had theopportunity to observe the witnesses' demeanorand deportment on the stand, and the manner inwhich they gave their testimonies. The trial judge

therefore can better determine if such witnesseswere telling the truth, being in the ideal positionto weigh conflicting testimonies. Therefore,unless the trial judge plainly overlooked certainfacts of substance and value which, if considered,might affect the result of the case, hisassessment on credibility must be respected.46

Contrary to petitioners stance on the third issue,Wallems failure to respond to its demand letterdoes not constitute an implied admission ofliability. To borrow the words of Mr. Justice OliverWendell Holmes, thus:

A man cannot make evidence for himself bywriting a letter containing the statements that hewishes to prove. He does not make the letterevidence by sending it to the party against whomhe wishes to prove the facts [stated therein]. Heno more can impose a duty to answer a chargethan he can impose a duty to pay by sendinggoods. Therefore a failure to answer such adverseassertions in the absence of furthercircumstances making an answer requisite ornatural has no effect as an admission.47
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With respect to the attorneys fees, it is evidentthat petitioner was compelled to litigate thismatter to protect its interest. The RTCs award ofP20,000.00 as attorneys fees is reasonable.

WHEREFORE, the petition is GRANTED. TheDecision of the Court of Appeals dated 22 June2004 and its Resolution dated 11 October 2004are REVERSED and SET ASIDE. Wallem is ordered

to pay petitioner the sum of P397,879.69, withinterest thereon at 6% per annum from the filingof the complaint on 7 October 1996 until the

judgment becomes final and executory. Thereafter, an interest rate of 12% per annumshall be imposed.48Respondents are also orderedto pay petitioner the amount of P20,000.00 forand as attorneys fees, together with the costs ofthe suit.

SO ORDERED.

G.R. No. 179446 January 10, 2011

LOADMASTERS CUSTOMS SERVICES, INC.,Petitioner,vs.GLODEL BROKERAGE CORPORATION andR&B INSURANCE CORPORATION,Respondents.

D E C I S I O N

MENDOZA,J.:

This is a petition for review on certiorari underRule 45 of the Revised Rules of Court assailingthe August 24, 2007 Decision1 of the Court ofAppeals (CA) in CA-G.R. CV No. 82822, entitled"R&B Insurance Corporation v. Glodel BrokerageCorporation and Loadmasters Customs Services,Inc.," which held petitioner Loadmasters CustomsServices, Inc. (Loadmasters) liable to respondentGlodel Brokerage Corporation (Glodel) in theamount of P1,896,789.62 representing theinsurance indemnity which R&B InsuranceCorporation (R&B Insurance) paid to the insured-consignee, Columbia Wire and Cable Corporation(Columbia).

THE FACTS:

On August 28, 2001, R&B Insurance issuedMarine Policy No. MN-00105/2001 in favor ofColumbia to insure the shipment of 132 bundlesof electric copper cathodes against All Risks. OnAugust 28, 2001, the cargoes were shipped onboard the vessel "Richard Rey" from Isabela,Leyte, to Pier 10, North Harbor, Manila. Theyarrived on the same date.

Columbia engaged the services of Glodel for the

release and withdrawal of the cargoes from thepier and the subsequent delivery to itswarehouses/plants. Glodel, in turn, engaged theservices of Loadmasters for the use of its deliverytrucks to transport the cargoes to Columbiaswarehouses/plants in Bulacan and ValenzuelaCity.

The goods were loaded on board twelve (12)trucks owned by Loadmasters, driven by itsemployed drivers and accompanied by itsemployed truck helpers. Six (6) truckloads of

copper cathodes were to be delivered toBalagtas, Bulacan, while the other six (6)truckloads were destined for Lawang Bato,Valenzuela City. The cargoes in six truckloads forLawang Bato were duly delivered in Columbiaswarehouses there. Of the six (6) trucks en routeto Balagtas, Bulacan, however, only five (5)reached the destination. One (1) truck, loadedwith 11 bundles or 232 pieces of coppercathodes, failed to deliver its cargo.

Later on, the said truck, an Isuzu with Plate No.NSD-117, was recovered but without the coppercathodes. Because of this incident, Columbia filedwith R&B Insurance a claim for insuranceindemnity in the amount of P1,903,335.39. Afterthe requisite investigation and adjustment, R&BInsurance paid Columbia the amount ofP1,896,789.62 as insurance indemnity.

R&B Insurance, thereafter, filed a complaint fordamages against both Loadmasters and Glodel

before the Regional Trial Court, Branch 14, Manila(RTC), docketed as Civil Case No. 02-103040. Itsought reimbursement of the amount it had paidto Columbia for the loss of the subject cargo. Itclaimed that it had been subrogated "to the rightof the consignee to recover from the party/partieswho may be held legally liable for the loss."2

On November 19, 2003, the RTC rendered adecision3 holding Glodel liable for damages forthe loss of the subject cargo and dismissingLoadmasters counterclaim for damages andattorneys fees against R&B Insurance. The

dispositive portion of the decision reads:

WHEREFORE, all premises considered, theplaintiff having established by preponderance ofevidence its claims against defendant GlodelBrokerage Corporation, judgment is herebyrendered ordering the latter:

1. To pay plaintiff R&B InsuranceCorporation the sum of P1,896,789.62 asactual and compensatory damages, withinterest from the date of complaint untilfully paid;

2. To pay plaintiff R&B InsuranceCorporation the amount equivalent to 10%of the principal amount recovered as andfor attorneys fees plus P1,500.00 perappearance in Court;

3. To pay plaintiff R&B InsuranceCorporation the sum of P22,427.18 aslitigation expenses.

WHEREAS, the defendant Loadmasters Customs

Services, Inc.s counterclaim for damages andattorneys fees against plaintiff are herebydismissed.

With costs against defendant Glodel BrokerageCorporation.

SO ORDERED.4

Both R&B Insurance and Glodel appealed the RTCdecision to the CA.
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On August 24, 2007, the CA rendered theassailed decision which reads in part:

Considering that appellee is an agent of appellantGlodel, whatever liability the latter owes toappellant R&B Insurance Corporation asinsurance indemnity must likewise be the amountit shall be paid by appellee Loadmasters.

WHEREFORE, the foregoing considered, theappeal is PARTLY GRANTED in that the appelleeLoadmasters is likewise held liable to appellantGlodel in the amount of P1,896,789.62representing the insurance indemnity appellantGlodel has been held liable to appellant R&BInsurance Corporation.

Appellant Glodels appeal to absolve it from anyliability is herein DISMISSED.

SO ORDERED.5

Hence, Loadmasters filed the present petition forreview on certiorari before this Court presentingthe following

ISSUES

1. Can Petitioner Loadmasters beheld liable to Respondent Glodel inspite of the fact that the latterrespondent Glodel did not file across-claim against it (Loadmasters)?

2. Under the set of facts establishedand undisputed in the case, canpetitioner Loadmasters be legallyconsidered as an Agent of respondentGlodel?6

To totally exculpate itself from responsibility forthe lost goods, Loadmasters argues that it cannotbe considered an agent of Glodel because itnever represented the latter in its dealings withthe consignee. At any rate, it further contendsthat Glodel has no recourse against it for its(Glodels) failure to file a cross-claim pursuant to

Section 2, Rule 9 of the 1997 Rules of CivilProcedure.

Glodel, in its Comment,7 counters thatLoadmasters is liable to it under its cross-claimbecause the latter was grossly negligent in thetransportation of the subject cargo. With respectto Loadmasters claim that it is already estoppedfrom filing a cross-claim, Glodel insists that it canstill do so even for the first time on appealbecause there is no rule that provides otherwise.Finally, Glodel argues that its relationship withLoadmasters is that of Charter wherein the

transporter (Loadmasters) is only hired for thespecific job of delivering the merchandise. Thus,the diligence required in this case is merelyordinary diligence or that of a good father of thefamily, not the extraordinary diligence required ofcommon carriers.

R&B Insurance, for its part, claims that Glodel isdeemed to have interposed a cross-claim againstLoadmasters because it was not prevented frompresenting evidence to prove its position even

without amending its Answer. As to therelationship between Loadmasters and Glodel, itcontends that a contract of agency existedbetween the two corporations.8

Subrogation is the substitution of one person inthe place of another with reference to a lawfulclaim or right, so that he who is substitutedsucceeds to the rights of the other in relation to a

debt or claim, including its remedies orsecurities.9 Doubtless, R&B Insurance issubrogated to the rights of the insured to theextent of the amount it paid the consignee underthe marine insurance, as provided under Article2207 of the Civil Code, which reads:

ART. 2207. If the plaintiffs property has beeninsured, and he has received indemnity from theinsurance company for the injury or loss arisingout of the wrong or breach of contractcomplained of, the insurance company shall besubrogated to the rights of the insured against

the wrong-doer or the person who has violatedthe contract. If the amount paid by the insurancecompany does not fully cover the injury or loss,the aggrieved party shall be entitled to recoverthe deficiency from the person causing the loss orinjury.

As subrogee of the rights and interest of theconsignee, R&B Insurance has the right to seekreimbursement from either Loadmasters orGlodel or both for breach of contract and/or tort.

The issue now is who, between Glodel and

Loadmasters, is liable to pay R&B Insurance forthe amount of the indemnity it paid Columbia.

At the outset, it is well to resolve the issue ofwhether Loadmasters and Glodel are commoncarriers to determine their liability for the loss ofthe subject cargo. Under Article 1732 of the CivilCode, common carriers are persons, corporations,firms, or associations engaged in the business ofcarrying or transporting passenger or goods, orboth by land, water or air for compensation,offering their services to the public.

Based on the aforecited definition, Loadmastersis a common carrier because it is engaged in thebusiness of transporting goods by land, throughits trucking service. It is a common carrier asdistinguished from a private carrier wherein thecarriage is generally undertaken by specialagreement and it does not hold itself out to carrygoods for the general public.10 The distinction issignificant in the sense that "the rights andobligations of the parties to a contract of privatecarriage are governed principally by theirstipulations, not by the law on commoncarriers."11

In the present case, there is no indication that theundertaking in the contract between Loadmastersand Glodel was private in character. There is noshowing that Loadmasters solely and exclusivelyrendered services to Glodel.

In fact, Loadmasters admittedthat it is a commoncarrier.12
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In the same vein, Glodel is also considered acommon carrier within the context of Article1732. In its Memorandum,13 it states that it "is acorporation duly organized and existing under thelaws of the Republic of the Philippines and isengaged in the business of customs brokering." Itcannot be considered otherwise because as heldby this Court in Schmitz Transport & BrokerageCorporation v. Transport Venture, Inc.,14 acustoms broker is also regarded as a commoncarrier, the transportation of goods being anintegral part of its business.

Loadmasters and Glodel, being both commoncarriers, are mandated from the nature of theirbusiness and for reasons of public policy, toobserve the extraordinary diligence in thevigilance over the goods transported by themaccording to all the circumstances of such case,as required by Article 1733 of the Civil Code.When the Court speaks of extraordinarydiligence, it is that extreme measure of care and

caution which persons of unusual prudence andcircumspection observe for securing andpreserving their own property or rights.15 Thisexacting standard imposed on common carriersin a contract of carriage of goods is intended totilt the scales in favor of the shipper who is at themercy of the common carrier once the goodshave been lodged for shipment.16 Thus, in case ofloss of the goods, the common carrier ispresumed to have been at fault or to have actednegligently.17 This presumption of fault ornegligence, however, may be rebutted by proofthat the common carrier has observedextraordinary diligence over the goods.

With respect to the time frame of thisextraordinary responsibility, the Civil Codeprovides that the exercise of extraordinarydiligence lasts from the time the goods areunconditionally placed in the possession of, andreceived by, the carrier for transportation untilthe same are delivered, actually orconstructively, by the carrier to the consignee, orto the person who has a right to receive them.18

Premises considered, the Court is of the view that

both Loadmasters and Glodel are jointly andseverally liable to R & B Insurance for the loss ofthe subject cargo. Under Article 2194 of the NewCivil Code, "the responsibility of two or morepersons who are liable for a quasi-delict issolidary."

Loadmasters claim that it was never privy to thecontract entered into by Glodel with theconsignee Columbia or R&B Insurance assubrogee, is not a valid defense. It may not havea direct contractual relation with Columbia, but itis liable for tort under the provisions of Article

2176 of the Civil Code on quasi-delicts whichexpressly provide:

ART. 2176. Whoever by act or omission causesdamage to another, there being fault ornegligence, is obliged to pay for the damagedone. Such fault or negligence, if there is no pre-existing contractual relation between the parties,is called a quasi-delict and is governed by theprovisions of this Chapter.

Pertinent is the ruling enunciated in the case ofMindanao Terminal and Brokerage Service, Inc. v.Phoenix Assurance Company of New York,/McGee& Co., Inc.19where this Court held that a tort mayarise despite the absence of a contractualrelationship,to wit:

We agree with the Court of Appeals that thecomplaint filed by Phoenix and McGee against

Mindanao Terminal, from which the present casehas arisen, states a cause of action. The presentaction is based on quasi-delict, arising from thenegligent and careless loading and stowing of thecargoes belonging to Del Monte Produce. Evenassuming that both Phoenix and McGee have onlybeen subrogated in the rights of Del MonteProduce, who is not a party to the contract ofservice between Mindanao Terminal and DelMonte, still the insurance carriers may have acause of action in light of the Courts consistentruling that the act that breaks the contract maybe also a tort. In fine, a liability for tort may

arise even under a contract, where tort is thatwhich breaches the contract. In the present case,Phoenix and McGee are not suing for damagesfor injuries arising from the breach of thecontract of service but from the allegednegligent manner by which Mindanao Terminalhandled the cargoes belonging to Del MonteProduce. Despite the absence of contractualrelationship between Del Monte Produce andMindanao Terminal, the allegation of negligenceon the part of the defendant should be sufficientto establish a cause of action arising from quasi-delict. [Emphases supplied]

In connection therewith, Article 2180 provides:

ART. 2180. The obligation imposed by Article2176 is demandable not only for ones own actsor omissions, but also for those of persons forwhom one is responsible.

x x x x

Employers shall be liable for the damages causedby their employees and household helpers actingwithin the scope of their assigned tasks, even

though the former are not engaged in anybusiness or industry.

It is not disputed that the subject cargo was lostwhile in the custody of Loadmasters whoseemployees (truck driver and helper) wereinstrumental in the hijacking or robbery of theshipment. As employer, Loadmasters should bemade answerable for the damages caused by itsemployees who acted within the scope of theirassigned task of delivering the goods safely tothe warehouse.

Whenever an employees negligence causesdamage or injury to another, there instantlyarises a presumption juris tantum that theemployer failed to exercise diligentissimi patrisfamilies in the selection (culpa in eligiendo) orsupervision (culpa in vigilando) of itsemployees.20To avoid liability for a quasi-delictcommitted by its employee, an employer mustovercome the presumption by presentingconvincing proof that he exercised the care anddiligence of a good father of a family in the
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selection and supervision of his employee.21 Inthis regard, Loadmasters failed.

Glodel is also liable because of its failure toexercise extraordinary diligence. It failed toensure that Loadmasters would fully comply withthe undertaking to safely transport the subjectcargo to the designated destination. It shouldhave been more prudent in entrusting the goods

to Loadmasters by taking precautionarymeasures, such as providing escorts toaccompany the trucks in delivering the cargoes.Glodel should, therefore, be held liable withLoadmasters. Its defense of force majeure isunavailing.

At this juncture, the Court clarifies that thereexists no principal-agent relationship betweenGlodel and Loadmasters, as erroneously found bythe CA. Article 1868 of the Civil Code provides:"By the contract of agency a person binds himselfto render some service or to do something in

representation or on behalf of another, with theconsent or authority of the latter." The elementsof a contract of agency are: (1) consent, expressor implied, of the parties to establish therelationship; (2) the object is the execution of a

juridical act in relation to a third person; (3) theagent acts as a representative and not forhimself; (4) the agent acts within the scope of hisauthority.22

Accordingly, there can be no contract of agencybetween the parties. Loadmasters neverrepresented Glodel. Neither was it ever

authorized to make such representation. It is asettled rule that the basis for agency isrepresentation, that is, the agent acts for and onbehalf of the principal on matters within thescope of his authority and said acts have thesame legal effect as if they were personallyexecuted by the principal. On the part of theprincipal, there must be an actual intention toappoint or an intention naturally inferable fromhis words or actions, while on the part of theagent, there must be an intention to accept theappointment and act on it.23 Such mutual intent isnot obtaining in this case.

What then is the extent of the respectiveliabilities of Loadmasters and Glodel? Eachwrongdoer is liable for the total damage sufferedby R&B Insurance. Where there are severalcauses for the resulting damages, a party is notrelieved from liability, even partially. It issufficient that the negligence of a party is anefficient cause without which the damage wouldnot have resulted. It is no defense to one of theconcurrent tortfeasors that the damage would nothave resulted from his negligence alone, withoutthe negligence or wrongful acts of the other

concurrent tortfeasor. As stated in the case ofFarEastern Shipping v. Court of Appeals,24

X x x. Where several causes producing an injuryare concurrent and each is an efficient causewithout which the injury would not havehappened, the injury may be attributed to all orany of the causes and recovery may be hadagainst any or all of the responsible personsalthough under the circumstances of the case, itmay appear that one of them was more culpable,and that the duty owed by them to the injured

person was not the same. No actor's negligenceceases to be a proximate cause merely becauseit does not exceed the negligence of other actors.Each wrongdoer is responsible for the entireresult and is liable as though his acts were thesole cause of the injury.

There is no contribution between joint tortfeasorswhose liability is solidary since both of them are

liable for the total damage. Where the concurrentor successive negligent acts or omissions of twoor more persons, although acting independently,are in combination the direct and proximatecause of a single injury to a third person, it isimpossible to determine in what proportion eachcontributed to the injury and either of them isresponsible for the whole injury. Where theirconcurring negligence resulted in injury ordamage to a third party, they become jointtortfeasors and are solidarily liable for theresulting damage under Article 2194 of the CivilCode. [Emphasis supplied]

The Court now resolves the issue of whetherGlodel can collect from Loadmasters, it havingfailed to file a cross-claim against thelatter.1avvphi1

Undoubtedly, Glodel has a definite cause ofaction against Loadmasters for breach of contractof service as the latter is primarily liable for theloss of the subject cargo. In this case, however, itcannot succeed in seeking judicial sanctionagainst Loadmasters because the recordsdisclose that it did not properly interpose a cross-

claim against the latter. Glodel did not even praythat Loadmasters be liable for any and all claimsthat it may be adjudged liable in favor of R&BInsurance. Under the Rules, a compulsorycounterclaim, or a cross-claim, not set up shall bebarred.25 Thus, a cross-claim cannot be set up forthe first time on appeal.

For the consequence, Glodel has no one to blamebut itself. The Court cannot come to its aid onequitable grounds. "Equity, which has been aptlydescribed as a justice outside legality, is appliedonly in the absence of, and never against,

statutory law or judicial rules of procedure."26 TheCourt cannot be a lawyer and take the cudgels fora party who has been at fault or negligent.

WHEREFORE, the petition is PARTIALLYGRANTED. The August 24, 2007 Decision of theCourt of Appeals is MODIFIED to read as follows:

WHEREFORE, judgment is rendered declaringpetitioner Loadmasters Customs Services, Inc.and respondent Glodel Brokerage Corporation

jointly and severally liable to respondent R&BInsurance Corporation for the insurance

indemnity it paid to consignee Columbia Wire &Cable Corporation and ordering both parties topay, jointly and severally, R&B InsuranceCorporation a] the amount of P1,896,789.62representing the insurance indemnity; b] theamount equivalent to ten (10%) percent thereoffor attorneys fees; and c] the amount ofP22,427.18 for litigation expenses.

The cross-claim belatedly prayed for byrespondent Glodel Brokerage Corporation against
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petitioner Loadmasters Customs Services, Inc. isDENIED.

SO ORDERED.

G.R. No. 166250 July 26, 2010UNSWORTH TRANSPORT INTERNATIONAL(PHILS.), INC., Petitioner,vs.

COURT OF APPEALS and PIONEERINSURANCE AND SURETY CORPORATION,Respondents.

D E C I S I O N

NACHURA,J.:

For review is the Court of Appeals (CA) Decision1

dated April 29, 2004 and Resolution2 datedNovember 26, 2004. The assailed Decisionaffirmed the Regional Trial Court (RTC) decision3

dated February 22, 2001; while the assailedResolution denied petitioner Unsworth TransportInternational (Philippines), Inc., AmericanPresident Lines, Ltd. (APL), and Unsworth

Transport International, Inc.s (UTIs) motion forreconsideration.

The facts of the case are:

On August 31, 1992, the shipper SylvexPurchasing Corporation delivered to UTI ashipment of 27 drums of various raw materials forpharmaceutical manufacturing, consisting of: "1)

3 drums (of) extracts, flavoring liquid, flammableliquid x x x banana flavoring; 2) 2 drums (of)flammable liquids x x x turpentine oil; 2 pallets.STC: 40 bags dried yeast; and 3) 20 drums (of)Vitabs: Vitamin B Complex Extract."4 UTI issuedBill of Lading No. C320/C15991-2,5 covering theaforesaid shipment. The subject shipment wasinsured with private respondent PioneerInsurance and Surety Corporation in favor ofUnilab against all risks in the amount ofP1,779,664.77 under and by virtue of Marine RiskNote Number MC RM UL 0627 926 and OpenCargo Policy No. HO-022-RIU.7

On the same day that the bill of lading wasissued, the shipment was loaded in a sealed 1x40container van, with no. APLU-982012, boarded onAPLs vessel M/V "Pres. Jackson," Voyage 42, andtransshipped to APLs M/V "Pres. Taft"8 fordelivery to petitioner in favor of the consigneeUnited Laboratories, Inc. (Unilab).

On September 30, 1992, the shipment arrived atthe port of Manila. On October 6, 1992, petitionerreceived the said shipment in its warehouse afterit stamped the Permit to Deliver Imported Goods9

procured by the Champs Customs Brokerage.10

Three days thereafter, or on October 9, 1992,Oceanica Cargo Marine Surveyors Corporation(OCMSC) conducted a stripping survey of theshipment located in petitioners warehouse. Thesurvey results stated:

2-pallets STC 40 bags Dried Yeast, both ingood order condition and properly sealed

19- steel drums STC Vitamin B ComplexExtract, all in good order condition andproperly sealed

1-steel drum STC Vitamin B ComplexExtra[ct] with cut/hole on side, withapprox. spilling of 1%11

On October 15, 1992, the arrastre Jardine

Davies Transport Services, Inc. (Jardine)issued Gate Pass No. 761412which statedthat "22 drums13 Raw Materials forPharmaceutical Mfg." were loaded on atruck with Plate No. PCK-434 facilitated byChamps for delivery to Unilabswarehouse. The materials were noted tobe complete and in good order in the gatepass.14 On the same day, the shipmentarrived in Unilabs warehouse and wasimmediately surveyed by an independentsurveyor, J.G. Bernas Adjusters &Surveyors, Inc. (J.G. Bernas). The Report

stated:

1-p/bag torn on side contents partlyspilled

1-s/drum #7 punctured and retaped onbottom side content lacking

5-drums shortship/short delivery15

On October 23 and 28, 1992, the sameindependent surveyor conducted final inspectionsurveys which yielded the same results.Consequently, Unilabs quality controlrepresentative rejected one paper bag containingdried yeast and one steel drum containingVitamin B Complex as unfit for the intendedpurpose.16

On November 7, 1992, Unilab filed a formalclaim17 for the damage against privaterespondent and UTI. On November 20, 1992, UTIdenied liability on the basis of the gate passissued by Jardine that the goods were in completeand good condition; while private respondent

paid the claimed amount on March 23, 1993. Byvirtue of the Loss and Subrogation Receipt18

issued by Unilab in favor of private respondent,the latter filed a complaint for Damages againstAPL, UTI and petitioner with the RTC of Makati.19

The case was docketed as Civil Case No. 93-3473and was raffled to Branch 134.

After the terminatio

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