JEA Steel Industries, Inc. (JEA Steel) imported from South Korea 72 aluminum-zinc-alloy-coated steel sheets in coils. These steel sheets were transported to Manila on board the vessel M/V Dooyang Glory as evidenced by Bill of Lading No. HDMUBSOML-214s011. Upon arrival of the shipment in Manila, these coils were stored under the custody of Asian Terminals, Inc. and were thereafter loaded on the trucks of Manuel Ong. The coils were delivered to JEA Steel’s plant in Cavite where it was found that eleven of the 72 coils were in damaged condition, dented and deformed.
JEA Steel filed a claim with Oriental for the value of the 11 damaged coils pursuant to Marine Insurance Policy No. OAC/M-12292. Oriental paid JEA Steel the sum of PHP 521,530.16 and subsequently demanded indemnity from Ong and Asian Terminals, but the latter refused to pay.
Oriental filed a complaint for sum of money against the respondents.
Ong countered that the 11 coils were already damages when they were loaded on board his trucks and transported to the consignee. Meanwhile, Asian Terminals claimed that it exercised due diligence in handling the cargo. It further alleged that Oriental’s claim was barred for the latter’s failure to file a notice of claim within the 15-day period provided in the Gate Pass and in Article VII, Section 7.01 of the Contact for Cargo Handling Services (Management Contract) between the Philippine Ports Authority and Asian Terminals. Such Gate Pass was signed by the consignee’s representative to acknowledge the delivery and receipt of the shipment. In addition, Asian Terminals contended that its liability, if any, should not exceed PHP 5,000.00, pursuant to Section 7.01.
The trial court dismissed the complaint. The Court of Appeals dismissed Oriental’s appeal on the ground that it had already prescribed. The appellate court held that Asian Terminals was bound to observe the same degree of care required of common carriers.
Issues:
- Whether or not the Court of Appeals gravely erred in passing upon the issue of prescription even though it was not an assigned error in the appeal;
- Whether or not the claim against Asian Terminals, Inc. is barred by prescription; and
- Whether or not the Court of Appeals gravely erred in ruling that Manuel Ong is not liable for the damage of the cargo
Ruling:
The petition was granted. The consignee’s claim latter that was received by the arrastre operator two (2) days after complete delivery of the cargo constitutes substantial compliance with the time limitation for filing claims under the Gate Pass and the Management Contract. However, the arrastre operator’s liability for damage to the cargo is limited to PHP 5,000.00 per package in accordance with the Management Contract.
The Court of Appeals properly passed upon the issue of prescription. An assignment of error is generally required for appellate review. Rule 51, Section 8 of the Rules of Court provides that only errors which have been stated in the assignment of errors and properly argued in the brief will be considered by the appellate court. The exceptions to this rule are errors affecting jurisdiction over the subject matter as well as plain and clerical errors.
However, as ruled in Mendoza v. Bautista, an appellate court is clothed with ample authority to review rulings even if they are not assigned as errors in the appeal in the following instances: (a) grounds not assigned as errors but affecting jurisdiction over the subject matter; (b) matters not assigned as errors on appeal but are evidently plain or clerical errors within contemplation of law; (c) matters not assigned as errors on appeal but consideration of which is necessary in arriving at a just decision and complete resolution of the case or to serve the interests of justice or to avoid dispensing piecemeal justice; (d) matters not specifically assigned as errors on appeal but raised in the trial court and are matters of record having some bearing on the issue submitted which the parties failed to raise or which the lower court ignored; (e) matters not assigned as errors on appeal but closely related to an error assigned; and (f) matters not assigned as errors on appeal but upon which the determination of a question property assigned, is dependent. Exceptions (d) and (e) apply in this case.
The provisions of the Management Contract and the Gate Pass are binding on Oriental as insurer-subrogee and successor-in-interest of the consignee. In Government Service Insurance System v. Manila Railroad Company, it was held that the provisions of a gate pass or of an arrastre management contract are binding on an insurer-subrogee even if the latter is not a party to it. Accordingly, by availing the services of an arrastre operator and taking delivery in pursuance of a permit and a pass issued by the latter, which were “subject to all the terms and conditions” of said management contract, including the requirement thereof that “a c alim is filed with the Company within 15 days from the date of arrival of the goods”, the consignee - together with the insurer or plaintiff herein, as successor to the rights of the consignee – became bound by the provisions of said contract.
This doctrine was also reiterated in the case of Summa Insurance Corporation v. Court of Appeals which stated that a management contract, which is a sort of a stipulation pour autrui within the meaning of Article 1311 of the Civil Code, is also binding on a consignee because it is incorporated in the gate pass and delivery receipt which must be presented by the consignee before delivery can be effected to it.
The fact that Oriental is not a party to the Gate Pass and the Management Contract does not mean that it cannot be bound by their provisions. Oriental is subrogated to the rights of the consignee upon its payment of the insurance claim.
According to Article 2207 of the Civil Code, if the plaintiff’s property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. This article is founded on the well-settled principle of subrogation. The Court held that payment by the insurer to the assured operates as an equitable assignment to the former of all remedies which the latter may have against the third party whose negligence or wrongful act caused the loss. The right of subrogation is not dependent upon, nor does it grow out of, any privity of contract or upon written assignment of claim. It accrues simply upon payment of the insurance claim by the insurer.
The issuance of a certificate of loss is not an indispensable condition for the 15-day limit to run. The Court has ruled that the purpose of the time limitation for filing claims is “to apprise the arrastre operator of the existence of a claim and enable it to check on the validity of the claimant’s demand while the facts are still fresh for recollection of the persons who took part in the undertaking and the pertinent papers are still available.” In addition, the Court has liberally construed the requirement for filing a formal claim and allowed claims filed even beyond the 15-day prescriptive period after finding that the request for bad order survey o the provisional claim filed by the consignee had sufficiently served the purpose of a formal claim (New Zealand Insurance Co., Ltd. v. Navarro).
It is well-settled in jurisprudence that substantial compliance with the 15-day time limitation is allowed provided that the consignee has made a provisional claim thru a request for bad order survey or examination report.
However, the facts of this case do not show that a provisional claim or a request for bad order survey was made by the consignee. Even so, the Court adopts a reasonable interpretation of the stipulations in the Management Contract and hold that petitioner’s complaint is not time-barred. The consignee’s claim letter is regarded as substantial compliance with the condition precedent set forth in the Management Contract to hold the arrastre operator liable.
Since the Cargo Gate Passes issued by Asian Terminals do not indicate the value of the cargo, the liability of the latter should be limited to the maximum recoverable value of PHP 5,000.00 per package or coil, totalling PHP 55,000.00 for the 11 damaged coils. This amount shall earn a legal interest rate of 6% per annum from the date of finality of this judgment until its full satisfaction as per Nacar v. Gallery Frames.
