Eastern Shipping Lines v.

Prudential Guarantee
G.R. No. 174116
September 11, 2009

Facts

Auto parts of Nissan motor vehicle were shipped to Manila. The shipment was
consigned to Nissan and was covered by a Bill of Lading. The carrier was owned
and operated by petitioner Eastern Shipping Lines. The carrier arrived at the port of
Manila. The shipment was then discharged from the vessel onto the custody of
the arrastre operator, Asian Terminals, complete and in good condition, except for
four cases. The shipment was withdrawn by Seafront Customs and Brokerage from
the pier and delivered to the warehouse of Nissan in Quezon City.

Survey of the shipment was then conducted at Nissan’s warehouse. The surveyor
submitted its report with a finding that there were missing and broken items in some
of the cases and that "in its opinion, the "shortage and damage sustained by the
shipment were due to pilferage and improper handling, respectively while in the
custody of the vessel and/or Arrastre Contractors. As a result, Nissan demanded the
sum of ₱1 million representing the cost of the damages sustained by the shipment
from petitioner. However, the demands were not heeded. As insurer of the shipment
against all risks, respondent Prudential Guarantee paid Nissan the cost of damages.

Respondent sued petitioner and ATI for reimbursement of the amount it paid to
Nissan before the RTC of Makati City. Respondent claimed that it was subrogated
to the rights of Nissan by virtue of said payment. The RTC rendered a Decision in
favor of respondent. On appeal to the CA, it affirmed the decision with modifications
by reducing the amount to ₱900k.

Issue & Ruling

Whether or not the two documents, without the Marine Insurance Policy, are
sufficient to prove respondent’s right of subrogation

It is undisputed that the cargoes were already on board the carrier as early as
November 8 and that the same arrived at the port of Manila on November 16. It is,
however, very apparent that the Marine Cargo Risk Note was issued only on
November 16. The same, therefore, should have raised a red flag, as it would be
impossible to know whether said goods were actually insured while the same were
in transit from Japan to Manila.

Based on the forgoing, it is already evident why herein petition is meritorious. The
Marine Risk Note relied upon by respondent as the basis for its claim for subrogation
is insufficient to prove said claim.

As previously stated, the Marine Risk Note was issued only on November 16; hence,
without a copy of the marine insurance policy, it would be impossible and simply
guesswork to know whether the cargo was insured during the voyage which started
on November 8. Again, without the marine insurance policy, it would be impossible
for this Court to know the following: first, the specifics of the Institute Cargo Clauses
A and other terms and conditions per Marine Open as alluded to in the Marine Risk
Note; second, if the said terms and conditions were actually complied with before
respondent paid Nissan’s claim.
Furthermore, a reading of the transcript of the records clearly show that, at the RTC,
petitioner had already objected to the non-presentation of the marine insurance
policy. Clearly, petitioner was not remiss when it openly objected to the non-
presentation of the Marine Insurance Policy. As testified to by respondent’s witness,
they had a copy of the marine insurance policy in their office. Thus, respondent was
already apprised of the possible importance of the said document to their cause.

Finally, there have been cases where this Court ruled that the non-presentation of the
marine insurance policy is not fatal. However, as in every general rule, there are
admitted exceptions. In Delsan Transport Lines, Inc. v. Court of Appeals, the Court
stated that the presentation of the insurance policy was not fatal because the loss of
the cargo undoubtedly occurred while on board the petitioner's vessel, unlike
in Home Insurance in which the cargo passed through several stages with different
parties and it could not be determined when the damage to the cargo occurred, such
that the insurer should be liable for it.

As in Delsan, there is no doubt that the loss of the cargo in the present case occurred
while in petitioner's custody. Moreover, there is no issue as regards the provisions
of Marine Open Policy, such that the presentation of the contract itself is necessary
for perusal, not to mention that its existence was already admitted by petitioner in
open court. And even though it was not offered in evidence, it still can be considered
by the court as long as they have been properly identified by testimony duly recorded
and they have themselves been incorporated in the records of the case.

Although the CA may have ruled that the damage to the cargo occurred while the
same was in petitioner’s custody, this Court cannot apply the ruling
in International to the case at bar. In contrast, unlike in International where there was
no issue as regards the provisions of the marine insurance policy, such that the
presentation of the contract itself is necessary for perusal, herein petitioner had
repeatedly objected to the non-presentation of the marine insurance policy and had
manifested its desire to know the specific provisions thereof. Moreover, and the
same is critical, the marine risk note in the case at bar is questionable because: first,
it is dated on the same day the cargoes arrived at the port of Manila and not during
the duration of the voyage; second, without the Marine Insurance Policy to elucidate
on the specifics of the terms and conditions alluded to in the marine risk note, it
would be simply guesswork to know if the same were complied with.