Presentation of Policies

INTERNATIONAL CONTAINERTERMINAL SERVICES, INC., petitioner,

vs.
FGU INSURANCE CORPORATION, respondent.

DECISION

AUSTRIA-MARTINEZ, J.:

In a Decision dated July 1, 1999 in Civil Case No. 95-73532, the Regional Trial Court (RTC)
of Manila, Branch 30, ordered International Container Terminal Services, Inc. (petitioner) to
pay FGU Insurance Corporation (respondent) the following sums: (1) P1,875,068.88 with
12% interest per annum from January 3, 1995 until fully paid; (2) P50,000.00 as attorney's
fees; and (3) P10,000.00 as litigation expenses.1

Petitioner's liability arose from a lost shipment of "14 Cardboards 400 kgs. of Silver Nitrate
63.53 FCT Analytically Pure (purity 99.98 PCT)," shipped by Hapag-Lloyd AG through the
vessel Hannover Express from Hamburg, Germany on July 10, 1994, with Manila,
Philippines as the port of discharge, and Republic Asahi Glass Corporation (RAGC) as
consignee. Said shipment was insured by FGU Insurance Corporation (FGU). When
RAGC's customs broker, Desma Cargo Handlers, Inc., was claiming the shipment,
petitioner, which was the arrastre contractor, could not find it in its storage area. At the
behest of petitioner, the National Bureau of Investigation (NBI) conducted an investigation.
The AAREMA Marine and Cargo Surveyors, Inc. also conducted an inquiry. Both found that
the shipment was lost while in the custody and responsibility of petitioner.

As insurer, FGU paid RAGC the amount of P1,835,068.88 on January 3, 1995.2 In turn,
FGU sought reimbursement from petitioner, but the latter refused. This constrained FGU to
file with the RTC of Manila Civil Case No. 95-73532 for a sum of money.

After trial, the RTC rendered its Decision dated July 1, 1999 finding petitioner liable.

Petitioner appealed to the Court of Appeals (CA), which, in the assailed Decision 3 dated
October 22, 2003, affirmed the RTC Decision. Petitioner filed a motion for reconsideration
which the CA denied in its Resolution dated January 8, 2004. 4

Hence, the present petition for review on certiorari under Rule 45 of the Rules of Court, with
the following assignment of errors:

1. THE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO APPLY THE

LIMITATION OF LIABILITY OF P3,5000 PER PACKAGE WHICH LIMITS
PETITIONER'S LIABILITY, IF ANY, TO A TOTAL OF ONLYP49,000.00 PURSUANT
TO PPA ADMINISTRATIVE ORDER NO. 10-81.

2. THE COURT OF APPEALS SERIOUSLY ERRED IN UPHOLDING THE MARINE

OPEN POLICY DESPITE THE FACT THAT THE SAME WAS NO LONGER IN
 FORCE AT THE TIME THE SHIPMENT WAS LOADED ON BOARD THE
CARRYING VESSEL.

3. THE COURT OF APPEALS SERIOUSLY ERRED IN FAILING TO DISMISS THE

COMPLAINT ON THE GROUND OF RESPONDENT'S FAILURE TO OFFER THE
INSURANCE POLICY IN EVIDENCE PURSUANT TO THIS HONORABLE
COURT'S DECISION IN HOME INSURANCE CORPORATION VS. COURT OF
APPEALS (225 SCRA 411) AND THE FAIRLY RECENT DECISION IN WALLEM
PHILIPPINES SHIPPING, INC. AND SEACOAST MARITIME CORP. VS.
PRUDENTIAL GUARANTEE AND ASSURANCE, INC. AND COURT OF APPEALS,
G.R. NO. 152158, 07 FEBRUARY 2003.

4. ASSUMING ARGUENDO THAT PETITIONER IS LIABLE, THE COURT OF

APPEALS SERIOUSLY ERRED IN AFFIRMING THE AWARD OF 12% INTEREST
DESPITE THE FACT THAT THE OBLIGATION PURPORTEDLY BREACHED DOES
NOT CONSTITUTE A LOAN OF FORBEARANCE OF MONEY AND DESPITE THE
CLEAR GUIDELINES SET FORTH BY THIS HONORABLE COURT IN EASTERN
SHIPPING LINES, INC. VS. COURT OF APPEALS. (234 SCRA 78).5

The rule in our jurisdiction is that only questions of law may be entertained by this Court in a
petition for review oncertiorari. This rule, however, is not ironclad and admits certain
exceptions, such as when (1) the conclusion is grounded on speculations, surmises or
conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is
grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the
findings of fact are conflicting; (6) there is no citation of specific evidence on which the
factual findings are based; (7) the findings of absence of facts are contradicted by the
presence of evidence on record; (8) the findings of the CA are contrary to those of the trial
court; (9) the CA manifestly overlooked certain relevant and undisputed facts that, if
properly considered, would justify a different conclusion; (10) the findings of the CA are
beyond the issues of the case; and (11) such findings are contrary to the

admissions of both parties.6 In the present case, there is nothing on record which will show
that it falls within the exceptions. Hence, the petition must be denied.

Petitioner posits that its liability for the lost shipment should be limited to P3,500.00 per
package as provided in Philippine Ports Authority Administrative Order No. 10-81 (PPA AO
10-81), under Article VI, Section 6.01 of which provides:

Section 6.01. Responsibility and Liability for Losses and Damages; Exceptions - The
CONTRACTOR shall at its own expense handle all merchandise in all work
undertaken by it hereunder deligently [sic] and in a skillful, workman-like and efficient
manner; that the CONTRACTOR shall be solely responsible as an independent
CONTRACTOR, and hereby agrees to accept liability and to promptly pay to the
shipping company consignees, consignors or other interested party or parties for the
loss, damage, or non-delivery of cargoes to the extent of the actual invoice value of
each package which in no case shall be more than THREE THOUSAND FIVE
HUNDRED PESOS (P3,500.00) (for import cargo) x x x for each package unless
the value of the cargo importation is otherwise specified or manifested or
 communicated in writing together with the declared bill of lading value and
supported by a certified packing list to the CONTRACTOR by the interested
party or parties before the discharge x x x of the goods, as well as all damage
that may be suffered on account of loss, damage, or destruction of any merchandise
while in custody or under the control of the CONTRACTOR in any pier, shed,
warehouse facility or other designated place under the supervision of the
AUTHORITY x x x.7 (Emphasis supplied)

The CA summarily ruled that PPA AO 10-81 is not applicable to this case without laying out
the reasons therefor.

PPA AO 10-81 is the management contract between by the Philippine Ports Authority and
the cargo handling services providers. In Summa Insurance Corporation v. Court of
Appeals,8 the Court ruled that:

In the performance of its job, an arrastre operator is bound by the management

contract it had executed with the Bureau of Customs. However, 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 insurer, as successor-in-interest of the consignee,
is likewise bound by the management contract. Indeed, upon taking delivery of the
cargo, a consignee (and necessarily its successor-in- interest) tacitly accepts the
provisions of the management contract, including those which are intended to limit
the liability of one of the contracting parties, the arrastre operator.

However, a consignee who does not avail of the services of the arrastre operator is
not bound by the management contract. Such an exception to the rule does not
obtain here as the consignee did in fact accept delivery of the cargo from the arrastre
operator.9

While it appears in the present case that the RAGC availed itself of petitioner's services and
therefore, PPA AO 10-81 should apply, the Court finds that the extent of petitioner's liability
should cover the actual value of the lost shipment and not the P3,500.00 limit per package
as provided in said Order.

It is borne by the records that when Desma Cargo Handlers was negotiating for the
discharge of the shipment, it presented Hapag-Lloyd's Bill of Lading, 10 Degussa's
Commercial Invoice, which indicates that value of the shipment, including seafreight
charges, was DM94.960,00 (CFR Manila);11 and Degussa's Packing List, which likewise
notes that the value of the shipment was DM94.960,00. 12 It is highly unlikely that petitioner
was not made aware of the actual value of the shipment, since it had to examine the
pertinent documents for stripping purposes and, later on, for the discharge of the shipment
to the consignee or its representative. In fact, the NBI Report dated September 26, 1994 on
the investigation conducted by it regarding the loss of the shipment shows that petitioner's
Admeasurer Rosco Esquibal was shown the Bill of Lading by Desma Brokerage's
representative, Rey Villanueva.13 Esquibal also stated that another representative of Desma
Brokerage, Joey Laurente, went to their office and furnished him a copy of the "processed
papers of the fourteen cartons of Asahi Glass cargoes." 14

By its own act of not charging the corresponding arrastre fees based on the value of the
shipment after it came to know of such declared value from the marine insurance policy,
petitioner cannot escape liability for the actual value of the shipment. The value of the
merchandise or shipment may be declared or stated not only in the bill of lading or shipping
manifest, but also in other documents required by law before the shipment is cleared from
the piers.15

Petitioner insists that Marine Open Policy No. MOP-12763 under which the shipment was
insured was no longer in force at the time it was loaded on board the Hannover Express on
June 10, 1994, as provided in the Endorsement portion of the policy, which states: "IT IS
HEREBY DECLARED AND AGREED that effective June 10, 1994, this policy is deemed
CANCELLED."16 FGU, on the other hand, insists that it was under Marine Risk Note No.
9798, which was executed on May 26, 1994, that said shipment was covered.

It must be emphasized that a marine risk note is not an insurance policy. It is only an
acknowledgment or declaration of the insurer confirming the specific shipment covered by
its marine open policy, the evaluation of the cargo and the chargeable premium. 17 It is the
marine open policy which is the main insurance contract. In other words, the marine open
policy is the blanket insurance to be undertaken by FGU on all goods to be shipped by
RAGC during the existence of the contract, while the marine risk note specifies the
particular goods/shipment insured by FGU on that specific transaction, including the sum
insured, the shipment particulars as well as the premium paid for such shipment. In any
event, as it stands, it is evident that even prior to the cancellation by FGU of Marine Open
Policy No. MOP-12763 on June 10, 1994, it had already undertaken to insure the shipment
of the 400 kgs. of silver nitrate, specially since RAGC had already paid the premium on the
insurance of said shipment.

Indeed, jurisprudence has it that the marine insurance policy needs to be presented in
evidence before the trial court or even belatedly before the appellate court. In Malayan
Insurance Co., Inc. v. Regis Brokerage Corp.,18 the Court stated that the presentation of the
marine insurance policy was necessary, as the issues raised therein arose from the very
existence of an insurance contract between Malayan Insurance and its consignee, ABB
Koppel, even prior to the loss of the shipment. In Wallem Philippines Shipping, Inc. v.
Prudential Guarantee and Assurance, Inc.,19 the Court ruled that the insurance contract
must be presented in evidence in order to determine the extent of the coverage. This was
also the ruling of the Court in Home Insurance Corporation v. Court of Appeals.20

However, as in every general rule, there are admitted exceptions. In Delsan Transport
Lines, Inc. v. Court of Appeals,21 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 No. MOP-12763, 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.22 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. 23

Finally, petitioner questions the imposition of a 12% interest rate, instead of 6%, on its
adjudged liability. The ruling in Prudential Guarantee and Assurance Inc. v. Trans-Asia
Shipping Lines, Inc.,24 to wit:

This Court in Eastern Shipping Lines, Inc. v. Court of Appeals, inscribed the rule of
thumb in the application of interest to be imposed on obligations, regardless of their
source. Eastern emphasized beyond cavil that when the judgment of the court
awarding a sum of money becomes final and executory, the rate of legal interest,
regardless of whether the obligation involves a loan or forbearance of money, shall
be 12% per annum from such finality until its satisfaction, this interim period being
deemed to be by then an equivalent to a forbearance of credit.

We find application of the rule in the case at bar proper, thus, a rate of 12% per
annum from the finality of judgment until the full satisfaction thereof must be imposed
on the total amount of liability adjudged to PRUDENTIAL. It is clear that the interim
period from the finality of judgment until the satisfaction of the same is
deemed equivalent to a forbearance of credit, hence, the imposition of the
aforesaid interest.25 (Emphasis supplied)

is instructive. The CA did not commit any error in applying the same.

The Court notes, however, an apparent clerical error made in the dispositive portion of the
RTC Decision. While it appears that FGU paid RAGC the amount of P1,835,068.88, as
shown in the Subrogation Receipt,26 as prayed for in its Complaint,27 the RTC awarded the
sum of P1,875,068.88. Thus, a necessary modification should be made on this score.

WHEREFORE, the petition is DENIED. The Decision dated October 22, 2003 and
Resolution dated January 8, 2004 of the Court of Appeals are AFFIRMED, with the
modification that the award in the RTC Decision dated July 1, 1999 should
be P1,835,068.88 instead of P1,875,068.88.

Costs against petitioner.

SO ORDERED.