Freight Management Worldwide Services, Inc. v. American President Lines

FIRST DIVISION

[G.R. No. 203612. August 7, 2019.]

FREIGHT MANAGEMENT WORLDWIDE SERVICES, INC., petitioner, vs.AMERICAN PRESIDENT LINES AND PHILAM INSURANCE CO., INC., respondents.

NOTICE

Sirs/Mesdames :

Please take notice that the Court, First Division, issued a Resolution dated August 7, 2019which reads as follows:

"G.R. No. 203612 (Freight Management Worldwide Services, Inc. v. American President Lines and Philam Insurance Co., Inc.). — In this petition for review on certiorari 1 assailing the April 19, 2012 Decision 2 and September 18, 2012 Resolution 3 of the Court of Appeals (CA) in CA-G.R. SP No. 104950, We reiterate the rule that an entity may only be held liable as a ship agent if it provisions the vessel or represents the vessel in the port where it may be found. If the entity does not perform either of these two functions, it may nonetheless be held liable as an agent pursuant to the rule on agency.

Freight Management Worldwide Services, Inc. (Freight) and Philam Insurance Co., Inc. (Philam) are domestic corporations engaged in the business of international and domestic freight forwarding, and insurance, respectively. Meanwhile, Carotrans International, Inc. (Carotrans) is a foreign company engaged in the freight forwarding business in the United States of America (USA). American President Lines (APL) is a foreign corporation engaged in the shipping business.

On November 29, 1999, Carotrans received from Gilbarco, Inc. (shipper) a shipment of nine fiber boxes of gasoline pumps (cargo), complete and in good condition, at the port of Los Angeles, California, USA. The cargo was loaded on board APL's vessel, M/V "APL Spinel" (vessel), for transportation and delivery at the port of Manila in favor of Flow Systems, Inc. (consignee). 4 It was insured with Philam in the amount of P997,174.95 under Marine Cargo Certificate No. 0801005900. 5

The cargo arrived in a damaged condition and was eventually rejected by the consignee. The consignee filed claims against Carotrans and APL but to no avail. It then filed an insurance claim with Philam in the amount of P172,284.29, which the latter paid. 6 Philam was subrogated to all the rights and causes of actions of the consignee. On November 27, 2000, Philam filed a complaint for damages against APL, Carotrans, and Freight as Carotrans' ship agent in the Philippines. 7

Freight denied that it is the ship agent of Carotrans. It asserted that it acted as a cargo consolidator only, having custody over the import documents, not the actual cargo. Freight maintained that it did not have legal or physical custody over the goods during the process of loading, unloading, or delivery. 8 CAIHTE

On the other hand, APL contended that it did not issue the bill of lading covering the cargo. The bill was issued by Carotrans, to which APL has no relation at all. Thus, there is no evidence of the execution of a contract of carriage between and/or among APL, the shipper, and the consignee. 9

Carotrans did not file an answer. 10

In its Decision dated July 7, 2005, the Metropolitan Trial Court (MeTC) ruled in favor of Philam, to wit:

WHEREFORE, premises considered, judgment is hereby rendered in favor of [Philam] and against [Carotrans, APL, and Freight] who are adjudged to be jointly and severally liable. Defendants Carotrans International, Inc., Freight Management Worldwide Services, Inc., and American President Lines Pte., Ltd. are ordered to pay the following:

(1) the amount of One Hundred Seventy Two Thousand Two Hundred Eighty Four and 29/100 Only (PhP172,284.29) representing the cost of the damaged gasoline pumps plus 12% legal interest thereon to be reckoned from the date of the filing of this complaint until fully paid;

(2) the amount of Twenty Thousand Pesos (P20,000.00) as reasonable attorney's fees; and

(3) the costs of suit.

SO ORDERED. 11

The MeTC found that APL received the cargo in good order but it arrived to the consignee in bad condition. Thus, the MeTC found APL liable as a common carrier, though it did not issue the bill of lading covering the cargo. The MeTC noted that a bill of lading is not indispensable for the creation of a contract of carriage. 12

According to the MeTC, Carotrans cannot likewise escape liability. Carotrans issued the bill of lading for the goods. As such, it obligated itself to deliver the cargo in good condition. Since the cargo was damaged, Carotrans is presumed negligent. 13

The MeTC further held that Freight is the agent of Carotrans in the Philippines pursuant to the Agreement entered into by the parties on February 19, 1993. Under paragraphs 3 and 4 of the Agreement, Freight is tasked to receive claims for damages of cargoes from the client of Carotrans, and to thereafter report them to its principal in order to be absolved from liability. However, Freight failed to submit evidence that it reported the damaged cargo to Carotrans by fax within 48 hours. Thus, Freight cannot be freed from liability. 14

APL and Freight appealed to the Regional Trial Court (RTC). 15

In its Decision dated May 14, 2008, the RTC affirmed the MeTC with modification. It deleted the attorney's fees granted to Philam for failure of the court a quo to state the basis for the award. 16 As to APL's liability, the RTC held that while the former did not issue the bill of lading covering the cargo, the Inward Foreign Manifest showed that it received the shipment for transportation. 17 Thus, APL acted as a common carrier required to observe extraordinary diligence in its vigilance over the goods. Since the cargo arrived in damaged condition, APL is presumed negligent. 18 Considering further that APL did not present evidence to controvert the presumption, it is liable for damages to Philam. 19

As to Freight, the RTC noted that it entered into an Agreement with Carotrans where it was stated that the former was responsible for insuring the release to forwarders/shippers of the documentation required in connection with the transportation of goods. In fact, Freight admitted that it has custody of the import documents and has the duty to release the Delivery Order (DO) to the consignee of the cargo in exchange of the bill of lading. Thus, Freight is the entity that represents the vessel. It is Carotrans' ship agent within the context of Article 586 of the Code of Commerce. The RTC held that Freight, being the ship agent of Carotrans and failing to comply with its duty to report the damaged cargo to Carotrans pursuant to their Agreement, became liable to Philam for damages. 20

Freight elevated the case to the CA. In its assailed Decision, 21 the CA affirmed the ruling of the RTC in toto. It explained that Freight failed to adduce evidence proving its claim that it is not the ship agent of Carotrans. Freight moved for reconsideration but it was denied. 22

Undaunted, Freight filed this petition. The sole issue presented is whether Freight is liable to Philam for damages. DETACa

We grant the petition.

At the outset, We address the procedural issues raised by Philam in its comment before Us. First, Philam alleges that the petition should be dismissed because the verification and certification against forum shopping attached to it is not accompanied by a board resolution proving the authority of the person who signed it. Instead, Freight solely submitted a Secretary's Certificate. 23 Even assuming that the Secretary's Certificate is sufficient, it does not provide for a specific authority to sign the certification against forum shopping. Second, Philam avers that the issue of whether Freight should be held liable as a ship agent is a question of fact which the courts a quo already ruled upon, and should not be disturbed, modified, or set aside. 24

Philam is incorrect. In LBL Industries, Inc. v. City of Lapu-Lapu, 25 We held that a Secretary's Certificate is a sufficient proof of authority for a named individual to represent a corporation in a suit. 26 Proof of authority is not limited to the Board Resolution itself. Here, the Secretary's Certificate attached to the petition clearly states that the board of directors of Freight, in a special meeting conducted on October 5, 2012, authorized Juan Carlos C. De Asis (De Asis) "to execute, sign and deliver for and on behalf of the corporation any and all documents, instruments, certification and deeds x x x that may be necessary or required in connection with the civil case filed by Philam x x x." 27 Thus, contrary to the claim of Philam, the Secretary's Certificate proved De Asis' authority to sign the certification against forum shopping.

We also find that the issue on Freight's liability presents mixed questions of fact and law. Freight denies that it is the ship agent of Carotrans, and as such, Article 586 of the Code of Commerce is inapplicable. Whether Freight is a ship agent of Carotrans is a question of fact, while whether Article 586 of the Code of Commerce applies in this case is a question of law. As a rule, only questions of law may be raised in petitions for review on certiorari. 28 However, this rule admits of exceptions, such as when the judgment of the CA is based on misapprehension of facts and the inference made by the court is manifestly mistaken, absurd, or impossible. 29 The foregoing exceptions obtain in this case.

The CA found that Freight is the ship agent of Carotrans based on the Agreement entered into between the parties on February 19, 1993. The pertinent portions of the Agreement read:

"WHEREAS, FMWS [referring to Freight] and CFCC [referring to Carotrans] agree that to establish a mutually beneficial relationship between them to profitably develop the transportation by sea of general cargo from the United States to the Philippines. This agreement and any addenda embody the entire understanding of the parties and all previous negotiations and understanding are merged therein.

xxx xxx xxx

1. GENERAL REPRESENTATION FMWS and CFCC warrant that they have the methods, personnel, and equipment to perform under this agreement.

xxx xxx xxx

3. FROM UNITED STATES PORTS TO MANILA, PHILIPPINES.

(A) CFCC shall solicit and accept for inland and transocean transportation, in accordance with its tariffs on file with the Federal Maritime Commission, freight from its United States operating areas having Philippines destinations to which FMWS offers services. Such freight shall be consolidated into ocean containers and transported by CFCC to such ports as are mutually agreed upon by FMWS and CFCC.

(B) FMWS shall be responsible for insuring the release to forwarders/shippers, as presented to FMWS, of documentation required in connection with the transportation of such freight, including, but not limited to, bills of lading, and export papers.

(C) FMWS will obtain outturn reports from the container freight stations and will in turn report all averages, shortages, and damage to CFCC Los Angeles NVOCC office by FAC within 48 hours of obtaining the above-mentioned outturn report. FMWSS will arrange for the survey of CFCC damaged freight when requested by CFCC and provide survey certification to CFCC to assist CFCC and its clients.30 (Emphasis supplied.) aDSIHc

According to the CA, Freight's obligations under the Agreement show that it represents Carotrans in the port of Manila. Particularly, Freight (1) ensures the release of the cargoes to forwarders and shippers; (2) processes the import documentations and export papers; and (3) prepares out-turn report to Carotrans. 31 Without elaborating on the basis of Freight's liability, the CA concluded that Freight, as Carotrans' ship agent, can be held civilly liable for damages in favor of Philam. 32

We do not agree.

Article 586 of the Code of Commerce provides:

Art. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested for the benefit of the same.

By ship agent is understood the person entrusted with provisioning or representing the vessel in the port in which it may be found.

An entity is considered a ship agent when it does either of two things: (1) provisions the vessel or (2) represents it in the port where it may be found. Macondray & Co., Inc. v. Provident Insurance Corporation, 33 teaches that by "provisioning the vessel," the entity prepares for the needs of the vessel like money, water and fuel; while, by "representing the vessel," the entity arranges the documentation for the entrance and clearance of the vessel in the port, to wit:

x x x [W]hether acting as agent of the owner of the vessel or as agent of the charterer, petitioner will be considered as the ship agent and may be held liable as such, as long as the latter is the one that provisions or represents the vessel.

The trial court found that petitioner "was appointed as local agent of the vessel, which duty includes arrangement for the entrance and clearance of the vessel." Further, the CA found and the evidence shows that petitioner represented the vessel. The latter prepared the Notice of Readiness, the Statement of Facts, the Completion Notice, the Sailing Notice and Custom's Clearance. Petitioner's employees were present at Sangi, Toledo City, one day before the arrival of the vessel, where they stayed until it departed. They were also present during the actual discharging of the cargo. Moreover, Mr. de la Cruz, the representative of petitioner, also prepared for the needs of the vessel, like money, provision, water, and fuel.

These acts all point to the conclusion that it was the entity that represented the vessel in the Port of Manila and was the ship agent within the meaning and context of Article 586 of the Code of Commerce. 34 (Emphasis supplied; citations omitted.)

Additionally, a ship agent is one who is bound to provision and victual the vessel, and to render complete reports on the operation of the vessel, and is authorized to appoint sub-agents. 35

We rule that Freight is not a ship agent of Carotrans under Article 586 of the Code of Commerce. The record is bereft of showing that Freight provided for the needs of the vessel. Nor did Freight arrange the documentation for the entrance and clearance for departure of the vessel in the port of Manila. Rather, Freight's duties under the Agreement are limited to ensuring the release to the forwarders/shippers of the documents needed for the delivery of the cargoes; obtaining outturn reports for Carotrans; and informing Carotrans of the shortages and damages suffered by the cargoes. Clearly, Freight owes the performance of these duties to Carotrans, and not the vessel or the owner of the vessel, APL.

Ace Navigation Co., Inc. v. FGU Insurance Corporation36 is on point. In that case, We held that Ace Navigation is not a ship agent within the context of Article 586 of the Code of Commerce because its obligation is limited to informing the consignee of the arrival of the vessel in order for the latter to immediately take possession of the goods. Its participation was limited to assuming responsibility over the cargo when they were unloaded in the vessel. Similar in this case before Us, Freight's obligations under the Agreement commenced only after the unloading of the cargo from the vessel. Freight had no hand in the loading, unloading, or delivery of the cargo.

Thus, the CA erred when it ruled that Freight is Carotrans' ship agent and liable to Philam for damages. Full resolution of the case does not however stop here for as We clarified in Ace Navigation Co., a party not held liable as a ship agent under the Code of Commerce may be held liable as an agent under the New Civil Code of the Philippines (Civil Code). 37 ETHIDa

Article 1868 of the Civil Code provides that, "by the contract of agency, a person binds himself to render some service or to do something in representation or on behalf of another, with the consent or authority of the latter." 38

Here, Freight indeed admitted that its main function is "to act as a representative of the cargo forwarder in the Philippines (referring to Carotrans)" where the consignee of the Philippine-bound cargo would apply for a DO. 39 Freight would issue a DO upon the consignee's surrender of the bill of lading issued by Carotrans. In turn, the consignee will present the DO at the Bureau of Customs to process the release of the goods. 40 These duties show that Freight is an agent of Carotrans with limited and specialized functions.

The Agreement between Freight and Carotrans, on the other hand, sets forth the duties of Freight under paragraphs 3 (C) and 4 (A), viz.:

3. FROM UNITED STATES PORTS TO MANILA, PHILIPPINES

xxx xxx xxx

(C) FMWS [referring to Freight] will obtain outturn reports from the container freight stations and will in turn report all averages, shortages, and damage to CFCC [referring to Carotrans] Los Angeles NVOCC office by FAC within 48 hours of obtaining the above-mentioned outturn report. FMWS will arrange for the survey of CFCC damaged freight when requested by CFCC and provide survey certification to CFCC to assist CFCC and its clients.

4. CARGO DAMAGE

(A) Compliance with the requirements of paragraph 3 shall absolve FMWS from the liability as to the shortages and/or damages reported. Failure to report such shortages and/or damages shall result in FMWS assuming full responsibility for any such unreported shortages or damages. FMWS shall comply with all applicable customs requirements.41 (Emphasis supplied.)

We are of course bound by the uniform factual findings of the MeTC, 42 RTC, 43 and the CA that Freight failed to submit evidence that it abided by its obligation to report the damaged cargo to Carotrans by fax within 48 hours. This factual finding, however, does not make Freight solidarily liable for damages to Philam under the terms of the Agreement.

Article 1311 of the Civil Code provides that contracts take effect only between the parties, their assigns, and heirs, except in case where the rights and obligations arising from the contract are not transmissible by their nature, by stipulation, or by provision of law. Hence, where there is no privity of contract, there is likewise no obligation or liability to speak of. The civil law principle of relativity of contracts provides that contracts can only bind the parties who entered into it, and it cannot favor or prejudice a third person, even if he/she is aware of such contract and has acted with knowledge thereof. 44

The Agreement is entered into between Carotrans and Freight. It is effective only between them. If the Agreement is violated or not complied with, only the contracting parties may derive any gain or suffer loss from it. Philam, being a third party to the Agreement, cannot derive any right or benefit from Freight's non-compliance of its obligation to report to Carotrans within 48 hours any damaged cargo. Thus, under the principle of relativity of contracts, only Carotrans may invoke the provision obligating Freight to assume full responsibility for the unreported damage. 45

There is, therefore, no legal basis to hold Freight liable to Philam under the Agreement that Freight entered into with Carotrans.

WHEREFORE, the petition is GRANTED. The April 19, 2012 Decision and September 18, 2012 Resolution of the Court of Appeals in CA-G.R. SP No. 104950 are hereby REVERSED insofar as the liability of Freight Management Worldwide Services, Inc. Accordingly, the complaint of Philam Insurance Co., Inc. against Freight Management Worldwide Services, Inc. in Civil Case No. 71976 is DISMISSED. cSEDTC

Atty. Bienvenido O. Bulatao's manifestation dated June 19, 2019, informing the Court that Atty. Noel L. Montilla, former counsel for respondent American President Lines, passed away on April 24, 2019, with thereto attached copy of his certificate of death is NOTED. The entry of appearance of Atty. Bulatao of Bulatao Law Office as counsel for respondent American President Lines, praying that he be furnished with orders, notices of hearings and pleadings which may be filed in connection with this case at 2nd Floor, Casa Maritima, 651 General Luna Street, Intramuros, Manila, is NOTED and GRANTED. Atty. Bulatao is hereby required to SUBMIT within five (5) days from notice hereof, a soft copy in compact disc, USB or e-mail containing the PDF file of the signed entry of appearance pursuant to A.M. Nos. 10-3-7-SC and 11-9-4-SC.

SO ORDERED."

 

Very truly yours,

 

(SGD.) LIBRADA C. BUENADivision Clerk of Court

 

Footnotes

1.Rollo, pp. 3-32.

2.Id. at 39-48. Penned by Associate Justice Isaias P. Dicdican, concurred in by Associate Justices Jane Aurora C. Lantion and Danton Q. Bueser.

3.Id. at 49-50.

4.Id. at 40.

5.Id. at 89.

6.Id. at 89-90.

7.Id. at 87-88. Civil Case No. 71976, Branch 61 of the Metropolitan Trial Court of Makati City.

8.Id. at 96.

9.Id. at 113-114.

10.Id. at 267.

11.Id. at 269-270.

12.Id. at 269.

13.Id.

14.Rollo, p. 269.

15. Civil Case No. 05-729, Branch 139 of the Regional Trial Court of Makati City.

16.Rollo, pp. 85-86.

17.Id. at 83.

18.Id. at 83-84.

19.Id. at 85.

20.Id. at 83.

21.Supra note 2.

22.Rollo, pp. 49-50.

23.Id. at 381-382.

24.Id. at 383.

25. G.R. No. 201760, September 16, 2013, 705 SCRA 688.

26.LBL Industries, Inc. v. City of Lapu-Lapu, G.R. No. 201760, September 16, 2013, 705 SCRA 688, 696, citing Shipside, Incorporated v. Court of Appeals, G.R. No. 143377, February 20, 2001, 352 SCRA 334; Cebu Metro Pharmacy, Inc. v. Euro-Med Laboratories Philippines, Inc., G.R. No. 164757, October 18, 2010, 633 SCRA 320; Mediserv, Inc. v. CA, G.R. No. 161368, April 5, 2010, 617 SCRA 284.

27.Rollo, p. 36.

28. See RULES OF COURT, Rule 45, Sec. 1.

29.Cirtek Employees Labor Union-Federation of Free Workers v. Cirtek Electronics, Inc., G.R. No. 190515, June 6, 2011, 650 SCRA 656, 660.

30.Rollo, pp. 215-216.

31.Id. at 45.

32.Id. at 46.

33. G.R. No. 154305, December 9, 2004, 445 SCRA 644.

34.Id. at 651-652.

35.Maritime Company of the Philippines v. Court of Appeals, G.R. No. 47004, March 8, 1989, 171 SCRA 61, 65.

36. G.R. No. 171591, June 25, 2012, 674 SCRA 348, 355.

37.Id.

38.CIVIL CODE, Art. 1868.

39.Rollo, p. 204.

40.Id.

41.Rollo, p. 216.

42.Id. at 269.

43.Id. at 83.

44.Sps. Borromeo v. Court of Appeals and Equitable Savings Bank, G.R. No. 169846, March 28, 2008, 550 SCRA 269, 270-271, citing Chan v. Maceda, Jr., G.R. No. 142591, April 30, 2003, 402 SCRA 352; Josefa v. Zhandong Trading Corporation, G.R. No. 150903, December 8, 2003, 417 SCRA 269; and Integrated Packaging Corporation v. Court of Appeals, G.R. No. 115117, June 8, 2000, 333 SCRA 170.

45.Mamaril v. The Boy Scout of the Philippines, G.R. No. 179382, January 14, 2013, 688 SCRA 437, 450.