G.R. No.

L-48264 February 21, 1980 By way of cross-claim, defendant Citadel Lines alleged that the
loss/damaged to the cargo took place while the latter was
SWITZERLAND GENERAL INSURANCE COMPANY, being delivered to the consignee thereof by the Mabuhay
LTD., petitioner,  Brokerage, Inc. and said corporation should be held liable
vs. therefor, as well as for all damages suffered and expenses
HON. PEDRO A. RAMIREZ, Presiding Judge of the Court of First incurred by defendant Citadel Lines as a result of the filing of
Instance of Manila, Branch XXX, OYAMA LINES, CITADEL LINES the suit. Defendant likewise interposed a counterclaim for
and MABUHAY BROKERAGE CO., INC., respondents. damages against plaintiff Switzerland General Insurance Company,
Ltd. (herein petitioner).

Manuel N. Camacho, for petitioner.

DEFENDANT OYAMA SHIPPING

Bito, Misa & Lozada for respondents Oyama Lines and Citadel Lines.
Defendant Oyama Shipping Co. Ltd. likewise filed its Answer,
denying the material averments of the complaint, alleging that it
Gregorio Gonzales for respondent Company. ceased to be represented in the Philippines upon the
declaration of its insolvency by the Tokyo Court; that it was a
ANTONIO, J.: mere charterer of the S/S "St. Lourdes" which is owned by
Companies Maritime de Brios, Sociedad Anonima a
Panamanian corporation; that due to the insolvency of Oyama
Petition for review of the decision, dated February 24, 1978 of the Shipping Co. Ltd., the case as against it should be dismissed,
Court of First Instance of Manila in Civil Case No. 100704, the remedy for the plaintiff being to file its claim before the
entitled "Switzerland General Insurance Co., Ltd. v. Oyama Lines and insolvency court in Tokyo, Japan. Further, it imputed the loss or
Citadel Lines, and/or Mabuhay Brokerage Co., Inc." damage to the shipment to the shipper, Sumitomo Shoji Kaisha,
Ltd. for failing to provide seaworthy packages for the goods,
On December 24, 1975, petitioner (SWITZERLAND), a foreign and/or the Mabuhay Brokerage for failure to exercise utmost
insurance company authorized to do business in the Philippines diligence after it took possession of the cargo from the vessel S/S
thru its agent, F. E. Zuellig Inc., filed an admiralty case (Civil Case "St. Lourdes". Finally, it was averred that plaintiff's reinsurer had
No. 100704) against private respondents Oyama Shipping Co., Ltd. already paid the plaintiff's claim and, hence, said reinsurer is the
(referred to as Oyama Lines), a foreign firm doing business in the real party to the action, and that assumming defendant Oyama
Philippines, and Citadel Lines, Inc. which is the local agent of Shipping Co., Ltd. to be liable, its liability is limited to the amount of
private, respondent Oyama Shipping Co., Inc. and/or Mabuhay the loss in relation to the total amount of the freight of the goods,
Brokerage Co., Inc. which if computed, would be a much lower amount. It was prayed
that the complaint be dismissed as against this defendant.
The complaint alleged that on December 21, 1974, 60,000 bags of
Urea Nitrogen were shipped from Niihama Japan, on board the S/S TRIAL COURT – rule in favor of Switzerland Gen Insurance,
St. Lourdes", claimed to be owned and operated by defendant against Oyama
Citadel Lines, Inc. The goods were consigned to Borden
International Phils., Inc., and insured by petitioner for the sum of After trial on the merits, respondent court rendered a decision,
P9,319,105.00 against all risks. dated February 23, 1978, in favor of petitioner as against therein
defendant Oyama Shipping Co., Ltd., but absolving Citadel Lines,
The shipment was discharged from the vessel S/S "St. Inc. and Mabuhay Brokerage Co., Inc. from liability. The
Lourdes" shipside into lighters owned by Mabuhay Brokerage decision reads, in part, as follows:
Company, Inc., but when the same was subsequently delivered
to and received by the consignee, it was found to have Since in the case at bar there is no question
sustained losses and/or damage amounting to P38.698.94. that the shipment in question has suffered loss
This amount was paid by petitioner insurance company to the or damage while in the custody of the carrier,
consignee/assured, by virtue of which payment it became the herein defendant Oyama Line, but it has
subrogated to the rights of the latter. not adduced evidence to prove that it was
caused by any of those factors or reasons
Petitioner made repeated demands against herein private exempting it from liability, particularly that the
respondents for payment of the aforesaid losses or damaged but no bags became torn or burst and the contents
payment was made and, uncertain in whose custody the goods spilled because of the character of the
were damaged, impleaded the private respondents as alternative shipment or defects in the packing or in the
defendants to determine their respective liability. containers, or the nature or defect of the article
itself. the defendant Oyama Line, as carrier,
cannot avoid liability to the consignee or its
DEFENDANT CITADEL LINES
subrogee the plaintiff herein.

Defendant Citadel Lines, Inc. filed an Answer with Compulsory

The defendant Oyama Line pleads
Counterclaim and Cross-claim, interposing special and
prescription of the plaintiff's cause of action
affirmative defenses and alleging that defendant Citadel Lines
under Article 366 of the Code of Commerce.
was merely the civil agent in the Philippines for the Japanese
The defense is untenable. to begin with, the
firm Oyama Shipping Co., Ltd., which was the charterer of the
required claim that the owner of
vessel S/S "St. Lourdes", said vessel being owned by
merchandise is supposed to make within 24
Companies Maritime de Brios, Sociedad Anonima a Panamanian
hours from receipt is but in the nature of a
corporation. It was further alleged that the principal agency
limitation upon his right to recovery and
relationship between the said Oyama Shipping Co., Ltd. and
the burden of proof is accordingly on the
defendant Citadel Lines, Inc. was terminated on August 21,
carrier to show that the limitation is
1975 when the Tokyo District Court declared and decreed the
reasonable and in proper form or without
insolvency of the said Oyama Shipping Co., Ltd.
the time stated (Southern Lines, Inc. vs.
Court of Appeals, 4 SCRA 258, 261-262). And
It was argued that defendant Citadel Lines "has always acted as an it is incumbent upon the said defendant to
agent of a disclosed principal and, therefore, the herein defendant prove its defense, particularly that no such
is without any liability at all" in connection with the plaintiff's claim was filed within the required period.
claim.
 Without such proof of a negative allegation, Petitioner filed a Motion for Reconsideration of the aforesaid
which it has failed to adduce, the pleader must decision insofar as it absolves respondents Citadel Lines, Inc. and
suffer defeat under the rules of evidence Mabuhay Brokerage Co., Inc. from liability, but said Motion for
(section 1, Rule 131, Revised Rules of Court). Reconsideration was denied on April 21, 1979; hence, the instant
Be that as it may, the survey report petition for review.
submitted in evidence by the plaintiff states
that after completion of delivery the The main issue raised in the instant petition is whether or not
consignee signified its 'intention to file a respondent Citadel Lines, Inc., the local agent of a foreign ocean
claim for the full value of the loss sustained going vessel, the S/S "St. Lourdes", may be held primarily liable for
by the shipment' (Exhibits 1, 1-1 to 1-5), a the loss/damage found to have been sustained by subject shipment
fact that has not at all been refuted by the while on board and/or still in the custody of the said vessel.
defendant Oyama Line.

SWITZERLAND
The fact that the defendant Oyama Line has
been declared insolvent by the Tokyo District
Court of Japan since August 21, 1975, is no Petitioner contends that respondent Citadel Lines, Inc., being
defense at all. For such declaration of the ship agent for the vessel S/S "St. Lourdes", is liable under
insolvency, even under Philippine Laws, does the pertinent provisions of the Code of Commerce and
not bar recovery of damages based on contract. applicable jurisprudence.
Neither can it successfully ward off liability on
a claim that it is a mere charterer of the CITADEL LINES
carrying vessel, having represented on the face
of the bill of lading as the carrier itself (Exhibit
A; Exhibit 1-Oyama) And even if it is but a Respondent Citadel Lines, Inc., in its Comment to the petition,
charterer of the vessel that it claims it is, it alleges that the lower court had made a finding that it is a mere
cannot avoid its liability as a carrier for loss agent of Oyama Shipping Co., Ltd., and not a ship agent, and this,
and damage suffered by the goods it has being a finding of fact, can no longer be questioned in the instant
transported. proceedings. Further, it argues that the provisions of the Code of
Commerce relied upon by petitioner are applicable to a ship agent,
but not to a mere agent like private respondent, and that granting
As a mere agent in the Philippines of the that it is a ship agent, it contends that it should not be held liable
defendant Oyama Line, the defendant Citadel because the principal, Oyama Shipping Co., Ltd. has been declared
Line (see paragraph 1, complaint) cannot be insolvent. it is claimed that petitioner, upon being informed of the
held liable for the damages recoverable from insolvency of the Oyama Shipping Co., Ltd., should have filed its
its principal. But for failure to substantiate it, claim before the Trustee of the Oyama Shipping Co., Ltd. in Japan.
its counterclaim against the plaintiff should be
dismissed. So must its crossclaim against its co-
defendant brokerage company be dismissed In fine, private respondents do not dispute that a ship agent is
since it has not at all been held liable to the liable to third persons under certain circumstances as provided in
plaintiff. the Code of Commerce, but insists that it is not a ship agent but a
mere agent and hence, not liable.

Neither can the defendant Mabuhay Brokerage

Company, Inc. be held answerable for the loss Q: MAY CITADEL LINES, INC., THE LOCAL AGENT OF A FOREIGN
and damage sustained by the cargo in question OCEAN GOING VESSEL, THE S/S "ST. LOURDES" ESCAPE
while still in custody of the carrying vessel, for LIABILITY BY CLAIMING THAT IT IS A “MERE AGENT” OF
obvious reasons. Nor can it be made liable, OYAMA?
jointly and severally, with the defendant
Oyama Line for further loss and damage to the A: NO
contents of the torn or burst bags turned over
to its custody in that condition in view of the
We find the instant petition meritorious the error of the lower
required extraordinary diligence that it has
court lies in its application of the general rule on agency to the
observed to prevent further loss or damage to
case a quo, when the applicable law is contained in the pertinent
them. According to the defendant brokerage's
provisions of the Code of Commerce as applied in relevant
witness, Virgilio de Jesus, as soon as the bags in
decisions of this Court. Its finding. Therefore, that respondent
bad order were received from the lighters they
Citadel Lines, Inc. was a mere agent of Oyama Shipping Co., Ltd.
were tied and the torn parts sewed the falsity
Was a result of its erroneous application of the law of agency to the
of which the plaintiff has failed to prove.
instant case. Considering the relationship of the parties,
respondent Citadel Lines, Inc. cannot be considered as a “mere
WHEREFORE, the Court hereby renders agent” under the civil law on agency as distinguished from a
judgment in favor of the plaintiff Switzerland ship agent, within the context of the Code of Commerce. In Yu
General Insurance Company, Ltd. and against Biao Sontua & Co. v. Ossorio, 1 for example, it was held that the
the defendant Oyama Line, ordering the latter doctrines having reference to the relations Between principal and
to pay the former the amount of P38,698.94, agent cannot be applied in the case of ship agents and ship owners.
with interest thereon at the legal rate from the For this reason, respondent cannot validly claim that the court a
date of the filing of the complaint on December quo made a finding of fact which is conclusive upon this Court. A
24, 1975, until fully paid, P5,000.00 as ship agent, according to Article 586 of the Code of Commerce,
attorney's fees and the costs of the suit. The is the person entrusted with the provisioning of a vessel or
plaintiff's complaint against the defendants who represents her in the port in which she happens to be.”
Citadel Line and Mabuhay Brokerage Company, (Emphasis supplied.)
Inc. are dismissed. So is the defendant Citadel
Lines' counterclaim against the plaintiff and
It is not disputed by the private respondent that it is the local
crossclaim against its co-defendant brokerage
representative in the Philippines of the Oyama Shipping Co.,
company dismissed.
Ltd. And, as alleged by petitioner, upon arrival of the vessel
S/S “St. Lourdes” in Manila, it took charge of the unloading of
PETITIONER SWITZERLAND the cargo and issued cargo receipts (or tally sheets) in its own
name, for the purpose of evidencing discharge of cargoes and
the conditions thereof from the vessel to the arrastre The foregoing provisions have been repeatedly applied by this
operators and/or unto barges/lighters, and that claims Court in various cases, among them: Pons y Compañia v. La
against the vessel S/S “St. Lourdes” for losses/damages Compania Maritima;2 Behn, Meyer & Co. v. McMicking, et al.:  3 Yu
sustained by shipments were in fact filed and processed by Biao Sontua & Co. v. Ossorio,  4Wing Kee Compradoring Co. v. Bark
respondent Citadel Lines, Inc. These facts point to the “Monongahela”  5 and The American Insurance Co., Inc. v. Macondray
inevitable conclusion that private respondent is the entity & Co., Inc.  6
that represents the vessel in the port of Manila and hence is a
ship agent within the meaning and context of Article 586 of In Pons v. La Compania Maritima, supra, it was held that for
the Code of Commerce. damages resulting to merchandize in transit due to negligence of
the officers of the ship, a cause of action arises against the owners
The Code of Commerce provides, among others, that the ship or agents of the vessels which may be prosecuted by the shipper or
agent shall also be liable for the indemnities in favor of third consignor the damaged goods.
persons which arise from the conduct of the captain in the
care of the goods which the vessel carried; but he may exempt At any rate, the liabilities of the ship agent are not disputed by
himself therefrom by abandoning the vessel with all her private respondent. It appearing that the Citadel Lines is the
equipments and the freightage he may have earned during the ship agent for the vessel S/S “St. Lourdes” at the port of Manila,
voyage. (Article 587). it is, therefore, liable to the petitioner, solidarily with its
principal, Oyama Shipping Co., Ltd., in an amount representing
In addition, Article 618 of the same Code states: the value of the goods lost and or damaged, amounting to
P38,698.94, which was likewise the amount paid by
Art. 618. The captain shall be civilly liable to petitioner, as insurer, to the insured consignee As found by
the ship agent and the latter to the third the court a quo, there has been no proof presented to show
persons who may have made contracts with that the officers of the vessel, in whose custody the goods were
the former — lost or damaged, are exempt from liability therefrom and that
the damage was caused by factors and circumstances
exempting them from liability.
1. For all the damages Iuffered by the vessel and
its cargo by reason of want of skill or
negligence on his part. If a misdemeanor or Q: DOES THE INSOLVENCY OF OYAMA HAVE BEARING IN THE
crime has been committed he shall be liable in LIABILITY OF CITADEL?
accordance with the Penal Code.
A: NONE
2. For all the thefts and robberies committed
by the crew, reserving his right of action The insolvency of Oyama Lines has no bearing on the instant case
against the guilty parties. insofar as the liability of Citadel Lines, Inc. is concerned. The law
does not make the liability of the ship agent dependent upon the
3. For the losses, fines, and confiscations solvency or insolvency of the ship owner.
imposed on account of violation. Of the laws
and regulations of customs, police, health, and WHEREFORE, the decision appealed from is modified, and private
navigation respondent Citadel Lines, Inc. is hereby ordered to pay, solidarily
with its principal, Oyama Lines (Oyama Shipping Co., LTD.), the
4. For the losses and damages caused by amount of P38,698.94, with interest thereon at the legal rate from
mutinies on board the vessel or by reason of the date of the filing of the complaint on December 24, 1975 until
faults committed by the crew in the service and fully paid, P5,000.00 as attorney's fees and the costs of suit. The
defense of the same, if he does not prove Chat, rest of the decision is affirmed. No pronouncement as to costs.
he made full use of his authority to prevent or
avoid them. SO ORDERED.

5. For those arising by reason of a misuse of

powers and non-fulfillment of the duties which
pertain to him in accordance with Articles 610
and 612.

6. For those arising by reason of his going out

of his course or taking a course which, in the
opinion of the officers of the vessel, at a
meeting attended by the shippers or super
cargoes who may be on board, he should not
have taken without sufficient cause.

No exception whatsoever shall exempt him

from his obligation.

7. For those arising by reason of his voluntarily

entering a port other than his destination, with
the exception of the cases or without the
formalities referred to in Article 612.

8. For those arising by reason of the non-

observance of the provisions contained in the
regulations for lights and maneuvers for the
purpose of preventing collisions.