G.R. No. L-48264, 21 February 1980

FACTS:

Petitioner Switzerland General Insurance Company, Ltd, a foreign insurance company authorized to do business in the Philippines thru its agent, F. E:.Zuellig, Inc., filed an admiralty case against private respondents Oyama Shipping Co., Ltd. (Oyama Lines), a foreign firm doing business in the Philippines, and Citadel Lines, Inc (Citadel). which is the local agent of private respondent Oyama Shipping Co., Inc. and/or Mabuhay Brokerage Co., Inc. (Mabuhay)

The complaint alleged that 60,000 bags of Urea Nitrogen were shipped from Japan, on board the S/S “St Lourdes”, claimed to be owned and operated by defendant Citadel. The goods were consigned to Borden International Phils., Inc., and insured by petitioner against all risks. The shipment was discharged from the vessel shipside into lighters owned by Mabuhay, but when the same was subsequently delivered to and received by the consignee, it was found to have sustained losses and/or damage which was paid by petitioner insurance company to the consignee/assured, by virtue of which payment it became subrogated to the rights of the latter. Petitioner made repeated demands against private respondents for payment of the losses but no payment was made and, uncertain in whose custody the goods were damaged, impleaded the private respondents as alternative defendants to determine their respective liability.

Defendant filed an Answer alleging that defendant Citadel Lines was merely the civil agent in the Philippines for the Japanese firm Oyama Lines., the charterer of the vessel S/S “St. Lourdes”, said vessel being owned by Companie Maritime de Brios, Sociedad Anonima (CMBSA), a Panamanian corporation. It was further alleged that the principal agency relationship between the said Oyama Lines and defendant Citadel Lines, Inc. was terminated on August 21, 1975 when the Tokyo District Court declared and decreed its insolvency. It was argued that defendant Citadel Lines “has always acted as an agent of a disclosed principal and, therefore, the herein defendant is without any liability at all” in connection with the plaintiff’s claim. Defendant alleged that said corporation should be held liable and interposed a counterclaim for damages against plaintiff. Defendant Oyama Lines alleged that it ceased to be represented in the Philippines upon the declaration of its insolvency by the Tokyo Court; that it was a mere charterer of the S/S “St. Lourdes” which is owned by CMBSA; that due to the insolvency of Oyama lines, the case as against it should be dismissed, the remedy for the plaintiff being to file its claim before the insolvency court in Tokyo, Japan. Further, it imputed the loss or damage to the shipment to the shipper, Sumitomo Shoji Kaisha, Ltd. for failing to provide seaworthy packages for the goods, and/or the Mabuhay Brokerage for failure to exercise utmost diligence after it took possession of the cargo from the vessel S/S “St. Lourdes.”

After trial on the merits, respondent court rendered a decision in favor of petitioner as against therein defendant Oyama Lines but absolving Citadel Lines, Inc. and Mabuhay Brokerage Co., Inc. from liability. Petitioner filed a Motion for Reconsideration insofar as it absolves respondents Citadel Lines, Inc. and Mabuhay Brokerage Co., Inc. from liability, but said Motion for Reconsideration was denied; hence, the instant petition for review.

ISSUE:

Whether respondent Citadel Lines, Inc., the local agent of a foreign ocean going vessel, the S/S “St. Lourdes”, may be held primarily liable for the loss/damage found to have been sustained by subject shipment while on board and/or still in the custody of the said vessel.

RULING:

In fine, private respondents do not dispute that a ship agent is liable to third persons under certain circumstances as provided in the Code of Commerce, but insists that it is not a ship agent but a mere agent and hence, not liable.

We find the instant petition meritorious. The error of the lower court lies in its application of the general rule on agency to the case a quo, when the applicable law is contained in the pertinent provisions of the Code of Commerce as applied in relevant decisions of this Court. Its finding, therefore, that respondent Citadel Lines, Inc. was a mere agent of Oyama Shipping Co., Ltd. was a result of its erroneous application of the law on agency to the instant case. Considering the peculiar relationship of the parties, respondent Citadel Lines, Inc. cannot be considered as a “mere agent” under the civil law on agency as distinguished from a ship agent, within the context of the Code of Commerce. In Yu Biao Sontua& Co. v. Ossorio 1 for example, it was held that the doctrines having reference to the relations between principal and agent cannot be applied in the case of ship agents and ship owners. For this reason, respondent cannot validly claim that the court a quo made a finding of fact which is conclusive upon this Court. A ship agent, according to Article 586 of the Code of Commerce, is “the person entrusted with the provisioning of a vessel, or who represents her in the port in which she happens to be.” (Emphasis supplied.)

It is not disputed by the private respondent that it is the local representative in the Philippines of the Oyama Lines and, as alleged by petitioner, upon arrival of the vessel S/S “St. Lourdes” in Manila, it took charge of the unloading of 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 operators and/or unto barges/lighters, and that claims against the vessel S/S “St. Lourdes” for losses/damages sustained by shipments were in fact filed and processed by respondent Citadel Lines, Inc. These facts point to the inevitable conclusion that private respondent is the entity that represents the vessel in the port of Manila and hence is a ship agent within the meaning and context of Article 586 of the Code of Commerce.

At any rate, the liabilities of the ship agent are not disputed by private Respondent. It appearing that the Citadel Lines is the ship agent for the vessel S/S “St. Lourdes” at the port of Manila, it is, therefore, liable to the petitioner, solidarily with its principal, Oyama Shipping Co., Ltd., in an amount representing the value of the goods lost and or damaged, amounting to P38,698.94, which was likewise the amount paid by petitioner, as insurer, to the insured/consignee. As found by the court a quo, there has been no proof presented to show that the officers of the vessel, in whose custody the goods were lost or damaged, are exempt from liability therefrom and that the damage was caused by factors and circumstances exempting them from liability.

The insolvency of Oyama Lines has no bearing on the instant case insofar as the liability of Citadel Lines, Inc. is concerned. The law does not make the liability of the ship agent dependent upon the solvency or insolvency of the ship owner.

WHEREFORE, the decision appealed from is modified, and private respondent Citadel Lines, Inc. is hereby ordered to pay, solidarily with its principal, Oyama Lines (Oyama Shipping Co., LTD.), the amount of P38,698.94, with interest thereon at the legal rate from the date of the filing of the complaint on December 24, 1975 until fully paid, P5,000.00 as attorney’s fees and the costs of suit. The rest of the decision is affirmed. No pronouncement as to costs.

*Case digest by Nikki P. Ebillo, JD-4, Andres Bonifacio Law School, SY 2019-2020