G.R. No.

87434 August 5, 1992

PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM PLASTICS,

INC., petitioners,
vs.
SWEET LINES, INC., DAVAO VETERANS ARRASTRE AND PORT SERVICES, INC. and HON.
COURT OF APPEALS, respondents.

REGALADO, J.

 A maritime suit was commenced on May 12, 1978 by herein Petitioner Philippine
American General Insurance Co., Inc. (Philamgen) and Tagum Plastics, Inc. (TPI)
against private respondents Sweet Lines, Inc. (SLI) and Davao Veterans Arrastre
and Port Services, Inc. (DVAPSI), along with S.C.I. Line (The Shipping Corporation
of India Limited) and F.E. Zuellig, Inc., as co-defendants in the court a quo, seeking
recovery of the cost of lost or damaged shipment plus exemplary damages,
attorney's fees and costs allegedly due to defendants' negligence.
 It would appear that in or about March 1977, the vessel SS "VISHVA YASH" took on
board at LA, two consignments of cargoes for shipment to Manila and later for
transhipment to Dava consisting of 600 bags Low Density Polyethylene 631 and
another 6,400 bags Low Density Polyethylene 647, both consigned to the order of
Far East Bank and Trust Company of Manila, with arrival notice to Tagum Plastics,
Inc. Said cargoes were covered by Bills of Lading Nos. 6 and 7 issued by the
foreign common carrier. The necessary packing or Weight List, as well as the
Commercial Invoices accompanied the shipment. The cargoes were likewise insured
by the Tagum Plastics Inc. with plaintiff Philippine American General Insurance Co.,
Inc.
 Said vessel arrived at Manila and discharged its cargoes in the Port of Manila for
transhipment to Davao. The foreign carrier awaited and made use of the services of
the vessel called M/V "Sweet Love" owned and operated by (SLI) defendant
interisland carrier.
 Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These
were commingled with similar cargoes belonging to Evergreen Plantation and also
Standfilco.
 On May 15, 1977, the shipments were discharged from the interisland carrier into the
custody of the consignee. A later survey conducted on July 8, 1977, upon the
instance of the plaintiff, shows the following:

Of the cargo covered by Bill of Lading No. 25 or (2)6, the survey shows shortages,
damages and losses to be as follows:

Undelivered/Damaged bags as tallied during discharge from vessel-

173 bags; undelivered and damaged as noted and observed whilst
stored at the pier-699 bags; and shortlanded-110 bags (Exhs. P and
P-1).

Of the 600 bags of Low Density Polyethylene 631, the survey

conducted on the same day shows an actual delivery to the
consignee of only 507 bags in good order condition. Likewise noted
were the following losses, damages and shortages, to wit:
 Undelivered/damaged bags and tally sheets during discharge from
vessel-17 bags.

Undelivered and damaged as noted and observed whilst stored at the

pier-66 bags; Shortlanded-10 bags.

 Therefore, of said shipment totaling 7000 bags, only a total of 5820 bags were
delivered to the consignee in good order condition, leaving a balance of 1080 bags.
Such loss from this particular shipment is what any or all defendants may be
answerable to (sic).
 Some bags were either shortlanded or were missing, and some of the 1,080 bags
were torn, the contents thereof partly spilled or were fully/partially emptied, but,
worse, the contents thereof contaminated with foreign matters and therefore could no
longer serve their intended purpose. The position taken by the consignee was that
even those bags which still had some contents were considered as total losses as
the remaining contents were contaminated with foreign matters and therefore did not
(sic) longer serve the intended purpose of the material. Each bag was valued, taking
into account the customs duties and other taxes paid as well as charges and the
conversion value then of a dollar to the peso, at P110.28 per bag.
 A compromise agreement was entered into between , and defendants S.C.I. Line
and F.E. Zuellig, upon the latter's payment of P532.65 in settlement of the claim
against them. Whereupon, the trial court in its order of August 12, 1981 granted 3

plaintiffs' motion to dismiss grounded on said amicable settlement and the case as to
S.C.I. Line and F.E. Zuellig was consequently "dismissed with prejudice and without
pronouncement as to costs."
 The trial court rendered judgment in favor Philamgen.
 CA reversed the trial court's decision on the ground of prescription, in effect
dismissing the complaint of herein petitioners.
 Petitioners filed the instant petition for review on certiorari, faulting respondent
appellate court with the following errors:
(1) in upholding, without proof, the existence of the so-called prescriptive period;
(2) granting arguendo that the said prescriptive period does exist, in not finding the
same to be null and void; and
(3) assuming arguendo that the said prescriptive period is valid and legal, in failing to
conclude that petitioners substantially complied therewith. 7

 To obviate any question as to who the real party in interest is and to protect their respective
rights as insurer and insured. In any case, there is no impediment to the legal standing of
Petitioner Philamgen, even if it alone were to sue herein private respondents in its own
capacity as insurer, it having been subrogated to all rights of recovery for loss of or damage
to the shipment insured under its Marine Risk Note No. 438734 dated March 31, 1977 8 in view
of the full settlement of the claim thereunder as evidenced by the subrogation receipt 9 issued in its favor by Far East Bank and
Trust Co., Davao Branch, for the account of petitioner TPI.

Upon payment of the loss covered by the policy, the insurer's entitlement to subrogation pro tanto,
being of the highest equity, equips it with a cause of action against a third party in case of
contractual breach. Further, the insurer's subrogatory right to sue for recovery under the bill of
10

lading in case of loss of or damage to the cargo is jurisprudentially upheld. However, if an insurer, 11

in the exercise of its subrogatory right, may proceed against the erring carrier and for all intents and
purposes stands in the place and in substitution of the consignee, a fortiori such insurer is presumed
to know and is just as bound by the contractual terms under the bill of lading as the insured.

On the first issue, petitioners contend that it was error for the Court of Appeals to reverse the
appealed decision on the supposed ground of prescription when SLI failed to adduce any evidence
in support thereof and that the bills of lading said to contain the shortened periods for filing a claim
and for instituting a court action against the carrier were never offered in evidence. Considering that
the existence and tenor of this stipulation on the aforesaid periods have allegedly not been
established, petitioners maintain that it is inconceivable how they can possibly comply therewith. In 12

refutation, SLI avers that it is standard practice in its operations to issue bills of lading for shipments
entrusted to it for carriage and that it in fact issued bills of lading numbered MD-25 and MD-26
therefor with proof of their existence manifest in the records of the case. For its part, DVAPSI
13

insists on the propriety of the dismissal of the complaint as to it due to petitioners' failure to prove its
direct responsibility for the loss of and/or damage to the cargo. 14

On this point, in denying petitioner's motion for reconsideration, the Court of Appeals resolved that
although the bills of lading were not offered in evidence, the litigation obviously revolves on such bills
of lading which are practically the documents or contracts sued upon, hence, they are inevitably
involved and their provisions cannot be disregarded in the determination of the relative rights of the
parties thereto. 15

Respondent court correctly passed upon the matter of prescription, since that defense was so
considered and controverted by the parties. This issue may accordingly be taken cognizance of by
the court even if not inceptively raised as a defense so long as its existence is plainly apparent on
the face of relevant pleadings. In the case at bar, prescription as an affirmative defense was
16

seasonably raised by SLI in its answer, except that the bills of lading embodying the same were not
17

formally offered in evidence, thus reducing the bone of contention to whether or not prescription can
be maintained as such defense and, as in this case, consequently upheld on the strength of mere
references thereto.

As petitioners are suing upon SLI's contractual obligation under the contract of carriage as contained
in the bills of lading, such bills of lading can be categorized as actionable documents which under
the Rules must be properly pleaded either as causes of action or defenses, and the genuineness
18

and due execution of which are deemed admitted unless specifically denied under oath by the
adverse party. The rules on actionable documents cover and apply to both a cause of action or
19

defense based on said documents. 20

In the present case and under the aforestated assumption that the time limit involved is a
prescriptive period, respondent carrier duly raised prescription as an affirmative defense in its
answer setting forth paragraph 5 of the pertinent bills of lading which comprised the stipulation
thereon by parties, to wit:

5. Claims for shortage, damage, must be made at the time of delivery to consignee
or agent, if container shows exterior signs of damage or shortage. Claims for non-
delivery, misdelivery, loss or damage must be filed within 30 days from accrual. Suits
arising from shortage, damage or loss, non-delivery or misdelivery shall be instituted
within 60 days from date of accrual of right of action. Failure to file claims or institute
judicial proceedings as herein provided constitutes waiver of claim or right of action.
In no case shall carrier be liable for any delay, non-delivery, misdelivery, loss of
damage to cargo while cargo is not in actual custody of carrier. 21

In their reply thereto, herein petitioners, by their own assertions that —

2. In connection with Pars. 14 and 15 of defendant Sweet Lines, Inc.'s Answer,

plaintiffs state that such agreements are what the Supreme Court considers as
contracts of adhesion (see Sweet Lines, Inc. vs. Hon. Bernardo Teves, et al., G.R.
No. L-37750, May 19, 1978) and, consequently, the provisions therein which are
 contrary to law and public policy cannot be availed of by answering defendant as
valid defenses. 22

thereby failed to controvert the existence of the bills of lading and the aforequoted provisions therein,
hence they impliedly admitted the same when they merely assailed the validity of subject
stipulations.

Petitioners' failure to specifically deny the existence, much less the genuineness and due execution,
of the instruments in question amounts to an admission. Judicial admissions, verbal or written, made
by the parties in the pleadings or in the course of the trial or other proceedings in the same case are
conclusive, no evidence being required to prove the same, and cannot be contradicted unless shown
to have been made through palpable mistake or that no such admission was made. Moreover, 23

when the due execution and genuineness of an instrument are deemed admitted because of the
adverse party's failure to make a specific verified denial thereof, the instrument need not be
presented formally in evidence for it may be considered an admitted fact. 24

Even granting that petitioners' averment in their reply amounts to a denial, it has the procedural
earmarks of what in the law on pleadings is called a negative pregnant, that is, a denial pregnant
with the admission of the substantial facts in the pleading responded to which are not squarely
denied. It is in effect an admission of the averment it is directed to. Thus, while petitioners objected
25

to the validity of such agreement for being contrary to public policy, the existence of the bills of
lading and said stipulations were nevertheless impliedly admitted by them.

We find merit in respondent court's comments that petitioners failed to touch on the matter of the
non-presentation of the bills of lading in their brief and earlier on in the appellate proceedings in this
case, hence it is too late in the day to now allow the litigation to be overturned on that score, for to
do so would mean an over-indulgence in technicalities. Hence, for the reasons already advanced,
the non-inclusion of the controverted bills of lading in the formal offer of evidence cannot, under the
facts of this particular case, be considered a fatal procedural lapse as would bar respondent carrier
from raising the defense of prescription. Petitioners' feigned ignorance of the provisions of the bills of
lading, particularly on the time limitations for filing a claim and for commencing a suit in court, as
their excuse for non-compliance therewith does not deserve serious attention.

It is to be noted that the carriage of the cargo involved was effected pursuant to an "Application for
Delivery of Cargoes without Original Bill of Lading" issued on May 20, 1977 in Davao City with the
26

notation therein that said application corresponds to and is subject to the terms of bills of lading MD-
25 and MD-26. It would be a safe assessment to interpret this to mean that, sight unseen, petitioners
acknowledged the existence of said bills of lading. By having the cargo shipped on respondent
carrier's vessel and later making a claim for loss on the basis of the bills of lading, petitioners for all
intents and purposes accepted said bills. Having done so they are bound by all stipulations
contained therein. Verily, as petitioners are suing for recovery on the contract, and in fact even
27

went as far as assailing its validity by categorizing it as a contract of adhesion, then they necessarily
admit that there is such a contract, their knowledge of the existence of which with its attendant
stipulations they cannot now be allowed to deny.

On the issue of the validity of the controverted paragraph 5 of the bills of lading above quoted which
unequivocally prescribes a time frame of thirty (30) days for filing a claim with the carrier in case of
loss of or damage to the cargo and sixty (60) days from accrual of the right of action for instituting an
action in court, which periods must concur, petitioners posit that the alleged shorter prescriptive
period which is in the nature of a limitation on petitioners' right of recovery is unreasonable and that
SLI has the burden of proving otherwise, citing the earlier case of Southern Lines, Inc. vs. Court of
Appeals, et al. They postulate this on the theory that the bills of lading containing the same
28
constitute contracts of adhesion and are, therefore, void for being contrary to public policy,
supposedly pursuant to the dictum in Sweet Lines, Inc. vs. Teves, et al. 29

Furthermore, they contend, since the liability of private respondents has been clearly established, to
bar petitioners' right of recovery on a mere technicality will pave the way for unjust
enrichment. Contrarily, SLI asserts and defends the reasonableness of the time limitation within
30

which claims should be filed with the carrier; the necessity for the same, as this condition for the
carrier's liability is uniformly adopted by nearly all shipping companies if they are to survive the
concomitant rigors and risks of the shipping industry; and the countervailing balance afforded by
such stipulation to the legal presumption of negligence under which the carrier labors in the event of
loss of or damage to the cargo. 31

It has long been held that Article 366 of the Code of Commerce applies not only to overland and
river transportation but also to maritime
transportation. Moreover, we agree that in this jurisdiction, as viewed from another angle, it is more
32

accurate to state that the filing of a claim with the carrier within the time limitation therefor under
Article 366 actually constitutes a condition precedent to the accrual of a right of action against a
carrier for damages caused to the merchandise. The shipper or the consignee must allege and
prove the fulfillment of the condition and if he omits such allegations and proof, no right of action
against the carrier can accrue in his favor. As the requirements in Article 366, restated with a slight
modification in the assailed paragraph 5 of the bills of lading, are reasonable conditions precedent,
they are not limitations of action. Being conditions precedent, their performance must precede a
33

suit for enforcement and the vesting of the right to file spit does not take place until the happening
34

of these conditions. 35

Now, before an action can properly be commenced all the essential elements of the cause of action
must be in existence, that is, the cause of action must be complete. All valid conditions precedent to
the institution of the particular action, whether prescribed by statute, fixed by agreement of the
parties or implied by law must be performed or complied with before commencing the action, unless
the conduct of the adverse party has been such as to prevent or waive performance or excuse non-
performance of the condition. 36

It bears restating that a right of action is the right to presently enforce a cause of action, while a
cause of action consists of the operative facts which give rise to such right of action. The right of
action does not arise until the performance of all conditions precedent to the action and may be
taken away by the running of the statute of limitations, through estoppel, or by other circumstances
which do not affect the cause of action. Performance or fulfillment of all conditions precedent upon
37

which a right of action depends must be sufficiently alleged, considering that the burden of proof to
38

show that a party has a right of action is upon the person initiating the suit. 39

More particularly, where the contract of shipment contains a reasonable requirement of giving notice
of loss of or injury to the goods, the giving of such notice is a condition precedent to the action for
loss or injury or the right to enforce the carrier's liability. Such requirement is not an empty formalism.
The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability,
but reasonably to inform it that the shipment has been damaged and that it is charged with liability
therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects
the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh
and easily investigated so as to safeguard itself from false and fraudulent claims. 40

Stipulations in bills of lading or other contracts of shipment which require notice of claim for loss of or
damage to goods shipped in order to impose liability on the carrier operate to prevent the
enforcement of the contract when not complied with, that is, notice is a condition precedent and the
carrier is not liable if notice is not given in accordance with the stipulation, as the failure to comply
41

with such a stipulation in a contract of carriage with respect to notice of loss or claim for damage
bars recovery for the loss or damage suffered. 42

On the other hand, the validity of a contractual limitation of time for filing the suit itself against a
carrier shorter than the statutory period therefor has generally been upheld as such stipulation
merely affects the shipper's remedy and does not affect the liability of the carrier. In the absence of
any statutory limitation and subject only to the requirement on the reasonableness of the stipulated
limitation period, the parties to a contract of carriage may fix by agreement a shorter time for the
bringing of suit on a claim for the loss of or damage to the shipment than that provided by the statute
of limitations. Such limitation is not contrary to public policy for it does not in any way defeat the
complete vestiture of the right to recover, but merely requires the assertion of that right by action at
an earlier period than would be necessary to defeat it through the operation of the ordinary statute of
limitations.43

In the case at bar, there is neither any showing of compliance by petitioners with the requirement for
the filing of a notice of claim within the prescribed period nor any allegation to that effect. It may then
be said that while petitioners may possibly have a cause of action, for failure to comply with the
above condition precedent they lost whatever right of action they may have in their favor or, token in
another sense, that remedial right or right to relief had prescribed. 44

The shipment in question was discharged into the custody of the consignee on May 15, 1977, and it
was from this date that petitioners' cause of action accrued, with thirty (30) days therefrom within
which to file a claim with the carrier for any loss or damage which may have been suffered by the
cargo and thereby perfect their right of action. The findings of respondent court as supported by
petitioners' formal offer of evidence in the court below show that the claim was filed with SLI only on
April 28, 1978, way beyond the period provided in the bills of lading and violative of the contractual
45

provision, the inevitable consequence of which is the loss of petitioners' remedy or right to sue. Even
the filing of the complaint on May 12, 1978 is of no remedial or practical consequence, since the time
limits for the filing thereof, whether viewed as a condition precedent or as a prescriptive period,
would in this case be productive of the same result, that is, that petitioners had no right of action to
begin with or, at any rate, their claim was time-barred.

What the court finds rather odd is the fact that petitioner TPI filed a provisional claim with DVAPSI as
early as June 14, 1977 and, as found by the trial court, a survey fixing the extent of loss of and/or
46

damage to the cargo was conducted on July 8, 1977 at the instance of petitioners. If petitioners
47

had the opportunity and awareness to file such provisional claim and to cause a survey to be
conducted soon after the discharge of the cargo, then they could very easily have filed the
necessary formal, or even a provisional, claim with SLI itself within the stipulated period therefor,
48

instead of doing so only on April 28, 1978 despite the vessel's arrival at the port of destination on
May 15, 1977. Their failure to timely act brings us to no inference other than the fact that petitioners
slept on their rights and they must now face the consequences of such inaction.

The ratiocination of the Court of Appeals on this aspect is worth reproducing:

xxx xxx xxx

It must be noted, at this juncture, that the aforestated time limitation in the
presentation of claim for loss or damage, is but a restatement of the rule prescribed
under Art. 366 of the Code of Commerce which reads as follows:
 Art. 366. Within the twenty-four hours following the receipt of the
merchandise, the claim against the carrier for damage or average
which may be found therein upon opening the packages, may be
made, provided that the indications of the damage or average which
gives rise to the claim cannot be ascertained from the outside part of
the packages, in which case the claims shall be admitted only at the
time of the receipt.

After the periods mentioned have elapsed, or the transportation

charges have been paid, no claim shall be admitted against the
carrier with regard to the condition in which the goods transported
were delivered.

Gleanable therefrom is the fact that subject stipulation even lengthened the period for
presentation of claims thereunder. Such modification has been sanctioned by the
Supreme Court. In the case of Ong Yet (M)ua Hardware Co., Inc. vs. Mitsui
Steamship Co., Ltd., et al., 59 O.G. No. 17, p. 2764, it ruled that Art. 366 of the Code
of Commerce can be modified by a bill of lading prescribing the period of 90 days
after arrival of the ship, for filing of written claim with the carrier or agent, instead of
the 24-hour time limit after delivery provided in the aforecited legal provision.

Tested, too, under paragraph 5 of said Bill of Lading, it is crystal clear that the
commencement of the instant suit on May 12, 1978 was indeed fatally late. In view of
the express provision that "suits arising from
. . . damage or loss shall be instituted within 60 days from date of accrual of right of
action," the present action necessarily fails on ground of prescription.

In the absence of constitutional or statutory prohibition, it is usually

held or recognized that it is competent for the parties to a contract of
shipment to agree on a limitation of time shorter than the statutory
period, within which action for breach of the contract shall be brought,
and such limitation will be enforced if reasonable . . . (13 C.J.S. 496-
497)

A perusal of the pertinent provisions of law on the matter would disclose that there is
no constitutional or statutory prohibition infirming paragraph 5 of subject Bill of
Lading. The stipulated period of 60 days is reasonable enough for appellees to
ascertain the facts and thereafter to sue, if need be, and the 60-day period agreed
upon by the parties which shortened the statutory period within which to bring action
for breach of contract is valid and binding. . . . (Emphasis in the original text.)49

As explained above, the shortened period for filing suit is not unreasonable and has in fact been
generally recognized to be a valid business practice in the shipping industry. Petitioners' advertence
to the Court's holding in the Southern Lines case, supra, is futile as what was involved was a claim
for refund of excess payment. We ruled therein that non-compliance with the requirement of filing a
notice of claim under Article 366 of the Code of Commerce does not affect the consignee's right of
action against the carrier because said requirement applies only to cases for recovery of damages
on account of loss of or damage to cargo, not to an action for refund of overpayment, and on the
further consideration that neither the Code of Commerce nor the bills of lading therein provided any
time limitation for suing for refund of money paid in excess, except only that it be filed within a
reasonable time.
The ruling in Sweet Lines categorizing the stipulated limitation on venue of action provided in the
subject bill of lading as a contract of adhesion and, under the circumstances therein, void for being
contrary to public policy is evidently likewise unavailing in view of the discrete environmental facts
involved and the fact that the restriction therein was unreasonable. In any case, Ong Yiu vs. Court of
Appeals, et al., instructs us that "contracts of adhesion wherein one party imposes a ready-made
50

form of contract on the other . . . are contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres he gives his consent." In the present case,
not even an allegation of ignorance of a party excuses non-compliance with the contractual
stipulations since the responsibility for ensuring full comprehension of the provisions of a contract of
carriage devolves not on the carrier but on the owner, shipper, or consignee as the case may be.

While it is true that substantial compliance with provisions on filing of claim for loss of or damage to
cargo may sometimes suffice, the invocation of such an assumption must be viewed vis-a-vis the
object or purpose which such a provision seeks to attain and that is to afford the carrier a reasonable
opportunity to determine the merits and validity of the claim and to protect itself against unfounded
impositions. Petitioners' would nevertheless adopt an adamant posture hinged on the issuance by
51

SLI of a "Report on Losses and Damages," dated May 15, 1977, from which petitioners theorize
52

that this charges private respondents with actual knowledge of the loss and damage involved in the
present case as would obviate the need for or render superfluous the filing of a claim within the
stipulated period.

Withal, it has merely to be pointed out that the aforementioned report bears this notation at the lower
part thereof: "Damaged by Mla. labor upon unloading; B/L noted at port of origin," as an explanation
for the cause of loss of and/or damage to the cargo, together with an iterative note stating that "(t)his
Copy should be submitted together with your claim invoice or receipt within 30 days from date of
issue otherwise your claim will not be honored."

Moreover, knowledge on the part of the carrier of the loss of or damage to the goods deducible from
the issuance of said report is not equivalent to nor does it approximate the legal purpose served by
the filing of the requisite claim, that is, to promptly apprise the carrier about a consignee's intention to
file a claim and thus cause the prompt investigation of the veracity and merit thereof for its
protection. It would be an unfair imposition to require the carrier, upon discovery in the process of
preparing the report on losses or damages of any and all such loss or damage, to presume the
existence of a claim against it when at that time the carrier is expectedly concerned merely with
accounting for each and every shipment and assessing its condition. Unless and until a notice of
claim is therewith timely filed, the carrier cannot be expected to presume that for every loss or
damage tallied, a corresponding claim therefor has been filed or is already in existence as would
alert it to the urgency for an immediate investigation of the soundness of the claim. The report on
losses and damages is not the claim referred to and required by the bills of lading for it does not fix
responsibility for the loss or damage, but merely states the condition of the goods shipped. The
claim contemplated herein, in whatever form, must be something more than a notice that the goods
have been lost or damaged; it must contain a claim for compensation or indicate an intent to claim. 53

Thus, to put the legal effect of respondent carrier's report on losses or damages, the preparation of
which is standard procedure upon unloading of cargo at the port of destination, on the same level as
that of a notice of claim by imploring substantial compliance is definitely farfetched. Besides, the
cited notation on the carrier's report itself makes it clear that the filing of a notice of claim in any case
is imperative if carrier is to be held liable at all for the loss of or damage to cargo.

Turning now to respondent DVAPSI and considering that whatever right of action petitioners may
have against respondent carrier was lost due to their failure to seasonably file the requisite claim, it
would be awkward, to say the least, that by some convenient process of elimination DVAPSI should
proverbially be left holding the bag, and it would be pure speculation to assume that DVAPSI is
probably responsible for the loss of or damage to cargo. Unlike a common carrier, an arrastre
operator does not labor under a presumption of negligence in case of loss, destruction or
deterioration of goods discharged into its custody. In other words, to hold an arrastre operator liable
for loss of and/or damage to goods entrusted to it there must be preponderant evidence that it did
not exercise due diligence in the handling and care of the goods.

Petitioners failed to pinpoint liability on any of the original defendants and in this seemingly wild
goose-chase, they cannot quite put their finger down on when, where, how and under whose
responsibility the loss or damage probably occurred, or as stated in paragraph 8 of their basic
complaint filed in the court below, whether "(u)pon discharge of the cargoes from the original
carrying vessel, the SS VISHVA YASH," and/or upon discharge of the cargoes from the interisland
vessel the MV "SWEET LOVE," in Davao City and later while in the custody of defendant arrastre
operator. 54

The testimony of petitioners' own witness, Roberto Cabato, Jr., Marine and Aviation Claims Manager
of petitioner Philamgen, was definitely inconclusive and the responsibility for the loss or damage
could still not be ascertained therefrom:

Q In other words, Mr. Cabato, you only computed the loss on the
basis of the figures submitted to you and based on the documents
like the survey certificate and the certificate of the arrastre?

A Yes, sir.

Q Therefore, Mr. Cabato, you have no idea how or where these

losses were incurred?

A No, sir.

xxx xxx xxx

Q Mr. Witness, you said that you processed and investigated the
claim involving the shipment in question. Is it not a fact that in your
processing and investigation you considered how the shipment was
transported? Where the losses could have occurred and what is the
extent of the respective responsibilities of the bailees and/or carriers
involved?

xxx xxx xxx

A With respect to the shipment being transported, we have of course

to get into it in order to check whether the shipment coming in to this
port is in accordance with the policy condition, like in this particular
case, the shipment was transported to Manila and transhipped
through an interisland vessel in accordance with the policy. With
respect to the losses, we have a general view where losses could
have occurred. Of course we will have to consider the different
bailees wherein the shipment must have passed through, like the
ocean vessel, the interisland vessel and the arrastre, but definitely at
that point and time we cannot determine the extent of each liability.
 We are only interested at that point and time in the liability as regards
the underwriter in accordance with the policy that we issued.

xxx xxx xxx

Q Mr. Witness, from the documents, namely, the survey of Manila

Adjusters and Surveyors Company, the survey of Davao Arrastre
contractor and the bills of lading issued by the defendant Sweet
Lines, will you be able to tell the respective liabilities of the bailees
and/or carriers concerned?

A No, sir. (Emphasis ours.) 55

Neither did nor could the trial court, much less the Court of Appeals, precisely establish the stage in
the course of the shipment when the goods were lost, destroyed or damaged. What can only be
inferred from the factual findings of the trial court is that by the time the cargo was discharged to
DVAPSI, loss or damage had already occurred and that the same could not have possibly occurred
while the same was in the custody of DVAPSI, as demonstrated by the observations of the trial court
quoted at the start of this opinion.

ACCORDINGLY, on the foregoing premises, the instant petition is DENIED and the dismissal of the
complaint in the court a quo as decreed by respondent Court of Appeals in its challenged judgment
is hereby AFFIRMED.

SO ORDERED.