**Facts:**
Padoson Stainless Steel Corporation (Padoson) engaged Asian Terminals, Inc. (ATI) to provide arrastre, wharfage, and storage services for a shipment consisting of steel coils which were imported in favor of Padoson. The shipments were subjected to a Hold-Order by the Bureau of Customs (BOC) due to Padoson’s tax liabilities. ATI demanded payment for the storage services provided, but Padoson did not comply. Consequently, ATI filed a complaint for a sum of money and damages with the Regional Trial Court (RTC) of Manila. Padoson countered, claiming the shipments suffered deterioration while under ATI’s custody and blamed ATI for this damage, demanding compensation for their losses. The case traveled through the legal system, with ATI challenging the RTC and the Court of Appeals (CA)’s decisions favoring Padoson, eventually bringing the matter before the Supreme Court via a petition for review on certiorari.
**Issues:**
1. Whether the CA erred in affirming the RTC decision that the shipments were under the BOC’s constructive possession, thus relieving Padoson of liability for the storage fees.
2. Whether Padoson failed to establish damage to the shipments while in ATI’s custody and its implication on liability.
3. The determination of liability for storage fees and the applicability of exemplary damages and attorney’s fees.
**Court’s Decision:**
1. The Supreme Court granted ATI’s petition, reversing the decisions of the CA and the RTC. It clarified that the BOC’s Hold-Order did not constitute constructive possession that would relieve Padoson of its obligation to pay ATI for storage fees. The Court highlighted the principle of relativity of contracts, emphasizing that a contract binds only the parties who entered into it. The BOC, not being a party to the service contract between Padoson and ATI, could not be held responsible for the storage fees.
2. The Court also found that Padoson failed to substantiate its claims of damage to the shipments while under ATI’s custody. The evidence Padoson attempted to present was deemed inadmissible or insufficient. Moreover, the chain of custody and the initial and final condition of the shipments, crucial in establishing ATI’s alleged negligence, were never properly documented or proven by Padoson.
3. Ultimately, the Supreme Court ordered Padoson to pay ATI the demanded amount for storage services, along with an interest rate adjustment from twelve percent (12%) per annum to six percent (6%) per annum after July 1, 2013, until full satisfaction of the judgment. The Court, however, did not grant ATI’s request for exemplary damages and attorney’s fees, citing a lack of basis for such awards.
**Doctrine:**
This case reiterates the doctrine of relativity of contracts, which states that contracts only bind the parties who entered into them and cannot benefit or prejudice third parties not privy to the agreement. Additionally, it emphasizes the proper criteria for establishing constructive possession and liability in the context of service provision and goods storage, especially under a legal and contractual framework.
**Class Notes:**
1. **Doctrine of Relativity of Contracts:** Contracts can only bind the parties involved and not third parties.
2. **Constructive Possession:** The mere issuance of a Hold-Order by the BOC does not equate to constructive possession that can alter liability or obligations arising from a contract of service.
3. **Evidence in Claiming Damages:** Proper admissibility and sufficiency of evidence are crucial. The burden of proof lies with the party asserting the claim.
4. **Interest Rates on Monetary Obligations:** The interest rate for obligations arising out of non-loan contracts is six percent (6%) per annum, subject to adjustments as stipulated by the Bangko Sentral ng Pilipinas Circular No. 799 since July 1, 2013.
5. **Exemplary Damages and Attorney’s Fees:** Not automatically granted unless supported by the circumstances defined under the Civil Code (Articles 2229, 2234, and 2208).
**Historical Background:**
This case provides insight into the responsibilities and legal interpretation of storage fees, damages, and possession amidst disputes involving customs hold-orders and alleged non-performance of service contracts. It clarifies the application of the doctrine of constructive possession and the conditions for the imposition of interest rates and damages, contributing to jurisprudence on contract law and obligations.
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