HOME INSURANCE CORPORATION, PETITIONER, VS. THE HON. COURT OF APPEALS, FORMER 7TH DIVISION AND MABUHAY BROKERAGE CO., INC., RESPONDENTS.

Filipro Phil., now known as Nestle Phil., was the consignee of
two hydraulic engines shipped on April 25, 1979, by INREDECO from the United
States on the M/S Oriental Statesman. The cargo arrived in Manila on May 17, 1979, on board the M/S Pacific
Conveyor. It was turned over to E.
Razon Arrastre, which retained custody until July 20, 1979. The cargo was later hauled by Mabuhay
Brokerage Co. to its warehouse, where it stayed until July 26, 1979. On this date it was delivered to the
consignee.

When the skidded plywood cases were opened by the consignee, one
of the engines was found to be damaged. Its fan cover was broken
and misaligned and its cap deformed. The consignee refused to accept the unit.

Nestle subsequently
filed a claim against E. Razon, Mabuhay, the Port Authority, and its insurer,
the Home Insurance Corp., for P49,170.00. When the other companies denied liability, Home Insurance paid the
claim and was issued a subrogation receipt for $6,070.00.^[1]

Mabuhay alone was sued
by Home Insurance for the recovery of the amount it had paid to Nestle. Mabuhay again denied liability. After trial, the Regional Trial Court of
Manila rendered judgment dismissing the complaint.^[2] Judge Lorenzo B. Veneracion declared that
the plaintiff failed to establish the legal and factual bases for its claim.

The decision noted
that the insurance contract between the corporation and the consignee
was not presented
and that the other supporting documents were all only photo­copies. No explanation was given for the failure of
the plaintiffs to submit the originals. The trial court also observed that the crates of the shipment did not
comply with the accepted international standards, taking into consideration the
length of the voyage and the transshipment of the cargo. Its conclusion was that whatever damage was
sustained by the engine must have occurred while it was at sea, for which
Mabuhay could not be held liable.

The judgment was affirmed on appeal.^[3] In
addition, the respondent court held that the appellant had failed to establish
a valid subrogation, which could not be presumed,^[4] and
to prove the amount Home had paid to Nestle. There was no evidence either of what happened to the damaged engine,
which still retained a residual value despite its defects.

The Court of Appeals
stressed that the petitioner could be excused from presenting the original of
the insurance contract only if there was proof that this had been lost. The unrebutted claim, however, is that the
original was in its possession all the time.^[5] The respondent court added that even if a valid subrogation could be
established, Mabuhay was nevertheless not an absolute insurer against all risks
of the transport of the goods. In any
case, it appeared that Mabuhay had exercised extraordinary diligence for the
safe delivery of the cargo.

The challenged
decision, however, deleted the award of P8,000.00 for litigation
expenses for lack of legal or equitable justification.

In the present
petition, it is argued that: (1) the
subrogation receipt proves the existence of the insurance contract between
Nestle and Home Insurance and the amount paid by the latter to the former; and
(2) the law or presumption of negligence operates against the carrier.

The petition has no merit.

Home’s action against
Mabuhay supposedly arose from its contract of insurance with Nestle. Having paid the consignee the damages it
sustained during the shipment, Home now claims it is rightfully subrogated
under such contract to the rights of the consignee. But the problem is – what rights? And against whom?

The insurance contract
has not been presented. It may be
assumed for the sake of argument that the subrogation receipt may nevertheless
be used to establish the relationship between the petitioner and the consignee
and the amount paid to settle the claim. But that is all the document can do. By itself alone, the subrogation receipt is not sufficient to prove the
petitioner’s claim holding the respondent liable for the damage to the
engine.

The shipment of the
cargo passed through several stages: first, from the shipper to the port of
departure; second, from the port of departure to the M/S Oriental Statesman;
third; from the M/S Oriental Statesman to the M/S Pacific Conveyor; fourth,
from the M/S Pacific Conveyor to the port of arrival; fifth, from the port of
arrival to the arrastre operator; sixth, from the arrastre operator to the
hauler; and lastly, from the hauler to the consignee.

In the absence of
proof of stipulations to the contrary, the hauler can be liable only for any
damage that occurred from the time it received the cargo until it finally
delivered it to the consignee. It
cannot be held responsible for the handling of the cargo before it actually
received it, particularly since there was no indication from the external
appearance of the crates, which Mabuhay did not open, that the engine was
damaged.

As a mere subrogee of Nestle, Home can exercise only such rights
against the parties handling the cargo as were granted to Nestle under the
insurance contract. The insurance
contract would have clearly indicated the scope of the coverage but there is no
evidence of this. It cannot simply be
supposed that the hauling was included in the coverage; it is possible that the
coverage ended with the arrastre. In
other words, the rights transferred to Home by Nestle – still assuming there
was a valid subrogation – might not include the right to sue Mabuhay.

The petitioner cites Article 1735 of the Civil Code reading as
follows:

Article 1735. In all cases
other than those mentioned in Nos. 1, 2, 3, 4, and 5 of the preceding article,
if the goods are lost, destroyed or deteriorated, common carriers are presumed
to have been at fault or to have acted negligently unless they prove that they
observed extraordinary diligence as required in Article 1733.

This presumption is
applicable only if the shipper or consignee has, to begin with, a right of
action against the carrier. It has not
been shown in the case at bar that Home, as the supposed subrogee of Nestle,
has acquired such a right against Mabuhay.

The insurance contract
might have proved that it covered the hauling portion of the shipment and was
not limited to the transport of the cargo while at sea, if that were really the
case. It could have shown that the agreement was not only a marine
transportation insurance but covered all phases of the cargo’s shipment, from
the time the cargo was loaded on the vessel in the United States until it was delivered
to the consignee in the Philippines. But there is no acceptable evidence of these stipulations because
the original contract of insurance has not been presented.

Rule 130, Section 3 of the Rules of Court is quite clear:

Sec. 3. Original document must be produced;
exceptions. – When the
subject of inquiry is the contents of a document, no evidence shall be
admissible other than the original document itself, except in the following
cases:

(a)     When the original has
been lost or destroyed, or cannot be produced in court, without bad faith on
the part of the offeror;

(b)     When the original is
in custody or under the control of the party against whom the evidence is
offered, and the latter fails to produce it after reasonable notice;

(c)     When the original
consists of numerous accounts or other documents which cannot be examined in
court without great loss of time and the fact sought to be established from
them is only the general result of the whole; and

(d)     When the original is a
public record in the custody of a public officer or is recorded in a public
office.

It is curious that the petitioner disregarded this rule, knowing
that the best evidence of the insurance contract was its original copy, which
was presumably in the possession of Home itself. Failure to present this original (or even a copy of it), for
reasons the Court cannot comprehend, must prove fatal to this petition.

WHEREFORE, the petition is DENIED, with costs against the
petitioner. It is so ordered.

Griño-Aquino, Davide, Jr., Bellosillo, and Quiason, JJ., concur.

^[1]
Exhibit E, Exhibits of the Plaintiff.

^[2]
Annex A, Rollo, pp. 29-30.

^[3]
Rollo, pp.
73-81.

^[4]
Ibid., p. 76.

^[5]
Rollo, p. 77.