MARITIME AGENCIES & SERVICES, INC., PETITIONER, VS. COURT OF APPEALS, AND UNION INSURANCE SOCIETY OF CANTON, LTD., RESPONDENTS.

Transcontinental Fertilizer Company of London
chartered from Hongkong Island Shipping Company of Hongkong the motor vessel named “Hongkong Island”
for the shipment of 8073.35 MT (gross) bagged urea from Novorossisk, Odessa, USSR, to the Philippines, the parties signing for this purpose a Uniform General Charter dated August 9, 1979.^[1]

Of the total shipment, 5,400.04 MT was for the account of Atlas
Fertilizer Company as consignee, 3,400.04 to be discharged in Manila
and the remaining 2,000 MT in Cebu.^[2]
The goods were insured by the consignee with the Union Insurance Society of
Canton, Ltd. for P6,779,214.00 against all risks.^[3]

Maritime Agencies & Services, Inc. was appointed as the charterer’s agent and Macondray
Company, Inc. as the owner’s agent.^[4]

The vessel arrived in Manila
on October 3, 1979, and
unloaded part of the consignee’s goods, then proceeded to Cebu on October 19, 1979, to discharge the rest of the
cargo.  On October 31, 1979, the consignee filed a formal claim
against Maritime, copy furnished Macondray, for the
amount of P87,163.54, representing C & F value of
the 1,383 shortlanded bags.^[5]
On January 12, 1980, the
consignee filed another formal claim, this time against Viva Customs Brokerage,
for the amount of P36,030.23, representing the value
of 574 bags of net unrecovered spillage.^[6]

These claims having been rejected, the consignee then went to Union,
which on demand paid the total indemnity of P113,123.86
pursuant to the insurance contract.  As subrogee of the consignee, Union
then filed on September 19, 1980,
a complaint
for reimbursement of this amount, with legal interest and attorney’s fees,
against Hongkong Island Company, Ltd., Maritime
Agencies & Services, Inc. and/or Viva Customs Brokerage.^[7]
On April 20, 1981, the complaint
was amended to drop Viva and implead Macondray Company, Inc. as a new defendant.^[8]

On January 4, 1984,
after trial, the trial court rendered judgment holding the defendants liable as
follows:

(a)     defendants Hongkong Island Co., Ltd., and its local agent Macondray & Co., Inc. to pay the plaintiff the sum of
P87,163.54 plus 12% interest from April 20, 1981 until the whole amount is
fully paid, P1,000.00 as attorney’s fees and to pay one-half (1/2) of the
costs; and

(b)     defendant Maritime
Agencies & Services, Inc., to pay the plaintiff the sum of P36,030.23, plus
12% interest from April 20, 1981 until the whole amount is fully paid, P600.00
as attorney’s fees and to pay one-half (1/2) of the costs.^[9]

Petitioner appealed the decision to the Court of Appeals, which
rendered a decision on November 28,
1986, the dispositive portion of which
reads:

WHEREFORE, the decision appealed from is modified, finding the charterer Transcontinental Fertilizer Co., Ltd. represented
by its agent Maritime Agencies & Services, Inc. liable for the amount of P87,163.54 plus
interest at 12% plus attorney’s
fees of P1,000.00.  Defendant Hongkong Island Co., Ltd. represented by Macondray Co., Inc. are
accordingly exempted from any liability.^[10]

Maritime and Union filed separate motions
for reconsideration which were both denied. 
The movants are now before us to question the
decision of the respondent court.

In G.R. No. 77638, Maritime pleads non-liability on the ground
that it was only the charterer’s agent and should not
answer for whatever responsibility might have attached to the principal.  It also argues that the respondent court
erred in applying Articles 1734 and 1735 of the Civil Code in determining the charterer’s liability.

In G.R. No. 77674, Union asks for the
modification of the decision of the respondent court so as to make Maritime solidarily and solely liable, its principal not having been
impleaded and so not subject to the jurisdiction of
our courts.

These two cases were consolidated and given due course, the
parties being required to submit simultaneous memoranda.  All complied, including Hongkong
Island Company, Ltd., and Macondray
Company, Inc., although they pointed out that they were not involved in the
petitions.

There are three general
categories of charters, to wit, the demise or “bareboat
charter,” the time charter and the voyage charter.

A demise
involves the transfer of full
possession and control of the vessel for
the period covered by the contract, the charterer
obtaining the right to use the vessel and carry whatever cargo it chooses, while manning and supplying the
ship as well.^[11]

A time charter is
a contract to use a vessel for a particular
period of time, the charterer obtaining the right to direct the movements of the vessel during the chartering
period, although the owner retains
possession and control.^[12]

A voyage charter is a contract for the hire of a vessel for one
or a series of voyages usually
for the purpose of transporting goods for the charterer.  The voyage charter is a contract of affreightment and is considered a private carriage.^[13]

Tested by those
definitions, the agreement entered into in the cases at bar should be considered.  This brings us to the basic question
of who, in this kind of charter, shall be liable for the cargo.

A voyage charter being a
private carriage, the parties may freely contract respecting liability for
damage to the goods and other matters. 
The basic principle is that “the responsibility for cargo loss
falls on the one who agreed to perform the duty involved” in accordance with
the terms of most voyage charters.^[14]

This is true in the present cases where the charterer
was responsible for loading, stowage and discharging at the ports visited,
while the owner was responsible for the care of the cargo during the
voyage.  Thus, Par. 2 of the Uniform
General Charter read:

2.       Owners are to be
responsible for loss of or damage to the goods or for delay in delivery of the
goods only in case the loss, damage or delay has been caused by the improper or
negligent stowage of the goods or by personal want of due diligence on the part
of the Owners or their Manager to make the vessel in all respects seaworthy and
to secure that she is properly manned, equipped and supplied or by the personal
act or default of the Owners or their Manager.

And the Owners are responsible for no loss or damage or delay
arising from any other cause whatsoever, even from the neglect or default of
the Captain or crew or some other person employed by the Owners onboard or
ashore for whose acts they would, but for this clause, be responsible, or from unseaworthiness of the vessel on loading or commencement of the voyage or at any time whatsoever.

Damage caused by contact with or leakage, smell or evaporation from
other goods or by the inflammable or explosive nature or insufficient package
of other goods not to be considered as caused by improper or negligent stowage,
even if in fact so caused.

while Clause 17
of Additional Clauses to Charterparty provided:

The cargo shall be loaded, stowed and discharged free of expense to the vessel under the Master’s
supervision.  However, if required at
loading and discharging ports the vessel is to give free use of winches and
power to drive them gear, runners and ropes. 
Also slings, as on board.  Shore winchmen are to be employed and they are to be for Charterers‘ or Shippers’ or Receivers’ account as the case may be.  Vessel is also to give free use of sufficient
light, as on board, if required
for night work.  Time lost through breakdown of winches or
derricks is not to count as laytime.

In Home Insurance Co. v. American Steamship Agencies, Inc.,^[15]
the trial court rejected similar stipulations as contrary to public policy and,
applying the provisions of the Civil Code on common carriers and of the Code of
Commerce on the duties of the ship captain, held the vessel liable in damages
for loss of part of the cargo it was carrying. 
This Court reversed, declaring as follows:

The provisions of our Civil Code on common carriers were taken from
Anglo-American law.  Under American
jurisprudence, a common carrier undertaking to carry a special cargo or
chartered to a special person
only, becomes a private
carrier.  As a private carrier, a stipulation exempting the owner from
liability for the negligence of its agent is not against public policy, and is
deemed valid.

Such doctrine we find reasonable. 
The Civil Code provisions on common carriers should not be applied where
the carrier is not acting as such but as
a private carrier.  The
stipulation in the charter party absolving the owner from liability for loss
due to the negligence of its agent would be void only if the strict public
policy governing common carriers is applied. 
Such policy has no force where the public at large is not involved, as
in the case of a ship totally chartered for the use of a single party.

Nevertheless, this ruling cannot benefit Hongkong, because there was
no showing in that case that the vessel was at fault.  In the cases at bar, the trial court found
that 1,383 bags were shortlanded, which could only
mean that they were damaged or lost on board the vessel before unloading of the
shipment.  It is not denied that the
entire cargo shipped by the charterer in Odessa
was covered by a clean bill of lading.^[16]
As the bags were in good order when received in the vessel, the presumption is
that they were damaged or lost during the voyage as a result of their negligent
or improper stowage.  For this the ship
owner should be held liable.

But we do agree that the period for filing the claim is one year,
in accordance with the Carriage of Goods by Sea Act.  This was adopted and embodied by our
legislature in Com. Act No. 65 which, as a special law, prevails over the general
provisions of the Civil Code on prescription of actions.  Section 3(6) of that Act provides as follows:

In any event, the carrier and the ship shall be discharged from all
liability in respect of loss or damage unless suit is brought within one year
after delivery of the goods or the date when the goods should have been
delivered; Provided, that if a notice of loss for damage; either apparent or
concealed, is not given as provided for in this section, that fact shall not
effect or prejudice the right of the shipper to bring suit within one year
after the delivery of the goods or the date when the goods should have been
delivered.

This period was applied by the Court in the case of Union
Carbide, Philippines, Inc. v. Manila Railroad Co.,^[17]
where it was held:

Under the facts of this case, we held that the one-year period was
correctly reckoned by the trial court from December 19, 1961, when, as agreed upon by the parties and as
shown in the tally sheets, the cargo was discharged from the carrying vessel
and delivered to the Manila Port Service. 
That one-year period expired on December
19, 1962.  Inasmuch as the
action was filed on December 21, 1962,
it was barred by the statute of limitations.

The one-year period in the cases at bar should commence on October 20, 1979, when the last item
was delivered to the consignee.^[18]
Union’s complaint was filed against Hongkong
on September 19, 1980, but
tardily against Macondray on April 20, 1981. 
The consequence is that the action is considered prescribed as far as Macondray is concerned but not against its principal, which
is what matters anyway.

As regards the goods damaged or lost during unloading, the charterer is liable therefor,
having assumed this activity under the charter party “free of expense to
the vessel.” The difficulty is that Transcontinental has not been impleaded in these cases and so is beyond our
jurisdiction.  The liability imposable
upon it cannot be borne by Maritime which, as a mere agent, is not answerable
for injury caused by its principal.  It
is a well-settled
principle that
the agent shall be liable for the act or omission of the principal only if the
latter is undisclosed.^[19]

Union seeks to hold Maritime liable as
ship agent on the basis of the ruling of this Court in the case of Switzerland
General Insurance Co., Ltd. v. Ramirez.^[20]
However, we do not find that that case is applicable.

In that case, the charterer represented
itself on the face of the bill of lading as the carrier.  The vessel owner and the charterer
did not stipulate in the Charterparty on their separate respective liabilities for
the cargo.  The loss/damage to the cargo
was sustained while it was still on board or under the custody of the
vessel.  As the charterer
was itself the carrier, it was made liable for the acts of the ship captain who
was responsible for the cargo while under the custody of the vessel.

As for the charterer’s agent, the
evidence showed that it represented the vessel when it took charge of the
unloading of the cargo and issued cargo receipts (or tally sheets) in its own
name.  Claims against the vessel for the
losses/damages sustained by that cargo were also received and processed by
it.  As a result, the charterer’s
agent was also considered a ship agent and so was held to be solidarily liable with its principal.

The facts in the cases at bar are different.  The charterer did
not represent itself as a carrier and indeed assumed
responsibility only for the unloading of the cargo, i.e., after the goods were
already outside the custody of the vessel. 
In supervising the unloading of the cargo and issuing Daily Operations Report and Statement of Facts
indicating and describing the day-to-day discharge of the cargo, Maritime acted
in representation of the charterer and not of the vessel.  It thus cannot be considered a ship
agent.  As a mere charterer’s
agent, it cannot be held solidarily liable
with Transcontinental for the losses/damages to the cargo outside the custody
of the vessel.  Notably,
Transcontinental was disclosed as the charterer’s principal and there is no question that
Maritime acted within the scope of its authority.

Hongkong and Macondray
point out in their memorandum that the appealed decision is not assailed
insofar as it favors them and so has become final as to them. 
We do not think so.  First of all, we note that they were formally
impleaded as respondents in G.R. No. 77674 and submitted their comment and later
their memorandum, where they discussed at length their position vis-a-vis the
claims of the other parties.  Secondly,
we reiterate the rule that even if issues are not formally and specifically
raised on appeal, they may nevertheless be considered in the interest of
justice for a proper decision of the
case.  Thus, we have held that:

Besides, an unassigned error closely related to the error properly assigned, or upon which the determination
of the question raised by the error properly assigned is dependent, will
be considered by the appellate court notwithstanding the failure to assign it
as error.

At any rate, the Court is clothed with ample authority to review
matters, even if they are not assigned as errors in their appeal, if it finds
that their consideration is necessary in arriving at a just decision of the case.^[21]

x        x          x

Issues, though not specifically raised in the pleadings in the
appellate court, may, in the interest of justice, be properly considered by
said court in deciding a case, if
they are questions raised in the trial court and are matters of record having
some bearing on the issue submitted which the parties failed to raise or the
lower court ignore(d).^[22]

x        x          x

While an assignment of error which is required by law or rule of court
has been held essential to appellate review, and only those assigned will be
considered, there are a number
of cases which appear to accord to the appellate court a broad discretionary
power to waive this lack of proper assignment of errors and consider errors not
assigned.^[23]

In his decision dated January
4, 1984, Judge Artemon de Luna of the
Regional Trial Court of Manila held:

The Court, on the basis of the evidence, finds nothing to disprove
the finding of the marine and cargo surveyors that of the 66,390 bags of urea
fertilizer, 65,547 bags were “discharged ex-vessel” and there were
“shortlanded” “1,383 bags,”
valued at P87,163.54.  This sum should be the principal and primary
liability and responsibility of the carrying vessel.  Under the contract for the transportation of
goods, the vessel’s responsibility
commence upon the actual delivery to, and receipt by the carrier or its
authorized agent, until its final discharge at the port of Manila.  Defendant Hongkong
Island Co., Ltd., as “shipowner” and
represented by the defendant Macondray & Co., Inc., as its local agent in the
Philippines, should be responsible for
the value of the bags of urea fertilizer which were shortlanded.

The remainder of the claim in the amount of P36,030.23,
representing the value of the 574 bags of unrecovered
spillages having occurred after the shipment was discharged from the vessel
unto the ex-lighters as well as during the discharge from the lighters to the
truck which transported the shipment to the consignee’s warehouses should be
for the account of the defendant Maritime Agencies & Services, Inc.

We affirm the factual findings but must modify the legal
conclusions.  As previously discussed,
the liability of Macondray can no longer be enforced
because the claim against it has prescribed; and as for Maritime, it cannot be
held liable for the acts of its known principal resulting in injury to Union.  The interest must also be reduced to the legal rate of 6%, conformably to our
ruling in Reformina v. Tomol^[24]
and Article 2209 of the Civil Code, and should commence, not on April 20, 1981, but on September 19, 1980, date of the
filing of the original complaint.

WHEREFORE, the decision of the respondent court is SET
ASIDE and that of the trial court is REINSTATED as above modified.  The parties shall bear their respective
costs.

SO ORDERED.

Narvasa, (Chairman), Gancayco, Griño-Aquino, and Medialdea, JJ., concur.

^[1]
Original Records, pp. 24-31.

^[2]
Ibid., pp. 65-66.

^[3]
Id., pp. 67-68.

^[4]
id., p. 33.

^[5]
id., p. 75.

^[6]
Id., p. 76.

^[7]
Rollo, G.R. No. 77638, p. 114.

^[8]
Original Records, pp. 3-6.

^[9]
Ibid., pp. 156-163.  Decided
by Judge Artemon D. Luna.

^[10]
Rollo, G.R. No. 77638, pp. 27-33.  Penned by Coquia, J.,
with Luciano and Cui, JJ., concurring.

^[11]
Schoenbaum, Thomas, J., Admiralty and Maritime
Law, 1987, Student Edition, p. 382.

^[12]
Ibid.

^[13]
Id., p. 383.

^[14]
Id., p. 403.

^[15]
23 SCRA 24.

^[16]
Original Records, p. 64.

^[17]
77 SCRA 359.

^[18]
Schoenbaum, Admiralty and Maritime Law, p. 379.

^[19]
2 Am Jur., pp. 247-249; 3 CJS,
pp. 119, 135.

^[20]
96 SCRA 297.

^[21]
Vda. de Javellana v. CA, 123 SCRA 799.

^[22]
Baquiran v. CA, 2 SCRA 873.

^[23]
Hernandez v. Andal, 78 Phil. 196.

^[24]
139 SCRA 260.