Lorenzo Shipping Corp. v. Chubb and Sons, Inc.
REITERATIONFacts
The Antecedents: Lorenzo Shipping Corporation (Lorenzo Shipping) was the initial carrier of 581 bundles of black steel pipes from Manila to Davao City. Upon arrival in Davao, the shipment was discharged and received by Philippine Transmarine Carriers, Inc. (Transmarine Carriers), agent for Gearbulk, Ltd. (Gearbulk). It was discovered that the steel pipes were submerged in seawater, exhibiting rust formation. A survey report confirmed the damage and the flooded condition of the cargo hold of Lorenzo Shipping's vessel, M/V Lorcon IV, noting holes in the tank top. Gearbulk then carried the shipment to the United States, issuing bills of lading marked "ALL UNITS HEAVILY RUSTED." The consignee, Sumitomo Corporation, rejected the damaged pipes and filed a marine insurance claim with Chubb and Sons, Inc. (Chubb), which settled the claim for US$104,151.00. Procedural History: Chubb filed a complaint against Lorenzo Shipping, Gearbulk, and Transmarine for collection of a sum of money. The Regional Trial Court (RTC) ruled in favor of Chubb, ordering Lorenzo Shipping to pay the settled insurance amount, attorney's fees, and costs, while dismissing the complaint against Gearbulk and Transmarine. The Court of Appeals (CA) affirmed the RTC decision. Lorenzo Shipping appealed to the Supreme Court. The Petition: Lorenzo Shipping argued that Chubb, as a subrogee of Sumitomo (a foreign corporation allegedly doing business without a license), lacked the capacity to sue in the Philippines. It also questioned whether Sumitomo validly made a claim within the prescribed period and whether Lorenzo Shipping was negligent.
Issue(s)
Whether respondent Chubb and Sons, Inc. has capacity to sue before the Philippine courts. Whether petitioner Lorenzo Shipping Corporation is negligent in carrying the subject cargo.
Ruling
The Supreme Court denied the petition and affirmed the decision of the Court of Appeals. Lorenzo Shipping Corporation was ordered to pay Chubb and Sons, Inc. the sum of US$104,151.00 or its equivalent in Philippine peso, with legal interest, plus attorney's fees and costs.
Ratio Decidendi
On Issue 1: The Supreme Court held that respondent Chubb and Sons, Inc. has the capacity to sue before Philippine courts. The Court disagreed with petitioner's argument that Chubb and Sons, Inc., as a subrogee of Sumitomo Corporation (a foreign corporation allegedly doing business in the Philippines without a license), also lacked capacity to sue. Firstly, the petitioner failed to raise the defense that Sumitomo was doing business in the Philippines without a license at the earliest opportunity, thus it is estopped from raising it on appeal as it involves a question of fact. Secondly, capacity to sue is a personal right conferred by law and not inherited through subrogation. While a subrogee succeeds to the rights and remedies relating to the debt, it does not acquire the subrogor's capacity to sue. Respondent Chubb and Sons, Inc. satisfactorily proved its own capacity by showing it was not doing business in the Philippines but was suing only under an 'isolated transaction,' specifically the single marine insurance policy issued to Sumitomo. The Court reiterated that the law does not prohibit foreign corporations from performing single acts of business, and the term 'isolated transaction' does not literally mean a single act but a transaction or series of transactions without the intention to engage in a progressive pursuit of business. Citing Eriks Pte. Ltd. vs. Court of Appeals, the Court emphasized that what determines 'doing business' is the intention to continue the body of its business in the country, not merely the number of transactions. On Issue 2: The Supreme Court affirmed the findings of the lower courts that petitioner Lorenzo Shipping Corporation was negligent in its care and custody of the consignee's goods. The Court noted that Lorenzo Shipping issued clean bills of lading, which constitute prima facie evidence of the receipt of goods in good condition. The subsequent discovery of the steel pipes heavily rusted and submerged in seawater within M/V Lorcon IV's cargo hold, which was found to be "rusty, thinning, and with several holes at different places," established a prima facie case of negligence against the carrier. The surveyor's report and testimonial evidence confirmed that the unpatched holes allowed seawater to enter the hatch, causing the steel pipes to rust. Applying Article 1735 of the Civil Code, common carriers are presumed to be at fault or to have acted negligently if goods are lost, destroyed, or deteriorated, unless they prove they observed extraordinary diligence. Lorenzo Shipping failed to present any contrary evidence or prove any of the exempting causes under Article 1734 of the Civil Code. The claim of defective packaging was disproven by testimony that the goods had 'superior packing'. Furthermore, the Court ruled that the claim for damages had not prescribed under Article 366 of the Code of Commerce because the 24-hour period does not begin until the consignee has actually received possession and can exercise ordinary control over the merchandise, which occurred only upon its arrival and inspection in the United States, not merely upon discharge in Davao City.
Main Doctrine
A foreign corporation, even if not licensed to do business in the Philippines, has the capacity to sue before Philippine courts on an isolated transaction, and this capacity is not diminished by its status as a subrogee, as capacity to sue is a personal right conferred by law and not by the parties.