Eastern Shipping Lines v. Court of Appeals
MODIFICATIONFacts
The Antecedents: Two fiber drums of riboflavin were shipped from Yokohama, Japan, on December 4, 1981, via the vessel "SS EASTERN COMET" owned by Eastern Shipping Lines, Inc. The shipment was insured by Mercantile Insurance Company, Inc. Upon arrival in Manila on December 12, 1981, one drum was noted to be in bad order when discharged to the custody of Metro Port Service, Inc. On January 7, 1982, Allied Brokerage Corporation received the shipment from Metro Port Service, Inc., with one drum found opened and without a seal. Deliveries to the consignee's warehouse on January 8 and 14, 1982, revealed that one drum had spillages and its contents were adulterated/fake. The consignee suffered losses totaling P19,032.95. Claims against the defendants were refused. Procedural History: Mercantile Insurance Company, Inc., having paid the consignee P19,032.95 under its insurance policy, was subrogated to the consignee's rights and filed an action against Eastern Shipping Lines, Inc., Metro Port Service, Inc., and Allied Brokerage Corporation for damages. The trial court found that the shipment sustained losses/damages while in the successive custody of the defendants and ordered them to pay plaintiff jointly and severally, with 12% legal interest from October 1, 1982, the date of filing, plus attorney's fees and costs. The Court of Appeals affirmed the trial court's decision in toto. Eastern Shipping Lines, Inc. appealed to the Supreme Court. The Petition: Eastern Shipping Lines, Inc. attributed error to the Court of Appeals in holding it jointly and severally liable with the arrastre operator and customs broker, and in awarding legal interest from the date of filing of the complaint at 12% per annum instead of from the date of the decision at 6% per annum, arguing the claim was unliquidated.
Issue(s)
Whether or not Eastern Shipping Lines, Inc. is jointly and severally liable with the arrastre operator and customs broker for the damages sustained by the shipment. Whether or not the legal interest on the award for loss or damage should be computed from the time the complaint is filed or from the date the decision appealed from is rendered. Whether or not the applicable rate of interest is twelve percent (12%) or six percent (6%) per annum, considering the period before and after the judgment becomes final.
Ruling
The petition is partly granted. The appealed decision is affirmed with the modification that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the decision, dated 03 February 1988, of the court a quo. A TWELVE PERCENT (12%) interest, in lieu of SIX PERCENT (6%), shall be imposed on such amount upon finality of this decision until the payment thereof.
Ratio Decidendi
On the issue of joint and several liability: The Supreme Court affirmed the principle that a common carrier's duty to observe extraordinary diligence in the shipment of goods lasts from the time the articles are surrendered to it until delivered to the consignee or until a reasonable time for acceptance has passed. When goods are lost or damaged, a presumption of negligence arises against the carrier, which can only be overcome by proving one of the exclusive causes enumerated in Article 1734 of the Civil Code. The Court noted that the factual finding of both the trial court and the Court of Appeals was that the shipment sustained damage while in the successive possession of the appellants, including Eastern Shipping Lines, Inc. Therefore, the liability imposed on Eastern Shipping Lines, Inc. was inevitable, regardless of whether other entities were solidarily liable with it. The Court reiterated that the legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman, and similarly, the relationship between the consignee and the common carrier is comparable. Both the arrastre operator and the carrier are charged with the obligation to deliver the goods in good condition to the consignee. On the issue of the commencement of legal interest: The Supreme Court, after reviewing its jurisprudence, clarified the rules regarding the award of interest. It distinguished between obligations constituting a loan or forbearance of money and those involving unliquidated damages. For unliquidated claims, where the demand cannot be established with reasonable certainty at the time it is made, interest shall begin to run only from the date the judgment of the court is made, as this is when the quantification of damages may be deemed reasonably ascertained. In this case, the claim for damages was unliquidated until ascertained by the court. Therefore, the legal interest should commence from the date of the decision of the court a quo, not from the filing of the complaint. On the issue of the rate of legal interest: The Supreme Court reiterated that the 12% interest rate prescribed by Central Bank Circular No. 416 applies only to loans or forbearance of money, goods, or credits, and judgments involving such. For obligations not constituting a loan or forbearance of money, where the obligation consists in the payment of a sum of money and the debtor incurs delay, the indemnity for damages, in the absence of stipulation, shall be the legal interest of six percent (6%) per annum, as provided by Article 2209 of the Civil Code. Since the claim in this case arose from damages sustained by a shipment, it did not involve a loan or forbearance of money. Thus, the applicable rate of interest on the damages awarded by the trial court should be six percent (6%) per annum. However, the Court also established a rule for the period after the judgment becomes final: when the judgment awarding a sum of money becomes final and executory, the rate of legal interest shall be twelve percent (12%) per annum from such finality until its satisfaction, as this interim period is deemed an equivalent to a forbearance of credit.
Main Doctrine
The Supreme Court clarified the rules on the award of legal interest in cases of breach of obligation, distinguishing between loans/forbearance of money and unliquidated damages, and setting specific rates and computation periods for each. It also affirmed the solidary liability of a common carrier with other entities in the chain of custody for damages sustained by goods.