REPUBLIC OF THE PHILIPPINES

COURT OF APPEALS
MANILA

AAA, INC.,
Plaintiff-Appellee,

-versus- CA-G.R. CV 1234

BBB, INC.,
Defendant-Appellant.

x------------------------------------------x

BBB, INC.,
Third Party Plaintiff-Appellant

-versus-

CCC CORP.,
Third Party Defendant-Appellee.

x----------------------------------------------x

APPELLEE’S BRIEF

COMES NOW Third Party Defendant-Appellee, CCC

CORPORATION (“CCC”), by counsel and unto this Honorable Court,
respectfully states that:

I. TIMELINESS

1.) On 21 March 2017, Third Party Defendant-Appellee, CCC,

through undersigned counsel received a copy of the Appellant’s Brief.

2.) Under Section 8, Rule 44 of the Rules of Court it provides:

RULE 44

ORDINARY APPEALED CASES
xxxxx

Prudential v. BBB 1
Appellee’s Brief
 Section 8. Appellee's brief. — Within forty-five (45) days from
receipt of the appellant's brief, the appellee shall file with the
court seven (7) copies of his legibly typewritten, mimeographed or
printed brief, with proof of service of two (2) copies thereof upon
the appellant.

3.) Third Party Defendant-Appellee has forty five days (45)

or until May 5, 2017 to file the Appellee’s Brief.

4.) Thus, this Appellee’s Brief is timely filed.

II. COUNTER-STATEMENT OF FACTS

5.) On 12 April 2006, the vessel “MV ABC”, a common carrier

owned, operated and/or chartered by defendant-appellant/third party
plaintiff-appellant BBB INC., (“BBB”) loaded on board, a shipment
consists of various feed ingredients including several thousand bags of wheat
products which were consigned by third-party defendant-appellee CCC.

6.) ABC was bound for Tablon, Cagayan De Oro City from Lapu-
Lapu City, Cebu where the plant of CCC was located.

7.) The said shipment was received by BBB in good condition

under Bill of Lading No. CCC-1. 1

8.) Further, the said cargo was also insured with AAA INC.,
(“AAA”) against all risk and for value under Marine Open Policy No. CG-
MOP-HOM-0000066.

9.) On April 13, 2006, while traversing Lavis Point, which is

approximately 6.5 nautical miles of Hilongos, Leyte, said vessel hit a reef
that caused substantial damage to it. Due to said incident, the hull of the
vessel cracked causing sea water to seep through the vessel. Consequently,
said goods and shipment were damaged rendering it unfit and useless for the
purpose for which the same were intended.

10.) When the shipment arrived at CCC Wharf in Lapu-Lapu City,

the representative of CCC inspected and examined said goods and found
that the same were severely damaged and spoiled rendering the same useless
and unfit.

11.) A total of 8, 663 bags of Hard Mill Run and China Wheat were
damaged and spoiled resulting to foul stench. Thus, the aforementioned
goods were no longer viable for consumption.

1
Exhibit 2 of the Formal Offer of CCC.
Prudential v. BBB 2
Appellee’s Brief
 12.) As a result, CCC' representative rejected all 8, 663 bags. and
stated that there was a delivery shortage of nine (9) bags.

13.) Based on survey and documents, CCC suffered losses in the

amount of TWO MILLION THIRTY EIGHT THOUSAND SEVEN
HUNDRED NINETY SEVEN PESOS AND TWENTY TWO
CENTAVOS (PHP 2, 038, 797.22).

14.) The proximate cause of the loss was due to the fault and
negligence of BBB while said shipment/goods were under its control,
possession and custody. CCC timely wrote a letter to BBB demanding
compensation in the amount of TWO MILLION THIRTY EIGHT
THOUSAND SEVEN HUNDRED NINETY SEVEN PESOS AND
TWENTY TWO CENTAVOS (PHP 2, 038, 797.22) for said
damages/losses it incurred. Two (2) demand letters dated 17 April 2006 and
05 May 2006 were sent by CCC to BBB, demanding payment for the
damaged goods/shipment, but to no avail.

15.) As a result of the relentless refusal of BBB to pay and

acknowledge CCC’s claim, the latter then filed a claim against its insurance,
AAA in the amount of TWO MILLION THIRTY EIGHT THOUSAND
SEVEN HUNDRED NINETY SEVEN PESOS AND TWENTY TWO
CENTAVOS (PHP 2, 038, 797.22). AAA paid CCC the said amount.

16.) However, AAA did not include incremental costs and the entire
value of the damaged cargo which, BBB should also be held liable in the
amount of FOUR HUNDRED EIGHTY FIVE ONE HUNDRED
FORTY TWO PESOS AND NINETY SEVEN CENTAVOS (Php
485,142.97).

17.) Nevertheless, since AAA paid CCC the amount of TWO

MILLION THIRTY EIGHT THOUSAND SEVEN HUNDRED
NINETY SEVEN PESOS AND TWENTY TWO CENTAVOS (PHP 2,
038, 797.22), the right of CCC against BBB is subrogated to AAA by
operation of law.

18.) Consequently, BBB is now indebted to AAA in the amount of

TWO MILLION THIRTY EIGHT THOUSAND SEVEN HUNDRED
NINETY SEVEN PESOS AND TWENTY TWO CENTAVOS (PHP 2,
038, 797.22) representing the amount the latter paid to CCC under the
Marine Policy Open Policy and by operation of law.

19.) In addition, BBB is also liable to CCC in the amount of FOUR

HUNDRED EIGHTY FIVE ONE HUNDRED FORTY TWO PESOS
AND NINETY SEVEN CENTAVOS (Php 485,142.97) for incremental
costs and the entire value of the damaged cargo. 2

2
Exhibit 3 of the Formal Offer of CCC.
Prudential v. BBB 3
Appellee’s Brief
 20.) However, BBB contends that assuming that CCC suffered
losses, the former was exempt from liability on the ground that the damage
was caused by the deviation of the ship in order to avoid head-on collision
with two (2) other vessels.

21.) BBB further maintained that AAA, as the insurer of the cargoes
of CCC, did not inherit any subrogatory rights of CCC based on the
Charter Agreement between BBB and CCC.

22.) However, CCC maintained its allegation that it never had any
standard form and neither did it draft a document denominated as Charter
Agreement. It further argued that assuming that there was in fact a Charter
Agreement, subrogatory rights of CCC were transferred to AAA by
operation of law.

III. ARGUMENTS

A. THE COURT A QUO DID NOT ERR IN HOLDING

DEFENDANT-APPELLANT LIABLE FOR THE CLAIMS OF
PLAINTIFF-APPELLEE.

23.) First and foremost, it is undeniable that herein BBB received

the subject cargoes in good condition. Under the control and custody of
herein BBB, the said cargoes were damaged due to the fault and negligence
of herein BBB on April 13, 2006. As a result, said goods were damaged
rendering it unfit and useless for the purpose for which the same were
intended.

24.) Considering that the subject cargoes were insured to AAA, the
latter paid CCC the value of all the cargoes.

25.) As a consequence, AAA was subrogated to all the rights of CCC

against herein BBB.

26.) This was duly noted by the Court a quo and ruled that BBB is
liable for damages and losses incurred by CCC. It held to wit:

“In sum, it was clearly established that the subject cargoes were
substantially damaged within the period of coverage of the
insurance policy, that as insurer, plaintiff was subrogated to the
rights and cause of action of the assured by virtue of the payment
of insurance claim and that the damage of the subject cargoes
was due or attributable to the fault or negligence of the
defendant BBB Shipping acting through its representative, the

Prudential v. BBB 4
Appellee’s Brief
 ship captain. Having said all these, plaintiff has, by preponderance
of evidence, established the liability of defendant BBB”.3

27.) AAA has a cause of action against BBB since there was a valid
subrogation.
28.) As will be further discussed below, prescription has not set in
since the same is covered by a Bill of Lading, the prescriptive period is ten
(10) years.

29.) Ultimately, BBB should be held liable due to the fact that it
failed to exercise extraordinary diligence required by law as a common
carrier.

B. THE COURT A QUO CORRECTLY RULED THAT AAA

INHERITED SUBROGATORY RIGHT FROM CCC AGAINST
BBB.

30.) BBB would like to mislead the Honorable Court that it could
not be held liable for damages and losses incurred by CCC on the ground
that the charter agreement between BBB and CCC expressly insulated the
carrier (BBB) from any subrogatory claims made whatsoever.

31.) However, there was no Charter Party Agreement to speak of in

the first place. BBB merely presented a photocopy of an alleged Charter
Party agreement between BBB and CCC.

32.) In support hereof, the Supreme Court in the case of Heirs of

Prodon v. Heirs of Alvarez, shed light on what should be considered as
Best Evidence, viz:

The Best Evidence Rule stipulates that in proving the terms of a

written document the original of the document must be
produced in court. The rule excludes any evidence other than the
original writing to prove the contents thereof, unless the offeror
proves: (a) the existence or due execution of the original; (b) the
loss and destruction of the original, or the reason for its non-
production in court; and (c) the absence of bad faith on the part
of the offeror to which the unavailability of the original can be
attributed.4

(Emphasis Supplied)

33.) The issue in this case is one of the provisions of the alleged
Charter Agreement. If there was in fact a Charter Agreement between BBB

3
RTC-Makati Decision dated 7 April 2016.
4
G.R. No. 170604, September 2, 2013.

Prudential v. BBB 5
Appellee’s Brief
and CCC, BBB should have presented the original and not merely a
photocopy.

34.) Opposing the allegation of BBB, CCC never had a standard

form and never did it draft a document denominated as Charter Agreement.
It is very unusual for a company like CCC who is not involved in a shipping
business to have draft the alleged Charter Agreement.

35.) To support the foregoing, Mr. JFC even stated in his Judicial
Affidavit that CCC never made such Charter Agreement nor drafted one, to
wit:

“Q: Mr. Witness, I’m showing to you a Charter Agreement

which in the Judicial Affidavit of Mr. Patrick Ang, the
latter alleged that the said Charter Agreement was
made by CCC and was signed by you, Mr. Witness,
what can you say about these allegations?

A: It is not true sir. First and foremost, CCC did not make
any Charter Agreement. CCC does not have any
standard form of this kind of document. We have a
retainer lawyer who makes legal documents for CCC.
Further, it is unusual for a client of BBB to be the one
to make an agreement between the parties
considering that BBB is in the line of shipping
business. This is not the ordinary course of business
transaction.5

(Emphasis supplied)
xxxxx

“Q: What about their allegation regarding your purported

signature in the said Charter Agreement?

A: I do not recall signing this document”6

(Emphasis supplied)

36.) During the cross-examination of JFC, he was consistent that

CCC did not make any Charter Agreement and it did not have any standard
form of such kind of document. He further stated that, he did not sign the
same, viz:

ATTY. PPP:

“Q: What about their allegation regarding your purported
signature in the said Charter Agreement?


5
Judicial Affidavit of Parco marked as Exhibit “1”, par (23)
6
Judicial Affidavit of Parco marked as Exhibit “1”, par (24)

Prudential v. BBB 6
Appellee’s Brief
 WITNESS:

A: I do not recall signing this document”

Q: Mr. Parco, in question 23 of your judicial affidavit, you
were shown a charter agreement which was attached in
the judicial affidavit of Patrick Ang and you answered
that the Charter Agreement was made by CCC and was
signed by you and in answer to that, you said that this is
not true and you said also that first and foremost, CCC
did not make any charter agreement, CCC does not have
any standard for of agreement, is that correct?

A: That’s correct, ma’am.

Q: So you are saying that you do not have any standard
form of charter agreement?

A: That’s right.

Q: That you have a retainer lawyer who makes legal
documents for CCC?

A: I’m sorry I did not understand you, ma’am.

ATTY. PBB:

May the witness be confronted with his judicial affidavit, your
honor.

ATTY. PPP:

Q: You said that you do not have a standard agreement,
correct?

A: That’s correct.

Q: But you have a retainer lawyer who makes other legal
documents for them, that’s in question 24?

“Q: You said that regarding the allegations of your
purported signature in the said charter agreement, you
did not deny signing it, you just said you did not recall
signing?”

A: I did not recall signing, that’s correct.

Q: Do you remember when you signed the Charter
Agreement?

ATTY. PBB:

Prudential v. BBB 7
Appellee’s Brief
 Your Honor, may the witness be confronted with the Charter
Agreement, your honor.

COURT:

Yes.

A: If I can see the original I can recall but if I remember it
right, that incident happened sometime in 2005, 2006.

ATTY. PPP:

Q: Just give me a figure, like 8 to 9 years ago roughly?

A: Yes, I was still based in Cebu that time.

Q: Again, you did not recall signing any Charter Agreement
between CCC and BBB Shipping?

A: That is correct.

Q: But that document was presented to you before?

A: I do not recall that document at all.

xxx xxx xxx

Q: In your answer to question 23, you answered:

“A: it is unusual for a client of BBB to be the one to
make and agreement between the parties considering
that BBB is in the line of shipping business. This is not
the ordinary course of business transaction.”

What exactly did you mean by that?

A: Well, in my 9 years of working in this industry and we
always chartered vessels and the shipping company
would normally and in fact in most cases do the charter
agreement.

Q: In most cases but not in all cases?

A: I have never come across an instance where CCC did a
Charter Agreement?

Q: But it is not impossible for CCC to do a Charter
Agreement?

A: I guess anyone can do a charter agreement if he wanted
to, but I’m talking from my experience as the person in
authority for CCC.

Prudential v. BBB 8
Appellee’s Brief
 Q: But not for BBB of course?

A: Yes.

Q: So technically, you are not competent to say that it is
unusual for CCC to make a charter agreement?

A: It is usual for CCC to make a charter agreement.

Q: Yeah, but it is unusual for CCC to make a charter
agreement?

xxx xxx xxx

A: CCC did not name a draft of charter agreement, it is the
shipping lines whom ade those charter agreements or
any other agreement, it’s not CCC.

Q: Again, I will reiterate your answer when you said that
you did not have any standard form of this kind of
agreement?

A: That’s correct.7

37.) Granting ex-gratia argumenti that the Charter Agreement exists

and that CCC prepared the same, the said provision insulating BBB of any
subrogatory rights is deemed null and void as it is against public policy.

38.) Article 1306 of the New Civil Code provides:

Art. 1306. The contracting parties may establish such stipulations,

clauses, terms and conditions as they may deem convenient,
provided they are not contrary to law, morals, good customs,
public order or public policy.


39.) Although parties can freely agree on any stipulations, clauses or
terms and conditions, the same is not absolute. It is limited by the fact that it
should not be against law, morals, good customs, public order, or public
policy.

40.) The provision in the Charter Agreement between BBB and

CCC is void for being contrary to law and public policy, viz:

“-xxx

-Carrier/Owner shall be free from any subrogatory claims made
whatsoever, Shipper/Carrier shall absolve the carrier/owner
from such claim.

7
TSN dated 20 January 2015, pp. 5-16.

Prudential v. BBB 9
Appellee’s Brief

-xxx”

41.) The stipulation insulating BBB from any and all subrogatory
claims is deemed not written in the Charter Agreement between CCC and
BBB, since it is void for being contrary to public policy.

42.) Further, the Supreme Court in the case of Loadstar Shipping

Co., Inc. v. Court of Appeals cited examples of stipulations, clauses,
terms and conditions which are contrary to public policy, to wit:

The stipulation in the case at bar effectively reduces the

common carrier's liability for the loss or destruction of the goods
to a degree less than extraordinary (Articles 1744 and 1745), that
is, the carrier is not liable for any loss or damage to shipments
made at "owner's risk." Such stipulation is obviously null and
void for being contrary to public policy. It has been said: Three
kinds of stipulations have often been made in a bill of lading.
The first is one exempting the carrier from any and all liability for
loss or damage occasioned by its own negligence. The second is
one providing for an unqualified limitation of such liability to an
agreed valuation. And the third is one limiting the liability of
the carrier to an agreed valuation unless the shipper declares a
higher value and pays a higher rate of freight. According to an
almost uniform weight of authority, the first and second kinds of
stipulations are invalid as being contrary to public policy, but the
third is valid and enforceable. Since the stipulation in question is
null and void, it follows that when MIC paid the shipper, it was
subrogated to all the rights which the latter has against the
common carrier, LOADSTAR.8

(Emphasis Supplied).

43.) While the above-stated case is not on all fours with the instant
case, the rationale behind said decision is applicable. Thus, the stipulation
insulating BBB from any subrogatory claims is deemed null and void since
the same is contrary to law and public policy. It then follows that when AAA
paid CCC, it was consequently subrogated to all rights, which CCC has
against BBB.

44.) In addition, Article 2207 of the New Civil Code provides:

Art. 2207. If the plaintiff's property has been insured, and he has
received indemnity from the insurance company for the injury or
loss arising out of the wrong or breach of contract complained
of, the insurance company shall be subrogated to the rights of
the insured against the wrongdoer or the person who has
violated the contract. If the amount paid by the insurance
company does not fully cover the injury or loss, the aggrieved

8
G.R. No. 131621, September 28, 1999.

Prudential v. BBB 10
Appellee’s Brief
 party shall be entitled to recover the deficiency from the person
causing the loss or injury.

(Emphasis Supplied)

45.) Thus, the right of subrogation attaches upon payment by the

insurer to the insured. AAA as subrogee inherited such rights of CCC
against BBB.

46.) Thus, the principle of subrogation must take place and BBB
should then pay AAA the amount of TWO MILLION THIRTY EIGHT
THOUSAND SEVEN HUNDRED NINETY SEVEN PESOS AND
TWENTY TWO CENTAVOS (PHP 2, 038, 797.22).

47.) Accordingly, the Court a quo correctly ruled that AAA

inherited subrogatory rights of CCC against BBB.

C. THE COURT A QUO PROPERLY RULED THAT THE CHARTER

AGREEMENT BETWEEN CCC AND BBB IS NOT BINDING TO
THIRD PERSONS.

48.) Assuming, without conceding that the provision in the charter

agreement is valid, the same is not binding on third persons who are not
privy to the agreement.

49.) One of the characteristics of contracts is the principle of

relativity. The Supreme Court in the case of Metropolitan Bank and
Trust Co. v. Chiok made a pronouncement anent the principle of
relativity of contracts, viz:

In several cases, this Court has ruled that under the civil law
principle of relativity of contracts under Article 1131, contracts
can only bind the parties who entered into it, and it cannot favor
or prejudice a third person, even if he is aware of such contract
and has acted with knowledge thereof. Metrobank and Global
Bank are not parties to the contract to buy foreign currency
between Chiok and Nuguid. Therefore, they are not bound by
such contract and cannot be prejudiced by the failure of Nuguid
to comply with the terms thereof.9

(Emphasis Supplied)

50.) Along the same vein, the Supreme Court held in the case of
Spouses Borromeo v. Court of Appeals, to wit:

It is clear that under Article 1311 of the Civil Code, contracts take
effect only between the parties who execute them. Where there

9
G.R. Nos. 172652, 175302 & 175394, November 6, 2014.
Prudential v. BBB 11
Appellee’s Brief
 is no privity of contract, there is likewise no obligation or liability
to speak about. The civil law principle
of relativity of contracts provides that contracts can only bind the
parties who entered into it, and it cannot favor or prejudice a
third person, even if he is aware of such contract and has acted
with knowledge thereof. Since a contract may be violated only by
the parties thereto as against each other, a party who has not
taken part in it cannot sue for performance, unless he shows that
he has a real interest affected thereby. 10

(Emphasis Supplied)

51.) In light of the foregoing jurisprudence, it could be gleaned that
the Charter Agreement between BBB and CCC is not binding to AAA since
the latter is not a party to the said agreement.

52.) Further, the Court a quo also noted that the agreement is not
binding to third persons, not having been notarized, viz:

“The court begs to differ. To begin with, the general charter is not
binding to third parties, not having been notarized and is
therefore not a public instrument whose effects bind third
persons. x x x x x” 11

53.) In order for a contract or agreement to be binding to third
persons who are not privy to said agreement, the same must appear in a
public instrument and the only way that a private document be converted to
a public instrument, is that, it must be notarized.

54.) To that end, the charter agreement cannot bind AAA who is
not a party to the said agreement.

D. THE COURT A QUO SUITABLY UPHELD THAT THE CAUSE OF

ACTION OF AAA AGAINST BBB HAD NOT YET PRESCRIBED.


55.) The argument of BBB that prescription had set in is untenable.

56.) As can be gleaned from the facts of the case, herein CCC timely
filed its claim against herein BBB. CCC sent two demand letters dated 17
April 2006 and 05 May 2006 to herein BBB which stopped the running of
the prescriptive period of filing a claim.

57.) This was duly noted by the Honorable Trial Court in its
assailed Decision, to wit:

10
G.R. No. 169846, March 28, 2008.
11
RTC-Makati Decision dated 7 April 2016.
Prudential v. BBB 12
Appellee’s Brief
 “Anent prescription, the court notes the immediate action by the plaintiff in
requesting for provisional claim from BBB which is tantamount to a duly-filed
claim. The request came in a few days after the occurrence of the damage to the
cargoes. Thus, prescription did not set in as there was a valid claim by CCC
(Exhibit F)”.12

58.) Further, the clause that CCC has 60 days from the date of the
accrual of the right to action to file suit is inconsistent with what is provided
in the book Review on Commercial Law by Sundiang, Sr. and Aquino13, to
wit:

22. PROCEDURE AND PRESCRIPTIVE PERIOD FOR CLAIMS

22.01 Coastwise or within the Philippines (Example: Manila to
Cebu)

x x x x x

b.) When to file a case in court-prescriptive period

1.) Within 6 years, if no bill of lading has been issued; or
2.) Within 10 years, if a bill of lading has been issued.

59.) Clearly, the stipulation in the bill of lading is again contrary to
law and public policy. Therefore, the complaint instituted by AAA/CCC
instituted on 19 April 2007 is within the prescriptive period of 10 years as
mentioned above.

E. THE COURT A QUO CORRECTLY MAINTAINED THAT BBB

WAS GUILTY OF NEGLIGENCE.

60.) The Court a quo found that BBB was guilty of negligence
when it ruled that:

“Article 1733 of the New Civil Code provide that common carriers
have the duty and obligation to exercise extraordinary diligence in
the handling of goods they received for transportation, while
Article 1735 of the same code in substance provide that common
carriers like the herein defendant BBB, are presumed to have
been at fault or negligent if the goods are lost or damaged, a
presumption arises against the carrier of its failure to observe that
diligence required by law, and there need not be an express
finding of fault or negligence to hold it liable.

In this case, it appears that the subject shipment was received by
defendants in good order and condition. However, upon arrival of

12
Ibid.
13
Sundiang, Sr, J. and Aquino, T. Reviewer on Commercial Law. Quezon City: Rex
Publishing. p.482. 2014 edition.
Prudential v. BBB 13
Appellee’s Brief
 the carrying vessel here in the Cebu, some of the insured cargoes
have been partially damaged due to the overt act of the ship
captain as he himself admitted. As such, defendant common
carrier is automatically presumed to have been at fault or
negligent in handling the insured cargoes. Said presumption can
be overcome by evidence of the extraordinary diligence exerted
by the carrier which, defendants failed to observe as borne by the
records.

Be it noted that the ship captain XXX himself declared that the
decision to change or alter the course of M/V VVV Dos was his
alone, and this was not due to any impending bad weather or any
other perils of the sea but rather, his effort at veering away from
an approaching ship. While the court acknowledges the good faith
of the ship captain in his bid to save the ship from damage and
collision, BBB failed to show proof that the ship captain was not
negligent in failing to anticipate the approaching ship as well as in
choosing which route to pursue since the altered course caused/V
VVV Dos to hit shallow waters in Bohol causing a crack in its hull
which allowed water to seep through the vessel. Convincingly,
said actions as personal to the ship captain alone and does not
constitute peril of the sea. At best, such negligent actions short of
extraordinary diligence expected of common carriers are deemed
perils of the ship, to which the common carrier is liable. “

61.) Article 1733 of the New Civil Code provides, to wit:

Article 1733. Common carriers, from the nature of their business

and for reasons of public policy, are bound to observe
extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by them, according to all
the circumstances of each case.

(Emphasis supplied).


62.) The Supreme Court in the case of Philippine American
General Insurance Company v. PKS Shipping Company, held that:

In case of loss, destruction or deterioration of goods, common

carriers are presumed to have been at fault or to have acted
negligently, and the burden of proving otherwise rests on them.
The provisions of Article 1733, notwithstanding, common carriers
are exempt from liability for loss, destruction, or deterioration of
the goods due to any of the following causes: (1) Flood, storm,
earthquake, lightning, or other natural disaster or calamity; (2) Act
of the public enemy in war, whether international or civil; (3) Act
or omission of the shipper or owner of the goods; (4) The
character of the goods or defects in the packing or in the
containers; and (5) Order or act of competent public authority.14

14
G.R. No. 149038, April 9, 2003.
Prudential v. BBB 14
Appellee’s Brief

(Emphasis Supplied)

63.) Similarly, the Honorable Supreme Court in the case of
Loadmasters Customs Services, Inc., vs. Glodel Brokerage
Corporation, held viz:

Loadmasters and Glodel, being both common carriers, are

mandated from the nature of their business and for reasons of
public policy, to observe the extraordinary diligence in the
vigilance over the goods transported by them according to all
the circumstances of such case, as required by Article 1733 of
the Civil Code. When the Court speaks of extraordinary diligence,
it is that extreme measure of care and caution which persons of
unusual prudence and circumspection observe for securing and
preserving their own property or rights. This exacting standard
imposed on common carriers in a contract of carriage of goods is
intended to tilt the scales in favor of the shipper who is at the
mercy of the common carrier once the goods have been lodged
for shipment. Thus, in case of loss of the goods, the common
carrier is presumed to have been at fault or to have acted
negligently. This presumption of fault or negligence, however,
may be rebutted by proof that the common carrier has observed
extraordinary diligence over the goods.

With respect to the time frame of this extraordinary
responsibility, the Civil Code provides that the exercise of
extraordinary diligence lasts from the time the goods are
unconditionally placed in the possession of, and received by, the
carrier for transportation until the same are delivered, actually
or constructively, by the carrier to the consignee, or to the
person who has a right to receive them.

(Emphasis Supplied)

64.) Time and time again, the Honorable Supreme Court stresses
that common carriers are bound to exercise extraordinary diligence in the
vigilance over the goods. The above-cited jurisprudence provides that such
extraordinary diligence over the goods lasts from the time such were
unconditionally placed in the possession of and received by BBB until the
same is delivered to its destination.

65.) Here, BBB failed to exercise the extraordinary diligence over

the goods as expected of a common carrier given the circumstances at the
time of the mishap.

66.) BBB asserted that Captain XXX saw two (2) vessels at the
opposite direction while traversing Lavis Point and in order to avoid a head-
on collision, Captain XXX changed the course of the vessel.

Prudential v. BBB 15
Appellee’s Brief
 67.) However, after said maneuver, ABC struck a reef in shallow
waters and caused the water to seep through its hull damaging the cargo of
CCC.

68.) BBB presented a copy of the Marine Protest filed by Captain

XXX. Nevertheless, such marine protest made by Captain XXX lacks any
indication that he in fact exercised extraordinary diligence to prevent such
mishap.

69.) First, if there was in fact an imminent collision, Captain XXX

should have at least identified or verified one of the names of the said vessels.
Capain XXX testified that the two (2) vessels were well lighted, viz:

“ATTY. PBB:

Q: I also would like to confirm that the earlier you stated that
the incoming vessels were also lighted?

WITNESS:

A: Yes, sir.”

xxx xxx xxx

Q: So you’re saying that these two (2) incoming vessels if
you did not deviate from your course you will have a
head-on collision? Magkakabangaan kayo?

A: Yes, sir, magkakabangaan kami pag hindi ko kinambiyo.

xxx xxx xxx

Q: Earlier you said that when you first saw the incoming
vessels, you were at the distance of more or less 3 miles.
When you went starboard or when you veered from
your normal course, how far were you from the
incoming vessels?

A: It was around .3 or .4 miles, sir. It was quite near, sir.

Q: So, when you first saw the incoming vessels, you said you
were at the distance of more or less 3 miles and you said
that you signaled the two (2) incoming vessels through
the light, is that correct?

A: Yes, sir.

Q: You did not try to communicate with them through radio?

A: We also did but nobody is responding, sir.

Prudential v. BBB 16
Appellee’s Brief
 Q: Considering that the incoming vessels were two (2) cargo
vessels, can you estimate to us how big was the two (2)
incoming vessels?

A: It was quite big, sir. Similar to container vessel, sir.

xxx xxx xxx

A: Parang tricycle lang ako sa kanila.

xxx xxx xxx

Q: When you went starboard or when you veered from your
normal course or in your navigational line, how far did
you veer?

A: Around half a mile, sir.

Q: And then after that?

A: Ayun na….(interrupted)

Q: How long did you veer? Kanina how far? Mga gaano
katagal ‘yung kalahating milya?

A: it’s only a few minutes, sir.

Q: Then after you veered, you tried to return already to
your normal course of navigational line?

A: Yes, sir.

Q: And at that time nabahura na kayo?

A: Yes, sir.”15

70.) Second, Captain XXX testified that the incoming two (2) cargo
vessels were bigger than ABC and yet, the captain failed to identify said
vessels or even recognize the color of said vessels.

“ATTY. PBB:

Q: What was the color of the incoming vessels?

WITNESS:

A: I couldn’t tell because it was dark, sir.

Q: But you said earlier that both vessels were lighted?


15
TSN of Captain Rainero XXX dated 19 November 2013, p. 53.
Prudential v. BBB 17
Appellee’s Brief
 A: Yes, sir, but the lights were at the side and they are not as
bright during the night, sir.

Q: You said earlier that you used a binocular to see the
incoming vessels, is that correct?

A: Yes, sir.

Q: Were you able to identify the flags?

A: It’s a Philippines flag, sir.

Q: So, the vessels were from the Philippines?

A: Yes, sir.”

71.) It is very unlikely that Captain XXX was able to identify the
flags of said vessels but failed to identify the names of said vessels or even its
colors.

72.) Third, BBB had every opportunity to evade the mishap but
failed to do so due to an obvious error in judgment. The testimony of
Captain XXX would show that he failed to exercise extraordinary diligence,
to wit:

“ATTY. PBB:

xxx xxx xxx

Q: Okay. Again I just like to clarify the earlier question by the
good counsel, when you first saw the two (2) incoming
vessels, what was your distance from the (2) incoming
vessels?

A: Very far, sir.

Q: Miles, kilometers, meters? Magbigay ka ng sukat. 2

kilometers, 3 kilometers, 5 kilometers, 100 meters, 100o
meters?

A: Around 3 miles, sir.”16

73.) Significantly, Captain XXX knew the shallow parts of the sea,
he should have exercised extraordinary diligence in order to avoid such part
of the sea and should have taken precaution to avoid the said mishap. It can
be gleaned from his testimony, to wit:

“ATTY DDD:

16
Ibid.
Prudential v. BBB 18
Appellee’s Brief

Q: Were you not aware, Mr. Witness, that there was a
shallow part of the reef when you made the turn?

WITNESS:

A: Nalaman namin sa mapa na mababaw, sir.

Q: So, you are aware that that portion of the reef was
shallow?

A: Yes, sir.”17

74.) A careful reading of the above-stated clearly reveals that

Captain XXX failed to exercise the required diligence given the said
circumstances, that is, extraordinary diligence.

75.) Futher, Article 1734 of the New Civil Code provides:

“Article 1734. Common carriers are responsible for the loss,

destruction, or deterioration of the goods, unless the same is due
to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster

or calamity;

(2) Act of the public enemy in war, whether international or civil;

(3) Act or omission of the shipper or owner of the goods;

(4) The character of the goods or defects in the packing or in the

containers;

(5) Order or act of competent public authority.

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.”

(Emphasis supplied)

76.) BBB cannot be exonerated from its liability on the ground that
the actions of its Captain does not fall within any of the exceptions
mentioned above.

17
TSN of Captain Rainero XXX dated 19 November 2013, p. 29.
Prudential v. BBB 19
Appellee’s Brief
 77.) Worth mentioning is the fact that at the time of the mishap,
there was no typhoon or storm, the vessel was exposed to ordinary wind and
waves, nothing more. Captain XXX testified that”

“ATTY. PBB:

Q: On that day you said that M/V VVV Dos ran aground on
April 13. How was the weather on that day? Wala bang
bagyo?

WITNESS:

A: The weather was in good condition, sir.

Q: The sea was calm?

A: Yes, sir.”18

78.) In sum, BBB failed to exercise extraordinary diligence. Captain

XXX claimed that such deviation from the usual route was justified in order
to avoid a possible head-on collision with two (2) larger vessels. However,
despite the fact that both oncoming vessels are well-lighted, Captain XXX
could not even identify the names of said vessels or even its color. However,
surprisingly he was able to identify that both vessels were from the
Philippines because of their flags. Withal, Captain XXX knew that there was
a shallow part of the sea but did not avoid the same.

79.) At the pain of being repetitive, the claim of BBB that it did
exercise extraordinary diligence had no leg to stand on.

F. THE COURT A QUO APPROPRIATELY SUSTAINED THAT BBB

DID NOT HAVE A CAUSE OF ACTION AGAINST CCC.

80.) The Court a quo correctly dismissed the Third-Party

Complaint filed by BBB against CCC for utter lack of merit.

81.) The subrogatory rights inherited by AAA from CCC against

BBB was broadly discussed above. Again, assuming arguendo that there was
a Charter Agreement between Best and CCC, the clause insulating BBB
from any subrogatory rights is deemed null and void for being contrary to
law and public policy.

82.) BBB would like to escape its liability by invoking said provision
in the Charter Agreement which is not valid. Finally, BBB would like to shift
the blame to CCC. However, CCC was not the one who was negligent and

18
Ibid. p. 271.

Prudential v. BBB 20
Appellee’s Brief
who did not exercise extraordinary diligence. It is BBB who is ultimately
liable for said damage and loss.

IV. SUMMARY

83.) All told, based on the foregoing, BBB should be held ultimately
liable for the claims of AAA on the following grounds:

a. There was no Charter Party Agreement to speak of;

b. Assuming, that there was an agreement, the clause insulating
BBB of any subrogatory claims is deemed null and void for
being contrary to law and public policy;
c. The said charter agreement, assuming there is one, AAA not
being a party thereto cannot be prejudiced;
d. The cause of action of AAA against BBB has not yet prescribed;
e. The claim of BBB that it exercised extraordinary diligence in
order to avoid the mishap do not hold water; and
f. Lastly, it is BBB who failed to exercise extraordinary diligence
required by law as a common carrier.

V. PRAYER

WHEREFORE, in view of the foregoing, Third Party Plaintiff-Appellee

CCC Corporation (CCC) respectfully prays unto this Honorable Court that
the Decision of the Trial Court dated 7 April 2016 be SUSTAINED.

Other reliefs, just and equitable, are likewise prayed for.

Pasig City for Manila City, 24 April 2017.

Prudential v. BBB 21
Appellee’s Brief