EASTERN SHIPPING LINES V CA & MERCANTILE INSURANCE CO.

(1994)
*Edited the digest I made for credit to fit relevant transpo concepts

Shipper --> Eastern Shipping --> Metro Port (arrastre) --> Allied (broker-forwarder) --> consignee (subrogated by
Mercantile Insurance)

December 4, 1981, two fiber drums of riboflavin1 were shipped from Yokohama, Japan through delivery vessel
"SS EASTERN COMET" owned by Eastern Shipping. The shipment was insured under the Mercantile Insurance
for Php36M. (Case does not name who the consignee is. But Mercantile Insurance was subrogated into the
rights of the consignee)

Upon arrival of the shipment in Manila on December 12, 1981, it was discharged unto the custody of Metro Port
Service (arrastre operator), Inc. who rejected one drum, which was said to be in bad order. The damage was
unknown to the Mercantile insurance Company.

January 7, 1982: Allied Brokerage Corporation (broker-forwarder) received the shipment together with the
opened and unsealed drum from Metro Port Service, Inc.

On January 8 and 14, 1982, Allied Brokerage Corporation made deliveries of the shipment to the consignee’s
(unidentified in the case) warehouse. The consignee excepted to one drum which was said to have contained
spillages.

Mercantile Insurance was compelled to pay the consignee P19,032.95 because of the loss/damage of one drum.
It was subrogated to all the rights of action of the consignee against the defendants Eastern, Metroport, and
Allied.

Defendants failed and refused to pay the claims.

Eastern Shipping Lines alleged that the shipment was discharged in good order from the vessel unto the custody
of Metro Port Service. However, Metro Port alleged that a portion of the shipment was already considered bad
order when it was received under its custody.

TC & CA: Goods were shipped in good condition (evidenced by bill of lading.) It follows then that the losses/
damages were sustained while in the respective and/or successive custody and possession the three
defendants.

Defendants Eastern Shipping, Metroport and Allied ordered to pay jointly and severally the plaintiff2.
Only Eastern Shipping appealed in this case.

WON a claim for damage sustained on a shipment of goods can be a solidary liability of the common
carrier, the arrastre operator and the customs broker. YES

WON common carrier Eastern Shipping liable. YES

WON the payment of legal interest on an award for loss or damage is to be computed from the time the
complaint is filed or from the date the decision appealed from is rendered. (IT DEPENDS. But in this
case: Date of lower court decision, judicial demand.)

Damages sustained in hands of carrier, arrastre, and broker.

1 Riboflavin, also known as vitamin B2 or additive E101, is an easily absorbed micronutrient with a key role in maintaining health in humans
and animal. Further, Riboflavin is also used to fortify and color food

2P19,032.95, with the present legal interest of 12% per annum from October 1, 1982, the date of filing of this complaints,
until fully paid.
The two drums were shipped in good order and condition, as clearly shown by the Bill of Lading and Commercial
Invoice which do not indicate any damages drum that was shipped. Correspondingly, it follows that the losses/
damages were sustained while in the respective and/or successive custody and possession of defendants
carrier (Eastern), arrastre operator (Metro Port) and broker (Allied Brokerage).

EASTERN SHIPPING LIABLE

− common carrier. Failed to rebut presumption of negligence.
− duty to observe the requisite diligence in the shipment of goods lasts from the time the articles are
surrendered to or unconditionally placed in the possession of, and received by, the carrier for
transportation until delivered to, or until the lapse of a reasonable time for their acceptance by,
the person entitled to receive them. When the goods shipped either are lost or arrive in damaged
condition, a presumption arises against the carrier.

The common carrier's duty to observe extraordinary diligence in the vigilance of goods remains in full force and
effect even if the goods are temporarily unloaded and stored in transit in the warehouse of the carrier at the
place of destination, until the consignee has been advised and has had reasonable opportunity to remove or
dispose of the goods

This case: Eastern shipping is duty bound to exercise extraordinary diligence until the goods are accepted by the
consignee. It doesn’t matter that the goods were passed on to other entities such as the arrastre and the broker,
as long as possession is still not with the consignee.

The common carrier Eastern Shipping and the arrastre operator are solidarily liable.
Since it is the duty of the ARRASTRE Metroport to take good care of the goods that are in its custody and to
deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the
ARRASTRE and the CARRIER are therefore charged with the obligation to deliver the goods in good condition
to the consignee.
But in this case, since only Eastern shipping appealed, it is no longer significant to pass upon the nature of the
other parties' liabilities. For sure, Eastern shipping is liable.

RE: Amount of Interest

RULES
A. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or forbearance
of money, the interest due should be:
1. with stipulation: that which may have been stipulated in writing. 
Interest due shall earn interest (interst on interst) from the time it is judicially demanded. 
2. no stipulation: 12% per annum to be computed from default,
default: from judicial or extrajudicial demand
*when decision already final and executory: 12% per annum

B. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount
of damages awarded may be imposed:
at the discretion of the court 
rate: 6% per annum. 

*when decision already final and executory: 12% per annum

THIS CASE:
Amount involved (19K) does not constitute a loan or forbearance of money. Hence, an interest interest of 6% is
imposed to be computed  from the date of the decision (03 February 1988) of the lower court.
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.