Lorenzo Shipping vs. Chubb and Sons

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Republic of the Philippines
SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 147724             June 8, 2004
LORENZO SHIPPING CORP., petitioner, 
vs.
CHUBB and SONS, Inc., GEARBULK, Ltd. and PHILIPPINE TRANSMARINE CARRIERS, INC., respondents. D E C I S I O N
PUNO, J.:
On appeal is the Court of Appeals’ August 14, 2000 Decision1 in CA-G.R. CV No. 61334 and March 28, 2001 Resolution2 affirming the March 19, 1998 Decision3 of the Regional Trial Court of Manila which found petitioner liable to pay respondent Chubb and Sons, Inc. attorney's fees and costs of suit. Petitioner Lorenzo Shipping Corporation (Lorenzo Shipping, for short), a domestic corporation engaged in coastwise shipping, was the carrier of 581 bundles of black steel pipes, the subject shipment, from Manila to Davao City. From Davao City, respondent Gearbulk, Ltd., a foreign corporation licensed as a common carrier under the laws of Norway and doing business in the Philippines through its agent, respondent Philippine Transmarine Carriers, Inc. (Transmarine Carriers, for short), a domestic corporation, carried the goods on board its vessel M/V San Mateo Victory to the United States, for the account of Sumitomo Corporation. The latter, the consignee, is a foreign corporation organized under the laws of the United States of America. It insured the shipment with respondent Chubb and Sons, Inc., a foreign corporation organized and licensed to engage in insurance business under the laws of the United States of America. The facts are as follows:

On November 21, 1987, Mayer Steel Pipe Corporation of Binondo, Manila, loaded 581 bundles of ERW black steel pipes worth US$137,912.844 on board the vessel M/V Lorcon IV, owned by petitioner Lorenzo Shipping, for shipment to Davao City. Petitioner Lorenzo Shipping issued a clean bill of lading designated as Bill of Lading No. T-35 for the account of the consignee, Sumitomo Corporation of San Francisco, California, USA, which in turn, insured the goods with respondent Chubb and Sons, Inc.6 The M/V Lorcon IV arrived at the Sasa Wharf in Davao City on December 2, 1987. Respondent Transmarine Carriers received the subject shipment which was discharged on December 4, 1987, evidenced by Delivery Cargo Receipt No. 115090.7 It discovered seawater in the hatch of M/V Lorcon IV, and found the steel pipes submerged in it. The consignee Sumitomo then hired the services of R.J. Del Pan Surveyors to inspect the shipment prior to and subsequent to discharge. Del Pan’s Survey Report8 dated December 4, 1987 showed that the subject shipment was no longer in good condition, as in fact, the pipes were found with rust formation on top and/or at the sides. Moreover, the surveyor noted that the cargo hold of the M/V Lorcon IV was flooded with seawater, and the tank top was "rusty, thinning, and with several holes at different places." The rusty condition of the cargo was noted on the mate’s receipts and the checker of M/V Lorcon IV signed his conforme thereon.9 After the survey, respondent Gearbulk loaded the shipment on board its vessel M/V San Mateo Victory, for carriage to the United States. It issued Bills of Lading Nos. DAV/OAK 1 to 7,10 covering 364 bundles of steel pipes to be discharged at Oakland, U.S.A., and Bills of Lading Nos. DAV/SEA 1 to 6,11 covering 217 bundles of steel pipes to be discharged at Vancouver, Washington, U.S.A. All bills of lading were marked "ALL UNITS HEAVILY RUSTED." While the cargo was in transit from Davao City to the U.S.A., consignee Sumitomo sent a letter12 of intent dated December 7, 1987, to petitioner Lorenzo Shipping, which the latter received on December 9, 1987. Sumitomo informed petitioner Lorenzo Shipping that it will be filing a claim based on the damaged cargo once such damage had been ascertained. The letter reads: Please be advised that the merchandise herein below noted has been landed in bad order ex-Manila voyage No. 87-19 under B/L No. T-3 which arrived at the port of Davao City on December...
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