Heung-A Shipping vs.
Philam Insurance
attributed tot he water seepage that gained entry into
Novartis Consumer Health Philippines, Inc.
(NOVARTIS) imported from Jinsuk Trading Co. Ltd.,
(JINSUK) 19 pallets of 200 rolls of Ovaltine Power 18 G
laminated plastic packaging material. To ship the
goods the the Philippines , JINSUK engaged the
services of Protop Shipping (PROTOP), a freight
forwarder based in S. Korea to forward the goods to
their consignee, NOVARTIS.
claims of Novartis, Philam filed a complaint for
Based on the Bill of Lading issued by Protop, the cargo
was on freight prepaid basis and on “shipper’s load
and count”. Likewise stated in the bill of lading (BoL) is
the name Sagawa Express Phils., Inc., (Sagawa)
designated as the entity in the PH which will obtain the
delivery contract.
Protop shipped the cargo through Dongnama Shipping
(Dongnama) which in turn loaded the same on M/V
Heung-A Bangkong owned and operated by Heung-A
Shipping (Heung-A) pursuant to a slot-charter
agreement whereby a space in the latter’s vessel was
reserved for the exclusive use of the former. Wallem
PH Shipping (Wallem) is the ship agent of Heung-A in
the PH.
nature and extent of damage because NOvartis failed
Novartis insured the shipment with Philam Insurance
under All Risk Marine Open Insurance Policy against all
loss, damage, liability or expense before, during transit
and even after the discharge of the shipment from the
carrying vessel until its complete delivery to the
consignee.
same within 15 days from receipt of the shipment.
The vessel arrived in Manila and the shipment was
discharged into the possession, custody and care of
Asian Terminals Inc (ATI) as the customs arrastre
operator. It was thereafter withdrawn by Novartis’
appointed broker, Stephanie Customs Brokerage Corp.
(STephanie) from ATI’s container yard.
that it could not have occurred while Stephanie was in
The shipment then reached Novartis’ premises and
was thereupon inspected. Upon inspection, Caparoso
(Novarti’s Senior Laboratory Technician) discovered
that the boxes were wet and damp. It was also
discovered that the container van was damaged and
rusty, with water droplets on the walls and the floor
was even wet. Because of this, the entire shipment
was rejected.
other particulars of the shipment.
A survey of the shipment was conducted wherein a
Certificate of Survey yielded results same to the
observations of Caparoso. All the 17 pallets were wet.
16 cartons were unaccounted for although the
surveyors remarked that this may be due to short
shipment by the supplier. The report further stated that
the wetting sustained by the shipment may be
the container’s damage roofs during transit.
Aggrieved, Novartis demanded indemnification from
Protop, Sagawa, ATI and Stephanie but was denied.
Insurance claims were then filed with Philam which
paid the insured value of the shipment.
Claiming that it was subrogated to the rights and
damages against Protop as issuer of the BoL, its ship
agent in the PH, Sagawa, consignee, ATI and broker,
Stephanie. Wallem was likewise impleaded after it
ignored the demand for reimbursement by Philam.
Heung-A was also added as party defendant for being
the registered owner of the vessel.
The defendants denied liability for the damaged
shipment.
Sagawa’s argument: Sagawa averred that its only role
with respect to the shipment was to inform Novartis of
its arrival in the PH and to facilitate the surrender of the
original BoL issued by Protop. Further, they argued that
they were deprived of the opportunity to examine the
to timely give a notice about the loss/damage.
ATI’s argument: It exercised due care and diligence in
handling the container. They also claimed that
Novartis, through Philam, is barred from filing
indemnification because the latter faile dto file the
Stephanie’s argument: It asserted that its only role
with respect to the shipment was its physical retrieval
form ATI and delivery it to Novartis. That entire time,
the shipment was sealed. Also, based on the certificate
of survey, the damage was due to salt water meaning
possession of the shipment.
Wallem’s argument: It argued that the damage and
shortages were the responsibility of the shipper,
Jinsuk, because it was taken on board on a shipper’s
load and count basis. The container van was already
sealed when it was loaded on the vessel and the
carrier was in no position to verify the condition and
Heung-A’s Argument: It argued that it is not the carrier
insofar as Novartis is concerned. The carrier was either
protop, a freight forwarder or Dongnama which
provided the container van to Protop. It denied being
the carrier and asserted that its only obligation was to
provided Dongnama a space on board M/V Heung-A
Bangkok.



Protop failed to answer to the complaint despite
having been served with alias summons.
2. WoN Novartis/Philam failed to timely file a claim
RTC Ruling:
The RTC Ruled that the damage to the shipment
occurred onboard the vessel while in transit. Heung-A
was adjudged as the common carrier of the shipment.
Despite the slot charter agreement with Dongnama, it
was still the obligation of Heung-a to transport the
cargo from Korea to Manila and thus, any damage to
the shipment is the responsibility of the carrier to the
consignee. Moreover, Heung-A failed to present
evidence showing that it exercised extraordinary
diligence to ensure the safety of the shipment.
conveying the same and its slot charter agreement
Wallem is held liable as Heung-a’s ship agent in the PH
while Protop was adjudged liable because the
damage sustained was due to the bad condition of the
container van. Also, on the back of the BoL, it
assumed responsibility for loss and damage as freight
forwarder.
ATI, Stephanie and Sagawa were exonerated from
responsibility. Sagawa was not liable by virtue of the
phrase “shipper’s load and count” in the BoL issued by
Protop. Since the container van was packed under the
sole responsibility of the shipper in Korea, Sagawa
which is based in the PH had no chance to check if the
contents were in good condition or not.
responsibility of the carrier and it is answerable for
CA Ruling:
CA agreed with RTC that Protop, Heung-A and Wallem
are liable for the damaged shipment. The fact that
Heung-A was not a party to the BoL did not negate the
existence of a contract of carriage between Heung-a
and/or Wallem and Novartis. A BoL is not
indispensable for the creation of a contract of carriage.
By agreeing to transport the goods, Heung-a impliedly
entered into a contract of carriage with Novartis —
thus it also assumed the obligations of a common
carrier to observe extraordinary diligence to assure the
safety of the shipment. Further, the slot charter
agreement did not change Heung-a’s character as a
common carrier.
Clearly, despite its contract of affreightment with
CA rejected Wallem and Heung-a’s argument that
Novartis failed to comply with filing a notice of claim
within 24-hrs of receipt of the goods (Art. 366 of the
Code of Commerce) because such provision only
applies to inter-island shipments within the PH.
goods they transported are damaged or lost, that is
ISSUES:
1. WoN Heung-A’s liability can be limited to US $500
per package pursuant to COGSA if the damage
was sustained while the shipment was in
possession of Heung-A?
against Heung-A and/or Wallem.
Ruling:
1. It is an uncontested fact that the damage was
sustained while it was in the possession and
custody of Heung-A. Heung-a failed to
demonstrate how it exercised due diligence in
handling and preserving the container van while in
transit, it should be liable for the damages
sustained. As the carrier of the shipment, Heung-A
was bound to exercise extraordinary diligence in
with Dongnama did not divest it of such
characterization nor relieve it of any accountability.
Based on testimony of Wallem’s employee and
witness, the charter agreement was a contract of
affreightment and not a bare boat or demise
charter. 

A charter party has two types. First, a contract of
affreightment wherey the use of shipping space on
vessels is leased in part or as a whole, to carry
goods for others. The charter-party provides for the
hire of vesel only, either for a determinate time (time
charter) or for a single or consecutive voyage
(voyage charter). The voyage remains under the
the loss of goods received for the transportation.
The charterer is free from liability to third persons in
respect of the ship. 



Second is a bare boat charter or charter by demise
under which the whole vessel is let to the charterer
with a transfer to him of its entire command and
possession and consequent control over its
navigation, including the master and the crew, who
are his servants. The charterer mans the vessel
with his own people and becomes, in effect the
owner for the voyage or service stipulated and
hence liable for damages or loss sustained by the
goods transported.



Dongnama, Heung-a remained responsible as the
carrier, hence liable for the damages incurred by
the shipment. Common carriers are required to
exercise due diligence. As a general rule, CCs are
presumed to have been at fault or negligent if the
u n l e s s t h e y p ro v e d t h a t t h e y e x e rc i s e d
extraordinary diligence. Heung-a failed to rebut the
prima facie presumption. 



Protop is solidarily liable with Heung-a in view of
the bill of lading the former issued to Novartis. A bill prima facie evidence, but shall be
of lading operates both as a receipt and as a conclusive on the carrier.

contract. It is a receipt for the goods shipped and a 


contract to transport and deliver the same as Hence, when there is a loss/damage to goods
stipulated. Protop breached its contract with covered by contracts of carriage from a foreign
Novartis when it failed to deliver the goods in the port to a PH port and in the absence of a
same quantity, qulality and description as stated in shipper’s declaration of the value of the goods
the BoL. 
 in the BoL, Heung-a, Wallem and Protop’s

 liability is limited to $500 per package.

Under Art. 1753 of the NCC, the law of the country

to which the goods are to be transported shall 2. Pursuant to COGSA, failure to comply with the
govern the liability of the common carrier for their notice requirement shall not affect or prejudice the
loss or destruction or deterioration. Since it was right of shipper to bring suit within 1 year after
being transported from S. Korea to PH, the civil delivery of the goods.

code provisions apply. In all matters not regulated 

by the NCC, the rights and obligations of common Novartis received the shipment on Jan. 5, 2001 and
carriers shall be governed by the Code of Philam filed a claim against Protop(June 2001),
Commerce and special laws such as COGSA. 
 Wallem(Oct. 2001) and heung-a(Dec. 2001) all
Article 372 of the Code of Commerce fills in this within the one-year prescriptive period. Verily then,
gap, thus:
despite Novartis’ failure to file a notice of claim, its
Article 372. The value of the goods which the subrogree, Philam is not barred from seeking
carrier must pay in cases if loss or reimbursement from Protop, Heung-A and Wallem
misplacement shall be determined in because demands for payment were timely filed.
accordance with that declared in the bill of
lading, the shipper not being allowed to
present proof that among the goods
declared therein there were articles of
greater value and money.


Horses, vehicles, vessels, equipment and all
other principal and accessory means of
transportation shall be especially bound in favor
of the shipper, although with respect to
railroads said liability shall be subordinated to
the provisions of the laws of concession with
respect to the property, and to what this Code
established as to the manner and form of
effecting seizures and attachments against said
companies. 


In case, however, of the shipper's failure to

declare the value of the goods in the bill of
lading, Section 4, paragraph 5 of the COGSA
provides:

Neither the carrier nor the ship shall in

any event be or become liable for any
loss or damage to or in connection with
the transportation of goods in an
amount exceeding $500 per package
lawful money of the United States, or in
case of goods not shipped in packages,
per customary freight unit, or the
equivalent of that sum in other currency,
unless the nature and value of such
goods have been declared by the
shipper before shipment and inserted in
the bill of lading. This declaration, if
embodied in the bill of lading shall be