FEDEX V. AHAC & PHILAM, G.R. No.

150094, August 18, 2004

FACTS:
[BEFORE THE ARRIVAL AT MANILA]
-Shipper SMITHKLINE USA delivered to carrier Burlington Air (agent of petitioner FEDEX) a
shipment containing 109 cartons of veterinary biologicals
-It was supposed to be delivered to consignee SMITHKLINE and French Overseas Company in
Makati
-The shipment was stamped on its face ‘REFRIGERATE WHEN NOT IN TRANSIT’ and
‘PERISHABLE’
-Burlington Air insured the shipment with American Home Assurance Association (AHAC-
respondent)
-Burlington Air turned over the custody of the shipment to FEDEX which transported the same
to Manila

[UPON ARRIVAL IN MANILA]

-Upon arrival in Manila, it was immediately stored at Cargohaus Inc.’s warehouse.
-Before the arrival, FEDEX informed the customs broker (GETC Cargo Int’l Corp.) of the
consignee to facilitate the release of its shipments from the Bureau of Customs

[12 DAYS AFTER ARRIVAL TO MNL]

-12 days after the arrival of the shipment to Manila, DIONEDA (non-licensed custom’s broker
assigned by GETC) found out that the shipments, instead of being placed in a refrigerator, were
only stored in a room with 2 airconditioners.

[WHAT THEY FOUND OUT IN THE WAREHOUSE;TESTS CONDUCTED]

-When the samples of the vaccines were taken to the Bureau of Animal Industry by SMITHKLINE
PH, it was discovered that the ‘ELISA reading of vaccinates sera are below the positive reference
serum.’

[AFTERMATH]
-Because of this, SMITHKLINE PH abandoned the shipment and declared total loss for the
unusable shipment
-SMITHKLINE filed a claim with AHAC thru its PH representative (PHILAM) which indemnified
SMITHKLINE for the whole insured amount

[LAWSUITS FILED]
-PHILAM filed an action for damages against FEDEX for negligence on either of both of them in
the handling of the shipment
-After trial, FEDEX was held solidarily liable for the loss
-FEDEX appealed to the CA claiming the respondents have no personality to sue
(still lost) the shipping receipts were a prima facie proof that the goods had indeed been
delivered to the carrier in good condition.
-Hence, this petition
ISSUE: Whether or not FEDEX (petitioner) is liable for the damage to or loss of the insured
goods.

HELD: Assailed decision was reversed.

1. Prescription of the claim has already prescribed.

Airway Bill No. 11263825 states:

a.) No action shall be maintained in case of damage or partial loss of the shipment unless a
written notice (containing the description of the goods concerned, approx date of damage/loss,
details of claim) is presented within 14 days from the date the goods are placed at the
disposal of the person entitled to the delivery.
In the case of total loss, unless presented within 120 days from date of issue of the
Airway Bill.

b.) The person entitled to delivery must make a complaint to the carrier in writing in the case of
visible damage to the goods, immediately after discovery of the damage and at least within 14
days from receipt of goods.

Article 26 of the Warsaw Convention also states:

a.) in case of damage, consignee must complain to the carrier forthwith after the discovery of
the damage within at least 3 days from date of receipt (for baggages); and 7 days from date of
receipt (for goods)

b.) every complaint must be made in writing

c.) upon failure of filing a complaint within the time prescribed, no action shall lie against the
carrier except for fraud in his part.

2. Condition Precedent

The stipulated condition requiring a written notice upon discovery of damage was not fulfilled.
Hence, such notice is a condition precedent and must be honored in order to impose the
liability to the carrier. In the case, the respondents did not comply with this requirement within
the prescribed period. Even if they had a cause of action, they can’t enforce it bec of their
failure to comply with the stipulation.

The reason for such condition is reasonable as it gives a chance for the carrier to:
-be informed that the shipment has been damaged, and is being charged for the liability
therefor;
-be given an opportunity to examine the nature and extent of the injury.
Because of this, it protects the carrier from false of fraudulent claims.

3. Proper Payee

The Certificate of Insurance specifies that the loss or damage to the insured shipment is
“payable to order xxx upon surrender of this certificate.” At the back of the Certificate is the
signature of the representative of Burlington Air. The document was indorsed in blank and is
deemed as a bearer instrument. (Whosoever holds the instrument is entitled to the payments)

Since SMITHKLINE was the holder of the Certificate, the former had the right to collection or
indemnification for the loss of or damage to the insured shipment, as fully is the property were
covered by the special policy in the name of the holder. Hence, SMITHKLINE was the proper
and legal payee of the insurance goods.

4. Subrogation

Upon receipt of the insurance proceeds the consignee (SMITHKLINE) executed a Subrogation
receipt in favor of the respondents (AHAC & PHILAM). The respondents were then authorized
to file claims and begin suit against any such carrier.

Consignee had a legal right to receive the shipment in the same condition it was delivered for
transport to FEDEX. If the right were violated, the consignee would have a cause of action to
against the responsible party.

In an exercise of a subrogatory right, an insurer may proceed against an erring carrier. Both the
insurer and consignee are bound by the contractual stipulations under the bill of lading.

Upon receipt of the insurance proceeds, the consignee (Smithkline) executed a subrogation
Receipt in favor of respondents. The latter were thus authorized "to file claims and begin suit
12 

against any such carrier, vessel, person, corporation or government." Undeniably, the consignee had
a legal right to receive the goods in the same condition it was delivered for transport to petitioner. If
that right was violated, the consignee would have a cause of action against the person responsible
therefor.

Upon payment to the consignee of an indemnity for the loss of or damage to the insured goods, the
insurer's entitlement to subrogation pro tanto -- being of the highest equity -- equips it with a cause of
action in case of a contractual breach or negligence. "Further, the insurer's subrogatory right to sue
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for recovery under the bill of lading in case of loss of or damage to the cargo is jurisprudentially
upheld." 14
In the exercise of its subrogatory right, an insurer may proceed against an erring carrier. To all
intents and purposes, it stands in the place and in substitution of the consignee. A fortiori, both the
insurer and the consignee are bound by the contractual stipulations under the bill of lading. 15