Pinewood Marine v. Emco Plywood Corporation

REYES, J.:

Before the Court is a petition for review on certiorari1 assailing the Decision2 dated June 21, 2006 and Resolution3 dated August 8, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 58909. The CA affirmed in toto the Decision4 rendered on May 14, 1997 by the Regional Trial Court (RTC) of Butuan City, Branch 4 in Civil Case No. 4374, an action for replevin, attachment and damages. The dispositive portion of the RTC decision is quoted below: WHEREFORE, decision is rendered in favor of plaintiff [EMCO Plywood Corporation (EMCO)] against defendant Ever Commercial Co., Ltd. [Ever] and [Ever] is ordered to pay [EMCO]: (a) the sum of Sixteen Million Six Hundred Eighty[-]Six Thousand Forty[-]Eight Pesos and Forty[-]Six Centavos (₱16,686,048.46) representing damages plus Six Percent (6%) interest on said amount from the filing of the Complaint until [Ever] fully pays the same.

As to the cross[-]claim of defendant Ever, the Court finds defendants [Shenzhen Guangda Shipping Co. (Shenzhen)] and/or charterer/owner of the vessel "TAO HUA LING" and Pinewood Marine (Phils.)[,] [Inc. (Pinewood)] to be jointly and severally liable to defendant Ever and are ordered to pay [Ever]: (a) the amount of Sixteen Million Six Hundred Eighty[-]Six Thousand Forty[-]Eight Pesos and Forty[-]Six Centavos (₱16,686,048.46), plus six percent (6%) interest thereon from the filing of the complaint until full payment thereof, by way of reimbursement and indemnification; (b) the amount of Two Million Pesos (₱2,000,000.00) as damages, plus Six Percent (6%) interest thereon; and (c) attorney's fees in the amount of One Hundred Seventy-Three Thousand [Six Hundred] Pesos (₱173,600.00).5 SO ORDERED.6 Antecedents The CA aptly summed up as follows the facts of the case leading to the rendition of the RTC decision: On December 11, 1995, [EMCO] filed a Complaint for "Replevin, Attachment and Damages"

impleading the following as defendants namely: [Shenzhen], Dalian Ocean Shipping Company x x x, [Pinewood], the vessel MV Tao Hua Ling, and its Unknown Owner and/or Demise Charterer and the Master of said vessel. In its Amended Complaint, EMCO impleaded, additionally, [Ever as the vessel's charterer]. EMCO is primarily engaged in the business of manufacturing plywood and the subject matter of its replevin action was its cargo of 2,638 pieces of PNG round logs fresh cut from Papua New Guinea, with a total invoice value of US $691,898.62.

EMCO had entered into a contract with [Ever] for the loading, transporting and unloading of the logs at Butuan City, Philippines. EMCO had paid [Ever] the full freight of its cargo in the amount of US $ 241,223.04. [Ever] then chartered the vessel MV Tao Hua Ling from Kanetomi (HK)Ltd., which, in turn, chartered the said vessel from defendant [Shenzhen].

The local ship agent of the latter, [Pinewood], represents it in the Philippines. The subject cargo was loaded on board the said vessel. Sometime thereafter, EMCO received a letter, dated December 5, 1995, from the law office of Sycip Salazar Hernandez [Gatmaitan &] Associates informing EMCO that their client, [Shenzhen], the "disponent owner"

of the vessel Tao Hua Ling, was exercising its lien over the cargo of logs for unpaid demurrage, detention and deviation. The letter further advised EMCO that [Shenzhen] had instructed both the master of the vessel and its ship agent, [Pinewood], to exercise the shipowner's lien on the cargo. A similar letter was also sent to the Collector of Customs, Port of Masao, Butuan, Agusan del Norte, requesting the latter to withhold the discharge of the cargo for the said reason.

Whereupon, the Bureau of Customs District II, sub-port of Nasipit, issued a memorandum directing the inspector of the vessel to withhold delivery of the cargo to EMCO. EMCO objected to the withholding of the cargo and assailed the lien as invalid. EMCO nonetheless offered a compromise with defendants and even declared its willingness to put up a bond in the amount of US $300,000.00 for the release of the cargo.

From [Ever], it demanded the immediate release of the logs. For its part, [Ever] took the initiative to effect the release of the logs to the extent of negotiating with the shipowner and other defendants. But all these were to no avail.

The day following the filing of EMCO's complaint, the [RTC] issued the writ of replevin. Whereupon, the logs were released and delivered to EMCO. In its Amended Complaint, EMCO had also sought the attachment of the vessel MV Tao Hua Ling.

Since the vessel had left [the] Philippine territory, EMCO did not pursue this relief. In addition to replevin and attachment, EMCO sought to recover damages for the unwarranted refusal of defendants to release the cargo. All the defendants, except [Ever], filed a motion to dismiss citing improper venue as their sole ground.

The [RTC] denied the motion. [Ever] filed its Answer with compulsory counterclaim and cross-claim. The rest of the defendants failed to answer and, upon motion, were declared in default pursuant to the [RTC's] Order dated June 17, 1996.7 (Citations omitted and emphasis ours) Ruling of the RTC Pre-trial and trial on the merit sensued.

On May 14, 1997, the RTC rendered its decision directing Ever to pay EMCO damages and interests. The RTC also granted Ever's cross-claim against Shenzhen, Dalian Ocean Shipping Co. and Pinewood, who were ordered to reimburse Ever for its liability to EMCO and additionally, to pay damages, interests and attorney's fees.8 The RTC explained that Section 1505 of the Customs and Tariff Code exclusively enumerates the nature of the claims that give rise to a lien, to wit, (1) freight, (2) lighter age, or (3) general average. Since a lien anchored on claims for demurrage and detention is not included in the enumeration, the withholding of EMCO's cargo for delivery or release was unwarranted.9 The RTC further declared that EMCO is not privy to the charter party agreements executed among Shenzhen, Kanetomi (HK) Ltd. (Kanetomi) and Ever.10 The RTC likewise took note of the fact that apart from Ever, the rest of the defendants were declared in default and were unable to present evidence to prove their claims.

EMCO and Ever, on the other hand, had amply established that the claims for demurrage, detention, and deviation were "baseless, excessive, unreasonable and invalid" and that the presence of defective vessel winches was due to the defendants' own fault and negligence.11 EMCO suffered damages by reason of the baseless withholding of delivery of the logs. Mr. Max Alcantara (Alcantara), Vice President, and Nelva G. Mandap (Mandap), a senior accounting staff, testified on the amount of damages suffered by EMCO.12 Alcantara testified that EMCO incurred operational losses at the rate of ₱1,500,000.00 per day due to the unavailability of the logs used as raw materials, which caused production delay and prevented the company from complying with contracts already entered into with buyers.

Alcantara also stated that the value of the cargo depreciated at the rate of $1 per cubic meter daily since the delay in the release of the logs affected their moisture content and other attributes.13 Alcantara likewise expressed that EMCO incurred expenses of ₱500,000.00 for attorney's fees and ₱450,000.00 for bond premium and other legal costs.14 Mandap, on her part, testified that EMCO's sales for the month of December in 1995 only amounted to ₱48,576,927.34, a 20% or about ₱17,000,000.00 drop from its average monthly sales of ₱65,000,000.00.

She also stated that EMCO registered a net loss of ₱10,686,924.05 for the month of December in 1995. While EMCO earns an average monthly income of ₱450,000.00, in the said month, a net loss was instead registered.15 Mandap further testified that the delay in the delivery of the logs caused EMCO to incur additional labor costs of ₱2,092,748.85 as its employees had to be paid their salaries even if no work was done due to the lack of raw materials. The deterioration cost of $1 per cu m per day due to the exposure of the logs to the elements during the withholding of their delivery yielded the total sum of ₱2,956,372.56.16 Ever, having breached its contractual obligation to immediately deliver and cause the discharge of the logs from the vessel, was thus ordered by the RTC to pay EMCO the following: Operational Losses (Net Loss) - - ₱10,686,924.05 Labor cost - - - - - - - - - - - - - - - - ₱2,092,748.85 Deterioration cost - - - - - - - - - - - ₱2,956,375.56 Attorney's fees - - - - - - - - - - - - - ₱500,000.00 Miscellaneous Expenses - - - - - - - (Bond Premium, legal costs) ₱450,000.00 Total - - - - - - - - - - - - - - - - - - - -