This was a petition for review on certiorari to set aside the decision of the Court of Appeals (CA) in CA-GR CV No 53538. The CA reversed the decision of the regional trial Court ordering the respondents, Wallem Philippines Shipping Inc (Wallem) and Advance Shipping Corp (Advance Shipping), jointly and severally liable to pay damages in favour of Cua.

On 12 November 1990, Cua filed a civil action for damages of PHP 2,030,303.52 against Wallem and Advance Shipping for damage to 218 tons and for a shortage of 50 tons of shipment of Brazilian soya beans consigned to him. He claimed that the loss was due to the respondents' failure to observe extraordinary diligence in carrying the cargo. Advance Shipping (a foreign corporation) was the owner and manager of the M/V Argo Trader that carried the cargo, while Wallem was its local agent.

Advance Shipping filed a motion to dismiss the complaint, arguing that Cua's claim should have first been submitted to arbitration. Cua contended that he, as a consignee, was not bound by the charterparty, which was a contract between the shipowner (Advance Shipping) and the charterers. The regional trial Court ruled that Cua was not bound by the arbitration clause in the charterparty.

Wallem filed its own motion to dismiss, raising the sole ground of prescription. Section 3(6) of the Carriage of Goods by Sea Act (COGSA) provides that 'the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods'. Wallem alleged that the goods were delivered to Cua on 16 August 1989, but that the damages suit was instituted only on 12 November 1990 - more than one year than the period allotted under COGSA. Since the action was filed beyond the one-year prescriptive period, Wallem argued that Cua’s action was time-barred. Cua denied the claim of prescription, referring to a telex message sent on behalf of the UK P&I Club, which stated that Advance Shipping agreed to extend the commencement of suit for 90 days, from 14 August 1990 to 12 November 1990. The regional trial Court found in favour of Cua.

On appeal, the CA held that the respondents' claim of prescription was meritorious, after finding that the telex message extending the period to file an action was neither attached to Cua's opposition to Wallem's motion to dismiss, nor presented during trial. The CA ruled that there was thus no basis to conclude that the prescriptive period was extended by the parties’ agreement. Hence, it set aside the decision and dismissed Cua's complaint.

Cua appealed to the Supreme Court.

Held: The CA decision is set aside and the regional trial Court decision is reinstated.

COGSA is the applicable law for all contracts for carriage of goods by sea to and from Philippine ports in foreign trade; it is thus the law that the Court shall consider in the present case since the cargo was transported from Brazil to the Philippines. Under s 3(6) of COGSA, the carrier is discharged from liability for loss or damage to the cargo 'unless the suit is brought within one year after delivery of the goods or the date when the goods should have been delivered'. Jurisprudence, however, has recognised the validity of an agreement between the carrier and the shipper/consignee extending the one-year period to file a claim: see Universal Shipping Lines Inc v Intermediate Appellate Court, GR No 74125, 31 July 1990, 188 SCRA 170, 174; Tan Liao v American President Lines Ltd, 98 Phil 203, 211 (1956); Chua Kuy v Everrett Steamship Corp, 93 Phil 207, 215 (1953) (CMI1535).

The MV Argo Trader arrived in Manila on 8 July 1989; Cua’s complaint for damages was filed on 12 November 1990. Although the complaint was clearly filed beyond the one-year period, Cua additionally alleged in his complaint that '[t]he defendants ... agreed to extend the time for filing of the action up to November 12, 1990'. The allegation of an agreement extending the period to file an action in Cua’s complaint is a material averment that, under s 11, r 8 of the Rules of Court, must be specifically denied by the respondents; otherwise, the allegation is deemed admitted. A review of the pleadings submitted by the respondents discloses that they failed to specifically deny Cua's allegation of an agreement extending the period to file an action to 12 November 1990. Wallem's motion to dismiss simply referred to the fact that Cua's complaint was filed more than one year from the arrival of the vessel, but it did not contain a denial of the extension.

This presumed admission is further bolstered by the express admission made by the respondents themselves in their memorandum: 'This case was filed by [the] plaintiff on 11 November 1990 within the extended period agreed upon by the parties to file suit.' This statement is a clear admission by the respondents that there was indeed an agreement to extend the period to file the claim. In light of this admission, it would be unnecessary for Cua to present a copy of the 10 August 1990 telex message to prove the existence of the agreement. Thus, Cua's claim for the damage to, and shortage of, the cargo was filed in time.