This was a petition for review on certiorari of a decision of the Court of Appeals (CA) denying the petitioner's motion for reconsideration, and upholding the decision of the regional trial Court.

The petitioner, Mitsui OSK Lines Ltd, is a foreign corporation represented in the Philippines by its agent, Magsaysay Agencies. It entered into a contract of carriage through Meister Transport Inc, an international freight forwarder, with the respondent, Lavine Loungewear Manufacturing Corp, to transport goods from Manila to Le Havre, France. The petitioner undertook to deliver the goods to France 28 days from initial loading. However, in Kaoshiung, Taiwan, the goods were not transhipped immediately, with the result that the shipment arrived in Le Havre late. The consignee paid only half the value of the goods on the ground that they did not arrive in France until the 'off season' in that country. The remaining half was charged to the account of the respondent, which in turn demanded payment from the petitioner through its agent.

The petitioner filed a motion to dismiss, alleging that the claim against it had prescribed under COGSA. The regional trial Court denied the petitioner's motion as well as its subsequent motion for reconsideration. On petition for certiorari, the Court of Appeals sustained the trial Court's orders. The petitioner appealed to the Supreme Court.

Held: The decision of the CA is affirmed.

The issue is whether the respondent's action is for 'loss or damage' to goods shipped within the meaning of s 3(6) of COGSA. In Ang v American Steamship Agencies Inc, 19 SCRA 123 (1967), the question was whether an action for the value of goods which had been delivered to a party other than the consignee was for 'loss or damage' within the meaning of s 3(6) of COGSA. It was held that there was no loss because the goods had simply been misdelivered. 'Loss' refers to the deterioration or disappearance of goods.

As defined in the Civil Code, and as applied to s 3(6) of COGSA, 'loss' contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown, or they cannot be recovered. Conformably with this concept of what constitutes 'loss' or 'damage', this Court held in Tan Liao v American President Lines Ltd, 98 Phil 203 (1956) that deterioration of goods due to delay in their transportation constitutes 'loss' or 'damage' within the meaning of s 3(6), so that as suit was not brought within one year the action was barred:

Whatever damage or injury is suffered by the goods while in transit would result in loss or damage to either the shipper or the consignee. As long as it is claimed, therefore, as it is done here, that the losses or damages suffered by the shipper or consignee were due to the arrival of the goods in damaged or deteriorated condition, the action is still basically one for damage to the goods, and must be filed within the period of one year from delivery or receipt, under the above-quoted provision of the Carriage of Goods by Sea Act.

But the Court allowed that:

There would be some merit in appellant’s insistence that the damages suffered by him as a result of the delay in the shipment of his cargo are not covered by the prescriptive provision of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the deterioration and decay of the goods while in transit, but to other causes independent of the condition of the cargo upon arrival, like a drop in their market value.

The rationale behind limiting the definitions of loss or damage to such parameters is not hard to find or fathom. As this Court held in Ang:

Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither lost nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain.

In this case, there is neither deterioration nor disappearance nor destruction of goods caused by the carrier's breach of contract. Whatever reduction there may have been in the value of the goods is not due to their deterioration or disappearance because they had been damaged in transit. As the suit below is not for 'loss or damage' to goods contemplated in s 3(6), the question of prescription of action is governed, not by COGSA, but by art 1144 of the Civil Code, which provides for a prescriptive period of ten years.