Case Digest: Westwind Shipping Corp. v. UCPB General Insurance Co., Inc. & Asian Terminal, Inc., G.R. No. 200289, November 25, 2013

Facts:

• On August 23, 1993, Kinsho-Mataichi Corporation shipped 197 metal containers/skids of tin-free steel from Kobe, Japan, to San Miguel Corporation (SMC) in Manila via M/V Golden Harvest, owned by Westwind Shipping Corporation.

• The shipment, valued at US$184,798.97, was insured by UCPB General Insurance Co., Inc.

• Upon arrival on August 31, 1993, six containers were damaged during unloading due to forklift mishandling by Ocean Terminal Services, Inc. (OTSI), resulting in a total of 15 damaged containers upon delivery to SMC’s warehouse.

• Six containers were damaged during unloading by the arrastre operator, Asian Terminals, Inc. (ATI), using forklifts.

• SMC’s customs broker, Orient Freight International, Inc. (OFII), discovered nine more containers damaged after delivery.

• SMC filed claims against UCPB, Westwind, ATI, and OFII, and UCPB paid SMC ₱292,732.80 for the damages.

• UCPB sued Westwind, ATI, and OFII.

• RTC: Dismissed UCPB’s complaint, ruling that the claim against ATI had prescribed, and Westwind and OFII were not liable since they were not involved in the forklift operations that caused the damages.

• CA: Reversed the RTC decision, holding:

• Westwind liable for the six containers damaged during unloading, as it was responsible for ensuring the cargo remained in good condition until properly unloaded.

• OFII liable for the additional nine damaged containers, as it was considered a common carrier bound to exercise extraordinary diligence during delivery.

• The CA ordered Westwind to pay ₱117,093.12 and OFII to pay ₱175,639.68, both with interest.

• Westwind argued that its responsibility ceased once the cargo was delivered to ATI.

• OFII contended it was only a customs broker, not a common carrier, and was not responsible for the forklift damages caused by ATI and SMC employees.

Issue:

1. Whether Westwind, and not ATI, is responsible for the six damaged containers/skids at the time of its unloading. YES

2. Whether OFII is liable for the additional nine damaged containers/skids. YES

Both petitions lack merit.

The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc. applies, as it settled the query on which between a common carrier and an arrastre operator should be responsible for damage or loss incurred by the shipment during its unloading. We elucidated at length:

Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them. Subject to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are responsible for the loss, destruction, or deterioration of the goods. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them.

For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable for the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at the port of loading, until he delivers it on the shore or on the discharging wharf at the port of unloading, unless agreed otherwise. In Standard Oil Co. of New York v. Lopez Castelo, the Court interpreted the ship captain’s liability as ultimately that of the shipowner by regarding the captain as the representative of the shipowner.

Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea, the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and immunities set forth in the Act. Section 3 (2) thereof then states that among the carriers’ responsibilities are to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods carried.

x x x x

On the other hand, the functions of an arrastre operator involve the handling of cargo deposited on the wharf or between the establishment of the consignee or shipper and the ship's tackle. Being the custodian of the goods discharged from a vessel, an arrastre operator's duty is to take good care of the goods and to turn them over to the party entitled to their possession.

Handling cargo is mainly the arrastre operator's principal work so its drivers/operators or employees should observe the standards and measures necessary to prevent losses and damage to shipments under its custody.

In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the relationship and responsibility of an arrastre operator to a consignee of a cargo, to quote:

The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman. The relationship between the consignee and the common carrier is similar to that of the consignee and the arrastre operator. Since it is the duty of the ARRASTRE to take good care of the goods that are in its custody and to deliver them in good condition to the consignee, such responsibility also devolves upon the CARRIER. Both the ARRASTRE and the CARRIER are therefore charged with and obligated to deliver the goods in good condition to the consignee.  

The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of Appeals with the clarification that the arrastre operator and the carrier are not always and necessarily solidarily liable as the facts of a case may vary the rule.

Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre operator and a carrier may not be held solidarily liable at all times. But the precise question is which entity had custody of the shipment during its unloading from the vessel?

The aforementioned Section 3 (2) of the COGSA states that among the carriers’ responsibilities are to properly and carefully load, care for and discharge the goods carried. The bill of lading covering the subject shipment likewise stipulates that the carrier’s liability for loss or damage to the goods ceases after its discharge from the vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo from the time it is turned over to him until its delivery at the port of unloading.

In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was ruled that like the duty of seaworthiness, the duty of care of the cargo is non-delegable, and the carrier is accordingly responsible for the acts of the master, the crew, the stevedore, and his other agents. It has also been held that it is ordinarily the duty of the master of a vessel to unload the cargo and place it in readiness for delivery to the consignee, and there is an implied obligation that this shall be accomplished with sound machinery, competent hands, and in such manner that no unnecessary injury shall be done thereto. And the fact that a consignee is required to furnish persons to assist in unloading a shipment may not relieve the carrier of its duty as to such unloading.

x x x x

It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier x x x.

In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co. (Philippines), Inc. and Asian Terminals, Inc. v. Philam Insurance Co., Inc., the Court echoed the doctrine that cargoes, while being unloaded, generally remain under the custody of the carrier. 

We cannot agree with Westwind’s disputation that "the carrier in Wallem clearly exercised supervision during the discharge of the shipment and that is why it was faulted and held liable for the damage incurred by the shipment during such time." What Westwind failed to realize is that the extraordinary responsibility of the common carrier lasts until the time the goods are actually or constructively delivered by the carrier to the consignee or to the person who has a right to receive them. There is actual delivery in contracts for the transport of goods when possession has been turned over to the consignee or to his duly authorized agent and a reasonable time is given him to remove the goods. 

In this case, since the discharging of the containers/skids, which were covered by only one bill of lading, had not yet been completed at the time the damage occurred, there is no reason to imply that there was already delivery, actual or constructive, of the cargoes to ATI. Indeed, the earlier case of Delsan Transport Lines, Inc. v. American Home Assurance Corp. serves as a useful guide, thus:

Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow because the same had already been actually and legally delivered to Caltex at the time it entered the shore tank holds no water. It had been settled that the subject cargo was still in the custody of Delsan because the discharging thereof has not yet been finished when the backflow occurred. Since the discharging of the cargo into the depot has not yet been completed at the time of the spillage when the backflow occurred, there is no reason to imply that there was actual delivery of the cargo to the consignee. Delsan is straining the issue by insisting that when the diesel oil entered into the tank of Caltex on shore, there was legally, at that moment, a complete delivery thereof to Caltex. To be sure, the extraordinary responsibility of common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by, the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to a person who has the right to receive them. The discharging of oil products to Caltex Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve the cargo. The carrier still has in it the responsibility to guard and preserve the goods, a duty incident to its having the goods transported.

To recapitulate, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case. The mere proof of delivery of goods in good order to the carrier, and their arrival in the place of destination in bad order, make out a prima facie case against the carrier, so that if no explanation is given as to how the injury occurred, the carrier must be held responsible. It is incumbent upon the carrier to prove that the loss was due to accident or some other circumstances inconsistent with its liability.

The contention of OFII is likewise untenable. A customs broker has been regarded as a common carrier because transportation of goods is an integral part of its business. In Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc., the Court already reiterated: It is settled that under a given set of facts, a customs broker may be regarded as a common carrier.

Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of Appeals held:

The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civil Code, to wit, Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air, for compensation, offering their services to the public.

x x x x

Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity. The contention, therefore, of petitioner that it is not a common carrier but a customs broker whose principal function is to prepare the correct customs declaration and proper shipping documents as required by law is bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary consideration.

And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the transportation of goods is an integral part of a customs broker, the customs broker is also a common carrier. For to declare otherwise "would be to deprive those with whom [it] contracts the protection which the law affords them notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel of petitioner’s business."

That OFII is a common carrier is buttressed by the testimony of its own witness, Mr. Loveric Panganiban Cueto, that part of the services it offers to clients is cargo forwarding, which includes the delivery of the shipment to the consignee. Thus, for undertaking the transport of cargoes from ATI to SMC’s warehouse in Calamba, Laguna, OFII is considered a common carrier. As long as a person or corporation holds itself to the public for the purpose of transporting goods as a business, it is already considered a common carrier regardless of whether it owns the vehicle to be used or has to actually hire one.

As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil Code, extraordinary diligence in the vigilance over the goods it transports according to the peculiar circumstances of each case. In the event that the goods are lost, destroyed or deteriorated, it is presumed to have been at fault or to have acted negligently unless it proves that it observed extraordinary diligence.

In the case at bar it was established that except for the six containers/skids already damaged OFII received the cargoes from ATI in good order and condition; and that upon its delivery to SMC additional nine containers/skids were found to be in bad order as noted in the Delivery Receipts issued by OFII and as indicated in the Report of Cares Marine Cargo Surveyors. Instead of merely excusing itself from liability by putting the blame to ATI and SMC it is incumbent upon OFII to prove that it actively took care of the goods by exercising extraordinary diligence in the carriage thereof. It failed to do so. Hence its presumed negligence under Article 1735 of the Civil Code remains unrebutted.

WHEREFORE, premises considered the petitions of Westwind and OFII in G.R. Nos. 200289 and 200314 respectively are DENIED. The September 13 2011 Decision and January 19 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 86752 which reversed and set aside the January 27 2006 Decision of the Manila City Regional Trial Court Branch 30 are AFFIRMED.

SO ORDERED.