Delgado Brothers, Inc. vs. Home Insurance Company

An arrastre operator's services at a port are not maritime in character; they are akin to those of an ordinary depositary or warehouseman, so an action against it for loss or damage to imported cargo is not an admiralty case within the jurisdiction of the Court of First Instance and must be brought in the court with jurisdiction over the amount claimed.

Delgado Brothers, Inc. operated the arrastre service at the Port of Manila under a Management Contract with the Bureau of Customs dated October 21, 1950, effective January 1, 1951, with the exclusive right and privilege of receiving, handling, caring for, and delivering imported and exported merchandise upon or passing over government-owned wharves and piers, and of recording or checking merchandise delivered at shipside. Home Insurance Company insured the shipment and, as subrogee of the shipper and/or consignee, asserted their claim for cargo loss against Delgado Brothers. The dispute implicated the jurisdictional boundary between admiralty and ordinary civil actions, as well as the Municipal Court of Manila's exclusive original jurisdiction over claims of the amount involved.

Delgado Brothers, Inc. was the manager of the Arrastre Service at the Port of Manila under a Management Contract with the Bureau of Customs dated October 21, 1950, effective January 1, 1951. Under Section 2 of that contract, Delgado Brothers had the exclusive right or privilege of receiving, handling, caring for, and delivering all merchandise, imported and exported, upon or passing over Philippine Government-owned wharves and piers in the Port of Manila; of recording or checking all merchandise delivered to the Port of Manila at shipside; and, in general, of furnishing lighting and water services and other incidental services in order to undertake its arrastre service. Its operations and responsibility for merchandise began from the time goods were placed upon the wharves or piers or delivered along the sides of ships; it had nothing to do with the loading or unloading of cargoes to and from ships.

On February 17, 1955, Victor Bijou & Co. of 14 East 37th Street, New York 16, New York, U.S.A., shipped at New York for Manila aboard the vessel S.S. Leoville and consigned to Judy Philippines, Inc. of Manila a shipment of one case of linen handkerchiefs and two cases of cotton piece goods. Barber Steamship Lines, Inc., the New York agent of the vessel, issued Bill of Lading No. 119. The shipment was insured with Home Insurance Company by the shipper and/or consignee.

The vessel arrived at the Port of Manila on March 30, 1955. The shipment was unloaded complete and in good order from the vessel by Delgado Brothers, but Delgado Brothers delivered it to the consignee with one case of linen handkerchiefs in bad order, with a shortage of 503 yards of linen print handkerchiefs, causing loss and damage of P1,287.20. The shipper and/or consignee filed a claim with Delgado Brothers for the loss in the sum of $713.08, equivalent to P1,436.86. Home Insurance Company paid that amount to the shipper and/or consignee and was subrogated to their rights and interests.

Delgado Brothers failed and refused to pay the claim, and Home Insurance Company filed a complaint in the Court of First Instance of Manila on March 7, 1956, seeking P1,287.20 with legal interest, P149.66 as the difference between P1,436.86 and P1,287.20, P478.95 as attorney's fees, and costs. The central factual premise for the jurisdictional dispute was that Delgado Brothers was an arrastre operator, not a carrier or stevedore, and that its responsibility began after the cargo was placed on the wharves or piers or delivered alongside the ships.

• Lack of Jurisdiction: Petitioner Delgado Brothers, Inc. claimed that the Court of Appeals, as did the Court of First Instance of Manila, erred in not dismissing respondent's complaint on the specific ground that the Court of First Instance had no jurisdiction over the subject matter, because the action was not an admiralty case and the amount sought to be recovered fell within the exclusive original jurisdiction of the Municipal Court of Manila.
• Nature of Arrastre Service: Petitioner maintained that its arrastre service was not maritime in nature and that it did not act as an agent of the carrying vessel, the importer, or the consignee.
• Release under Law and Contract: Petitioner alleged as a special defense that no claim was filed within the 15-day period from the arrival of the goods and before suit within one year from arrival, so that it was completely relieved and released of any and all liability for loss or damage under the law and the pertinent provisions of the Management Contract with the Bureau of Customs.

• Admiralty Jurisdiction: Respondent Home Insurance Company submitted that the ruling in Macondray & Company, Inc. vs. Delgado Brothers, Inc. was wrong and urged a re-examination of the issue, arguing that petitioner's arrastre service is maritime in nature and that actions against an arrastre operator properly come under the jurisdiction of the Court of First Instance of Manila.
• Action in Admiralty: Respondent opposed petitioner's motion to dismiss by alleging that the case is an action in admiralty and therefore within the original jurisdiction of the court.
• Multiplicity of Suits: Respondent invoked the rule against multiplicity of suits to support retaining the action in the Court of First Instance.
• Cited Authorities: Respondent relied on Cebu Arrastre Service vs. Collector of Internal Revenue, American Stevedores vs. Porello, and Evans vs. New York & Pacific Steamship Co., Ltd., et al. to support its position that the arrastre service was maritime.

• Jurisdiction over Subject Matter: Whether the Court of First Instance of Manila had jurisdiction over an action against an arrastre operator for loss or damage to imported cargo, or whether the action fell within the exclusive original jurisdiction of the Municipal Court of Manila.
• Maritime Character of Arrastre Service: Whether the arrastre operator's services under its Management Contract with the Bureau of Customs are maritime in nature, such that an action against it is an admiralty case.
• Multiplicity of Suits: Whether the rule against multiplicity of suits could justify retaining jurisdiction in the Court of First Instance despite the lack of jurisdiction over the subject matter.
• Applicability of Macondray: Whether the Court should depart from or re-examine the ruling in Macondray & Company, Inc. vs. Delgado Brothers, Inc.

• Jurisdiction over Subject Matter: No. The Court of First Instance of Manila had no jurisdiction over the subject matter; the action was not an admiralty case, and the amount sought to be recovered fell within the exclusive original jurisdiction of the Municipal Court of Manila.
• Maritime Character of Arrastre Service: No. An arrastre operator's services are not maritime; they are akin to those of an ordinary depositary or warehouseman, and any connection to maritime transportation is merely incidental.
• Multiplicity of Suits: No. The rule against multiplicity of suits must yield to the superior requirement that the court must have jurisdiction over the subject matter.
• Applicability of Macondray: No departure. The Court found no justification to re-examine or depart from Macondray & Company, Inc. vs. Delgado Brothers, Inc., the facts and issues being identical mutatis mutandis.

• Jurisdiction over Subject Matter: The Court held that petitioner's contention was meritorious. Because the action was not an admiralty case and the amount sought to be recovered fell within the exclusive original jurisdiction of the Municipal Court of Manila, the Court of First Instance of Manila had no jurisdiction over the subject matter. The Court of Appeals should have dismissed the complaint on that ground instead of reversing the judgment of dismissal and ordering payment. The Supreme Court accordingly reversed the Court of Appeals and dismissed the case.
• Maritime Character of Arrastre Service: Under Section 2 of the Management Contract, petitioner's functions as arrastre operator were (1) to receive, handle, care for, and deliver all merchandise imported and exported, upon or passing over Government-owned wharves and piers in the Port of Manila; (2) to record or check all merchandise delivered to the port at shipside; and (3) in general, to furnish lighting and water services and other incidental services in order to undertake its arrastre service. Nothing in those functions related to the trade and business of navigation or to the use or operation of vessels. Both as to the nature of the functions and the place of their performance—upon wharves and piers shipside—petitioner's services were clearly not maritime. As held in Macondray, they were no different from those of a depositary or warehouseman. Even granting arguendo that petitioner's arrastre service depended on, assisted, or furthered maritime transportation, it was merely incidental to its functions as arrastre operator and did not make the service maritime in character. To give admiralty jurisdiction over a contract as maritime, the contract must relate to the trade and business of the sea; it must be essentially and fully maritime in character; it must provide for maritime services, maritime transactions, or maritime casualties. Petitioner had nothing to do with the loading or unloading of cargoes to and from ships; its operation on and responsibility for the merchandise began from the time the goods were placed upon the wharves or piers or delivered along the sides of ships.
• Multiplicity of Suits: Respondent could not invoke the rule against multiplicity of suits because that rule had to be subservient to the superior requirement that the court must have jurisdiction. The Court cited International Harvester Company of the Philippines vs. Judge Aragon, et al., G.R. No. L-2372, prom. August 26, 1949, 84 Phil. 363, for this principle.
• Applicability of Macondray: The Court found the facts and issues in Macondray & Company, Inc. vs. Delgado Brothers, Inc., G.R. No. L-13116, prom. April 28, 1960, identical, mutatis mutandis, to the case at bar. It adopted the Macondray ruling that the case did not deal with any maritime matter or with the administration and application of maritime law, and that the arrastre operator's duty was like that of an ordinary depositary. The Court distinguished respondent's cited authorities: Cebu Arrastre Service vs. Collector of Internal Revenue involved stevedore functions of loading and unloading coastwise vessels calling at the port of Cebu, subject to percentage tax under Section 191 of the Tax Code; American Stevedores vs. Porello involved stevedores or longshoremen, not an arrastre operator; and Evans vs. New York & Pacific Steamship Co., Ltd., et al. involved a suit against the steamship company, not the warehouseman or depositary. The Court thus found no justification to depart from Macondray.

• Arrastre Operator's Services Are Not Maritime — An arrastre operator's functions—receiving, handling, caring for, and delivering merchandise imported and exported upon or passing over government-owned wharves and piers, recording or checking merchandise at shipside, and furnishing lighting and water services and other incidental services—are not maritime in character. They are akin to those of an ordinary depositary or warehouseman. Consequently, an action against an arrastre operator for loss or damage to cargo is not an admiralty case.
• Admiralty Jurisdiction over a Contract — To give admiralty jurisdiction over a contract as maritime, the contract must relate to the trade and business of the sea; it must be essentially and fully maritime in character; and it must provide for maritime services, maritime transactions, or maritime casualties. A merely incidental connection to maritime transportation does not make a contract maritime.
• Foreign Origin of Goods Is Immaterial to Nonmaritime Controversies — The foreign origin of goods is immaterial to the law applicable to the case, the rights of the parties, or the procedure for settling their disputes where the principal matter involved is nonmaritime. The imported character of the shipment did not convert the arrastre operator's obligation into a maritime one.
• Jurisdiction over Subject Matter Prevails over Avoidance of Multiplicity of Suits — The rule against multiplicity of suits must yield to the superior requirement that the court must have jurisdiction over the subject matter. A court cannot retain a case merely to avoid multiple suits if it lacks jurisdiction.
• Stare Decisis and Mutatis Mutandis Application — Where the facts and issues of a later case are identical, mutatis mutandis, to those of a prior controlling decision, the Court will adhere to that decision absent sufficient justification to depart from it. The Court applied Macondray & Company, Inc. vs. Delgado Brothers, Inc. to the present case.

• "The case at bar does not deal with any maritime or with the administration and application of any maritime law. As custodian of the sixty-eight (68) cartons of paints it had received from the MS Pleasantville, it was defendant's duty, like that of any ordinary depositary, to take good care of said goods and to turn the same over to the party entitled to its possession, subject to such qualifications as may have validly been imposed in the contract between the parties concerned." — Quoted from Macondray and adopted by the Court, this passage establishes that an arrastre operator's obligation is akin to that of an ordinary depositary and does not invoke maritime law.
• "To give admiralty jurisdiction over a contract as maritime, such contract must relate to the trade and business of the sea; it must be essentially and fully maritime in its character; it must provide for maritime services, maritime transactions, or maritime casualties." — This is the Court's canonical formulation of the requisites for admiralty jurisdiction over a contract, which the arrastre contract failed to satisfy.
• "Both as to the nature of the functions and the place of their performance (upon wharves and piers shipside), petitioner's services are clearly not maritime. As we held in the Macondray case, they are no different from those of a depositary or warehouseman." — This passage directly applies the nonmaritime characterization to petitioner's arrastre services and is central to the ruling on jurisdiction.
• "Respondent cannot invoke the rule against multiplicity of suits, for the simple reason that said rule has to be subservient to the superior requirement that the court must have jurisdiction." — This states the Court's resolution of respondent's procedural argument that the action should be retained to avoid multiple suits.

• Macondray & Company, Inc. vs. Delgado Brothers, Inc., G.R. No. L-13116, April 28, 1960 — Controlling precedent. The Court found the facts and issues identical, mutatis mutandis, and followed its holding that an arrastre operator's duty is like that of an ordinary depositary, not maritime, and that admiralty jurisdiction does not attach.
• Cebu Arrastre Service vs. Collector of Internal Revenue, G.R. No. L-7444, May 30, 1956 — Distinguished. It involved stevedore functions of loading and unloading coastwise vessels calling at the port of Cebu, subject to percentage tax under Section 191 of the Tax Code, and not an arrastre operator.
• American Stevedores vs. Porello, 330 U.S. 446, 91 L. Ed. 1011 — Distinguished. It involved stevedores or longshoremen, not an arrastre operator.
• Evans vs. New York & Pacific Steamship Co., Ltd., et al., 145 F. 841 — Distinguished. The suit there was against the steamship company, not the warehouseman or depositary, so the contract was maritime and within admiralty jurisdiction.
• International Harvester Company of the Philippines vs. Judge Aragon, et al., G.R. No. L-2372, August 26, 1949, 84 Phil. 363 — Cited for the rule that the avoidance of multiplicity of suits must yield to the requirement of jurisdiction.
• The James T. Furber, 129 Fed. 808, cited in 66 L.R.A. 212 — Cited for the requirement that a contract be essentially and fully maritime in character to confer admiralty jurisdiction.

• Section 2, Management Contract between Delgado Brothers, Inc. and the Bureau of Customs, dated October 21, 1950, effective January 1, 1951 — Defined petitioner's functions as arrastre operator: the exclusive right or privilege of receiving, handling, caring for, and delivering all merchandise, imported and exported, upon or passing over Philippine Government-owned wharves and piers in the Port of Manila; recording or checking merchandise delivered at shipside; and furnishing lighting and water services and other incidental services. The Court relied on this provision to hold that petitioner's services were not maritime.
• Section 191, Tax Code — Mentioned in distinguishing Cebu Arrastre Service vs. Collector of Internal Revenue. The Court noted that the functions of the Cebu Arrastre Service involved loading and unloading of coastwise vessels and were those of a stevedore, subject to the percentage tax under Section 191 of the Tax Code, unlike the arrastre operator in this case.

Bengzon, Acting Chief Justice; Padilla, Bautista Angelo, Labrador, Concepcion, Reyes, J.B.L., Paredes, and Dizon, JJ., concurred.