Fireman's Fund Insurance Co. vs. Metro Port Service, Inc.

An arrastre operator is solidarily liable for the negligence of its tractor operator in failing to inspect the chassis and ensure that the cargo is securely loaded, even if the carrier also contributed to the damage by not providing twist locks.

Fireman's Fund Insurance Co. was the insurer of Vulcan Industrial and Mining Corporation's shipment and later sued as subrogee. Metro Port Service, Inc., formerly E. Razon, Inc., was the arrastre operator at the Port of Manila, while Maersk Line and Compania General de Tabacos de Filipinas acted as carrier and agent. The arrastre operator's duties and liability were governed by a Management Contract with the Bureau of Customs, which made the contractor responsible for cargo handled at the piers and allowed it to provide tractor operators to shipping lines.

Vulcan Industrial and Mining Corporation imported from the United States several machineries and equipment which were loaded on board the SIS Albert Maersk at the port of Philadelphia, U.S.A., and transhipped for Manila through the vessel S/S Maersk Tempo. The cargo, covered by a clean bill of lading issued by Maersk Line and Compania General de Tabacos de Filipinas (the CARRIER), consisted of one piece truck mounted core drill, one piece trailer mounted core drill, one 40-foot container of 321 pieces steel tubings, one 40-foot container of 170 pieces steel tubings, and one 40-foot container of 13 cases, 3 crates, 2 pallets and 26 mining machinery parts. The shipment arrived at the port of Manila on June 3, 1979 and was turned over complete and in good order condition to the arrastre operator E. Razon, Inc., now Metro Port Service, Inc. (the ARRASTRE).

At about 10:20 in the morning of June 8, 1979, Danilo Librando, a tractor operator employed by the ARRASTRE, was ordered to transfer the shipment to the Equipment Yard at Pier 3. While Librando was maneuvering the tractor, which was owned and provided by Maersk Line, to the left, the cargo fell from the chassis and hit one of the container vans of American President Lines. It was discovered that there were no twist lock at the rear end of the chassis where the cargo was loaded. The cargo suffered heavy damage, with parts of the machineries broken, cracked, and no longer useful for their purposes; the damage was estimated at P187,500.00.

Fireman's Fund Insurance Co. paid Vulcan Industrial and Mining Corporation the amount of P187,500.00 under the covering insurance policy. Under its subrogation rights, Fireman's Fund then filed a suit against Maersk Line, Compania General de Tabacos as agent, and E. Razon, Inc. for recovery of the amount it paid the assured under the covering insurance policy.

The CFI found that the accident occurred while the cargoes were in the custody of the arrastre operator; that the tractor operator was an employee of the arrastre operator; that under the management contract, because the foreign shipping company had no tractor operator in its employ, the arrastre provided the operator; that it was the responsibility of the tractor operator, an employee of the arrastre operator, to inspect the chassis and tractor before driving, which he failed to do; and that it was the responsibility of the arrastre operator's supervisor to see that their men complied with their tasks, including examining whether the chassis had twist locks. The CA found that although Librando was on the ARRASTRE's payroll, he was technically and strictly an employee of Maersk Line for that particular instance when he drove the tractor owned by the foreign shipping line; that he received instructions from Maersk Line, not Metro Port, relative to the job; and that he was performing a duty that properly pertained to Maersk Line, which had to get or hire a tractor operator from the ARRASTRE under their management contract. The CA also found that Librando was not remiss in his duty because the proximate and direct cause of the damage was the absence of twist locks at the rear end of the chassis, which Maersk Line failed to provide.

• Solidary Liability: Petitioner argued that the CA erred in limiting liability solely to co-defendant Maersk Line, contrary to the trial court's findings of fact and other factors showing the clear joint and solidary liability of the defendants.
• Employment and Supervision: Petitioner argued that the ARRASTRE had the sole discretion and prerogative to hire and assign Librando to operate the tractor and to detail and deploy him for the task from its pool of tractor operators or drivers.

• Solidary Liability of the Arrastre Operator: Whether the CA erred in absolving the arrastre operator and limiting liability solely to Maersk Line despite the trial court's findings and the evidence showing the arrastre operator's joint and solidary liability.
• Negligence of the Tractor Operator: Whether the arrastre operator is liable for the negligence of its tractor operator in failing to inspect the chassis and ensure that the cargo was securely loaded, even if Maersk Line also failed to provide twist locks.
• Limited Liability of the Arrastre Operator: Whether the arrastre operator's liability is limited under the Management Contract when the value of the importation was relayed to it and processed by its chief claims examiner based on the documents submitted.

• Solidary Liability of the Arrastre Operator: Yes. The CA erred in absolving the arrastre operator; Metro Port Service, Inc. was solidarily liable for the negligence of its employee, Librando, who remained the arrastre operator's employee despite driving a Maersk Line tractor.
• Negligence of the Tractor Operator: Yes. Librando was negligent in failing to inspect the chassis and ensure the cargo was securely loaded; the carrier's separate failure to provide twist locks did not absolve the arrastre operator.
• Limited Liability of the Arrastre Operator: The limited-liability clause did not confine the arrastre operator's liability in this case; the records disclose that the value of the importation was relayed to the arrastre operator and processed by its chief claims examiner based on the documents submitted.

• Solidary Liability of the Arrastre Operator: The SC acknowledged the general rule that the CA's factual findings are conclusive when supported by the evidence, but applied the exception because the CA's findings were contrary to the trial court's findings and contradicted by the record. The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman, and the relationship between the consignee and the common carrier is similar; both the ARRASTRE and the CARRIER are obligated to take good care of the goods and deliver them in good condition. Under the Management Contract, the contractor was solely responsible for damage arising from the negligence or carelessness of the contractor, its agents, or employees. Maersk Line provided the chassis and tractor and merely requested the ARRASTRE to dispatch a tractor operator, an arrangement allowed by the Management Contract; the ARRASTRE had the sole discretion to hire and assign Librando and to detail him from its pool of operators. Librando therefore remained the ARRASTRE's employee, and the CA erred in treating him as Maersk Line's employee for that occasion. Metro Port Service, Inc. was solidarily liable for its employee's negligence.
• Negligence of the Tractor Operator: Handling cargo was the ARRASTRE's principal work, so its drivers and employees had to observe the standard and indispensable measures to prevent loss or damage to shipments in its custody. Librando was remiss: Benildez Cepeda, an arrastre investigator of Metro Port, admitted that Librando as tractor operator should first have inspected the chassis and made sure the cargo was securely loaded, and Librando himself admitted that he usually inspected the tractor and chassis but failed to do so in this instance because he presumed the chassis had twist locks. Although Maersk Line was also at fault for not providing twist locks on the chassis, Manuel Heraldez, Motor Pool General Superintendent of Metro Port, testified that twist locks are permanently attached to the chassis and that a driver who closely examined the van could have detected whether a twist lock was present. Whether or not the twist lock could be seen by the naked eye when the cargo was loaded, an efficient and diligent tractor operator had to check that the cargo was securely loaded on the chassis. The ARRASTRE was therefore liable for Librando's negligence.
• Limited Liability of the Arrastre Operator: The Management Contract limited the contractor's liability for loss, damage, or non-delivery to the actual invoice value of each package, not more than P3,500.00 for each package, unless the value of the importation was otherwise specified or manifested or communicated in writing together with the invoice value and supported by a certified packing list to the contractor by the interested party before discharge of the goods. The SC noted that the records disclosed that the value of the importation was relayed to the arrastre operator and in fact processed by its chief claims examiner based on the documents submitted. The SC thus did not apply the P3,500.00 cap and reinstated the CFI award.

• Arrastre operator as depositor/warehouseman — The relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman, and the relationship between the consignee and the common carrier is similar; both the arrastre operator and the carrier are charged with the duty to take good care of the goods and deliver them in good condition to the consignee. The SC applied this to hold both the ARRASTRE and the CARRIER obligated, while finding the ARRASTRE solidarily liable for its employee's negligence.
• Solidary liability of arrastre operator for employee negligence — An arrastre operator is solidarily liable for the negligence of its tractor operator in failing to inspect the chassis and ensure the cargo is securely loaded. The operator remains the arrastre operator's employee even when driving a carrier-owned tractor at the carrier's request, because the arrastre operator has the sole discretion to hire, assign, detail, and deploy the operator from its pool.
• Due diligence of tractor operator — A tractor operator must inspect the chassis and tractor before driving and must ensure that the cargo is securely loaded on the chassis. The operator's failure to do so is negligence; the carrier's separate failure to provide twist locks does not absolve the arrastre operator, since an efficient and diligent operator must still check that the cargo is secure.
• Limited liability clause in arrastre Management Contract — The arrastre contractor's liability for loss, damage, or non-delivery is limited to the actual invoice value of each package, not more than P3,500.00 per package, unless the value of the importation is otherwise specified or manifested or communicated in writing with the invoice value and supported by a certified packing list before discharge. The SC noted that the value of the importation was relayed to the arrastre operator and processed by its chief claims examiner.
• Exception to conclusiveness of CA factual findings — The CA's factual findings are generally conclusive on the SC when supported by the evidence, but the rule is not absolute; review is warranted when the CA's findings are contrary to those of the trial court and appear contradicted by the evidence on record. The SC applied this exception because the CA's findings on Librando's employment and negligence conflicted with the trial court's findings and the evidence.

• "The legal relationship between the consignee and the arrastre operator is akin to that of a depositor and warehouseman (Lua Kian v. Manila Railroad Co., 19 SCRA 5 [1967])." — The SC used this to define the arrastre operator's duty and to hold that both the arrastre operator and the carrier must deliver the goods in good condition.
• "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." — This passage establishes the concurrent obligation of the arrastre operator and the carrier over the cargo.
• "It is, therefore, inacurrate to state that Librando should be considered an employee of Maersk Line on that specific occasion." — The SC rejected the CA's finding that Librando became Maersk Line's employee merely because he drove a Maersk Line tractor.
• "Whether or not the twist lock can be seen by the naked eye when the cargo has been loaded on the chassis, an efficient and diligent tractor operator must nevertheless check if the cargo is securely loaded on the chassis." — This defines the standard of diligence for the tractor operator and supports the finding of negligence despite Maersk Line's separate fault.

• Metro Port Service, Inc. vs. Court of Appeals, 131 SCRA 365 [1984] — Cited for the exception to the general rule that the CA's factual findings are conclusive on the SC when supported by the evidence; the SC found the exception present because the CA's findings were contrary to the trial court's and contradicted by the evidence.
• Lua Kian vs. Manila Railroad Co., 19 SCRA 5 [1967] — Cited as the basis for treating the relationship between the consignee and the arrastre operator as akin to that of a depositor and warehouseman.
• Northern Motors, Inc. vs. Prince Line, et al., 107 Phil. 253 [1960] — Cited for the rule that the relationship between the consignee and the common carrier is similar to that between the consignee and the arrastre operator.
• Visayan Cebu Terminal Co., Inc. vs. Commissioner of Internal Revenue, 13 SCRA 357 [1965] — Cited for the nature of arrastre work as covering the handling of cargoes at piers and wharves.

• Management Contract between the Bureau of Customs and E. Razon, Inc., Claims and Liability for Losses and Damages, paragraph 1 — Bound the contractor to handle all merchandise at the piers diligently and skillfully, made it solely responsible as an independent contractor, and made it liable for loss, damage, or non-delivery of cargoes to the extent of the actual invoice value of each package, not more than P3,500.00 unless the value was otherwise specified or manifested or communicated in writing with the invoice value and supported by a certified packing list before discharge. The SC used this to define the arrastre operator's liability and the limited-liability exception.
• Management Contract, contractor's responsibility clause — Made the contractor solely responsible for any and all injury or damage arising from the negligence or carelessness of the contractor, its agents, or employees in the performance of the undertaking, and required the contractor to hold the Bureau of Customs harmless. The SC applied this to hold Metro Port Service, Inc. solidarily liable for Librando's negligence.