International Container Terminal Services, Inc. vs. Prudential Guarantee & Assurance Co., Inc.

An arrastre operator handling cargo shipped at “shipper’s load and count” is not required to verify or compare the container’s contents with the shipper’s declaration; it need only deliver the container received from the carrier, and a claim for loss is barred if no formal or provisional claim is filed within 15 days from the consignee’s discovery of the loss.

ICTSI was the arrastre operator at the Port of Manila, while Prudential was the marine cargo insurer of Duel Food Enterprises, the consignee of a shipment of canned foodstuff. The arrastre and wharfage receipt issued by ICTSI carried a liability clause incorporating PPA Administrative Order No. 10-81 and requiring a formal claim within 15 days from issuance of a bad order certificate or certificate of loss, damage or non-delivery. Prudential’s claim against ICTSI was made as subrogee of the consignee under the marine cargo policy.

On April 25, 1990, the mother vessel “Tao He” loaded and received on board in San Francisco, California, five lots of canned foodstuff complete and in good order and condition for transport to Manila in favor of Duel Food Enterprises. China Ocean Shipping Company issued the corresponding bill of lading. The consignee insured the shipment with Prudential against all risks for P1,921,827.00 under Marine Insurance Policy No. 20RN-3011/90. On May 30, 1990, the shipment arrived at the Port of Manila and was discharged by the vessel MS “Wei He” in favor of ICTSI for safekeeping.

On June 1, 1990, A.D. Reyna Customs Brokerage withdrew the shipment and delivered the same to the consignee. An inspection thereof revealed that 161 cartons were missing, valued at P85,984.40. Claim for indemnification of the loss having been denied by ICTSI and the brokerage, the consignee sought payment from Prudential under the marine cargo policy and received a compromised sum of P66,730.12 in settlement. As subrogee, Prudential instituted the complaint against ICTSI and the brokerage.

ICTSI countered that it observed extraordinary diligence over the subject shipment while under its custody; that the loss is not attributable to its fault or its agent, representative or employee; that the consignee failed to file a formal claim against it in accordance with PPA Administrative Order No. 10-81; and that the complaint states no cause of action. By way of crossclaim, it sought reimbursement from the brokerage in the event it is adjudged to pay the loss. To discharge its burden, ICTSI presented five Arrastre and Wharfage Bill/Receipts, which also doubled as container yard gate passes, covering the whole shipment in question. The short-landed shipment was covered by the gate pass marked Exhibit 5, which bore the signature of a representative of the consignee acknowledging receipt of the shipment in good order and condition. Lamberto Cortez, ICTSI’s witness, testified that he personally examined the shipment and identified the gate pass covering the delivery and countersigned by the consignee’s representative; before signing the gate pass, the consignee’s representative gave it to him, he wrote down the items to be delivered so they could be mounted on the consignee’s truck, and after mounting he checked the container number and whether it was properly padlocked, and if okay he placed “okay” and signed it for countersignature by the consignee’s representative.

The independent adjuster, Tan-Gatue Adjustment Company, Inc., stated in Exhibit F that the 3,439 cartons comprising the balance of the shipment were found and accepted by the consignee’s representative in good order; in its opinion, the shortage was due to pilferage while the sea vans containing the shipment were stored at ICTSI’s container yard at North Harbor, Manila, but it could not categorically state when and who undertook it due to the absence of documentary evidence. The report also stated that the customs safety wire and padlock of Sea Van No. HTMU-803515-6 where the missing cartons were discovered may have been tampered with, opened, and returned or re-closed with finesse, which was not noticed during delivery and prior to opening at the consignee’s warehouse; that all the sea vans were reportedly full of contents when examined by the customs examiner for tax evaluation; and that the ship agents and arrastre contractor’s representative reportedly refused the consignee’s invitation to witness the stripping or withdrawal at the warehouse, averring that the shipment per bill of lading was shipped under “Shipper’s Load and Count” and hence loss or damage, if any, was not their liability. The adjuster insisted that the shipment was complete when the customs examiner opened the sea vans for tax evaluation, but the latter’s report was not presented, so there was no basis for comparing the cartons subjected to customs examination and those delivered to the consignee.

The consignee discovered the shortage on June 4, 1990, when the sea vans were stripped or opened at its place upon receipt of the shipment; after discovering the loss, the consignee asked the adjuster to investigate the reason for the short-landing. The claim for loss was filed on October 2, 1990, four months after the June 4, 1990 delivery. Prudential did not explain the delay and did not allege or prove that the discovery of the shortage was made by the consignee only 15 days before October 2, 1990; the consignee waited for the independent adjuster’s survey report dated September 7, 1990 before filing the claim. The consignee made no request for a bad order survey despite being provided by ICTSI a form therefor. The RTC found that the evidence adduced by the parties showed that the consignee received the container vans in good condition under Exhibits 1-6. The CA, on the other hand, found ICTSI negligent because the original seal and padlock of the container were lost and replaced with safety wire while the shipment was still stored at the ICTSI compound, and concluded that the shortage was due to pilferage while the sea vans were stored at the container yard of ICTSI.

• Proof of Negligence: Petitioner argued that the CA erred in ruling that ICTSI failed to adduce convincing evidence to rebut the finding of the independent adjuster; it maintained that it observed extraordinary diligence and that the loss was not attributable to its fault or that of its agents or employees.
• Formal Claim / Prescriptive Period: Petitioner contended that the CA misconstrued the liability clause printed on the dorsal side of the Arrastre and Wharfage Bill/Receipt; the 15-day limitation for filing a claim should run from delivery of the goods to the consignee, and failure to file a claim within that period was sufficient ground to deny the claim for loss.
• Bad Order Survey: Petitioner claimed that the absence of a request for a bad order survey belied the consignee’s assertion that the shipment was filched while in ICTSI’s custody, and that such absence did not stop the 15-day period from running.

• Liability Clause: Respondent countered that the clear and unambiguous language of the liability clause does not support petitioner’s construction.

• Proof of Negligence: Whether the CA erred in ruling that ICTSI failed to adduce convincing evidence to rebut the finding of the independent adjuster and in concluding that ICTSI was negligent for the shortage.
• Period to File a Claim for Loss: Whether the CA erred in allowing the complaint despite the consignee’s failure to file a formal claim within the period stated on the dorsal side of the arrastre and wharfage receipt.

• Proof of Negligence: No. The CA erred; ICTSI was not negligent. The cargo was shipped at “shipper’s load and count,” so ICTSI was required only to deliver the container received from the carrier, not verify its contents; the consignee acknowledged receipt in good order and condition, and the adjuster’s report did not establish ICTSI’s negligence.
• Period to File a Claim for Loss: Yes. The claim was barred. The 15-day period is a prescriptive period and condition precedent to holding the arrastre operator liable; it runs from the consignee’s discovery of the loss, and failure to file a formal or provisional claim within that period relieves ICTSI of liability.

• Proof of Negligence: The legal relationship between an arrastre operator and a consignee is akin to that between a warehouseman and a depositor, and the arrastre operator’s services are not maritime in character. In a claim for loss filed by a consignee, the burden of proof to show compliance with the obligation to deliver the goods to the appropriate party devolves upon the arrastre operator; because safekeeping of the goods rests within its knowledge, it must prove that the losses were not due to its negligence or that of its employees. ICTSI presented five Arrastre and Wharfage Bill/Receipts, which also served as container yard gate passes, covering the whole shipment; the short-landed shipment was covered by Exhibit 5, which bore the signature of the consignee’s representative acknowledging receipt in good order and condition. By its signature on the gate pass and by its failure to protest on time, the consignee is deemed to have acknowledged receipt of the goods in good order and condition. The CA relied on the independent adjuster’s report, but that report could not categorically state when and who undertook the pilferage due to the absence of documentary evidence; the adjuster insisted that the shipment was complete when the customs examiner opened the sea vans for tax evaluation, but the latter’s report was not presented, so there was no basis for comparing the cartons subjected to customs examination and those delivered to the consignee. More importantly, the goods were shipped under “Shipper’s Load and Count,” meaning the shipper was solely responsible for loading the container while the carrier was oblivious to the contents; protection against pilferage was the consignee’s lookout. The arrastre operator was duty-bound to take good care of the goods received from the vessel and turn them over to the party entitled to possession, subject to valid contractual qualifications, but it was not required to verify the contents of the container and compare them with those declared by the shipper; it was expected to deliver to the consignee only the container received from the carrier. The CA therefore erred in concluding that the shortage was due to the negligence of the arrastre operator.

• Period to File a Claim for Loss: The liability clause required a formal claim within 15 days from the date of issuance of the Bad Order Certificate or certificate of loss, damage or non-delivery by ICTSI. Petitioner argued that the 15-day limitation should run from delivery of the goods to the consignee, while the CA held that the period did not begin because no certificate of loss was issued. The SC agreed with petitioner that a claim must be filed within the 15-day period, but interpreted the condition liberally in favor of fairness, equity and justness; a long line of cases has held that the 15-day period should be counted from the date the consignee learns of the loss, damage or misdelivery of goods. The filing of the claim for loss within the 15-day period is in the nature of a prescriptive period for bringing an action and is a condition precedent to holding the arrastre operator liable; it is a defense made available to the arrastre operator, who may use or waive it. The requirement is not an empty formality: it gives the arrastre contractor a reasonable opportunity to check the validity of the claim while facts are still fresh and pertinent documents are still available, and the period is sufficient for the consignee to file a provisional claim after discharge. In this case, the consignee discovered the shortage on June 4, 1990, but the claim for loss was filed on October 2, 1990, four months after delivery. Prudential did not explain the delay and did not allege or prove that discovery was made only 15 days before October 2, 1990; the consignee waited for the independent adjuster’s survey report dated September 7, 1990 before filing the claim, and by that time the 15-day period had expired. Within 15 days from discovery, the consignee could have filed a provisional claim, which would have constituted substantial compliance with the rule; its failure to do so relieved the arrastre operator of liability for the nondelivery of the goods and bars a subsequent action in court. The lack of a bad order survey does not toll the prescriptive period because the consignee can always file a provisional claim within 15 days from the time it discovers the loss or damage; such a claim would place the arrastre operator on notice and allow it to verify its culpability and liability. A provisional claim seasonably filed is sufficient compliance with the liability clause.

• Arrastre Operator as Warehouseman/Depositary — The legal relationship between an arrastre operator and a consignee is akin to that between a warehouseman and a depositor. In a claim for loss, the burden of proof to show compliance with the obligation to deliver the goods to the appropriate party devolves upon the arrastre operator; because safekeeping rests within its knowledge, it must prove that the losses were not due to its negligence or that of its employees. The SC applied this by requiring ICTSI to present evidence of delivery and by crediting its gate passes and witness testimony.
• Shipper’s Load and Count — When cargo is placed on a vessel at the “shipper’s load and count,” the shipper is solely responsible for loading the container, while the carrier is oblivious to the contents. The arrastre operator is required only to deliver to the consignee the container van received from the shipper, not to verify or compare the contents with those declared by the shipper. The SC applied this to absolve ICTSI of liability for the missing cartons.
• 15-Day Claim as Prescriptive Period and Condition Precedent — A claim for loss, damage or misdelivery of goods must be filed within 15 days from the date the consignee learns of the problem. The filing is in the nature of a prescriptive period for bringing an action and is a condition precedent to holding the arrastre operator liable; it is a defense the arrastre operator may use or waive. The SC applied this to bar Prudential’s claim, which was filed four months after discovery.
• Provisional Claim — A provisional claim seasonably filed within the 15-day period is sufficient compliance with the liability clause, even if the exact amount of loss cannot be specified at the moment. It places the arrastre operator on notice and allows it to verify its culpability and liability. The SC applied this by holding that the consignee could have filed a provisional claim within 15 days from discovery but failed to do so.
• Bad Order Survey — A request for a bad order survey is normally made in case of apparent or presumed loss or damage, but the lack of such a request does not toll the 15-day prescriptive period because the consignee can always file a provisional claim within 15 days from discovery. The SC applied this by holding that the absence of a bad order survey did not prevent the 15-day period from running against the consignee.

• “When cargo is placed on a vessel at the "shipper's load and count," the arrastre operator is required only to deliver to the consignee the container van received from the shipper, not to verify or to compare the contents thereof with those declared by the shipper.” — The SC states the core rule on the arrastre operator’s limited duty for shipper’s-load-and-count cargo.
• “The filing of the claim for loss within the 15-day period is in the nature of a prescriptive period for bringing an action and is a condition precedent to holding the arrastre operator liable.” — The SC characterizes the 15-day requirement as both prescriptive and a condition precedent.
• “A long line of cases has held that the 15-day period for filing claims should be counted from the date the consignee learns of the loss, damage or misdelivery of goods.” — The SC fixes the accrual of the 15-day period from discovery.
• “A provisional claim seasonably filed is sufficient compliance with the liability clause.” — The SC allows a provisional claim to satisfy the 15-day requirement.

• Summa Insurance Corporation vs. Court of Appeals, 253 SCRA 175 — Followed for the rule that the arrastre operator-consignee relationship is akin to that between a warehouseman and a depositor.
• Delgado Brothers, Inc. vs. Home Insurance Co., 1 SCRA 853 — Followed for the rule that an arrastre operator’s services are not maritime in character.
• Keng Hua Paper Products Co., Inc. vs. Court of Appeals, 286 SCRA 257 — Followed for the “shipper’s load and count” rule limiting the arrastre operator’s duty to the container received.
• Consunji vs. Manila Port Service, 110 Phil. 231 — Followed for the 15-day period for filing claims against the arrastre operator.
• Insurance Co. of North America vs. Manila Port Service, 21 SCRA 422 — Followed for the rule that the 15-day requirement is a defense available to the arrastre operator.
• Manila Port Service vs. Court of Appeals, 22 SCRA 1364 — Followed for the liberal interpretation counting the 15-day period from the consignee’s discovery of the loss.
• Communications Insurance Co., Inc. vs. Manila Port Service, 39 SCRA 490 — Followed for the same liberal interpretation of the 15-day period from discovery.
• Universal Insurance & Indemnity Co. vs. Manila Railroad Company, 32 SCRA 364 — Followed for the rule that failure to file a provisional claim bars a subsequent action.

• Liability Clause, Arrastre and Wharfage Bill/Receipt — Required a formal claim within 15 days from the date of issuance of the Bad Order Certificate or certificate of loss, damage or non-delivery by ICTSI. The SC construed the 15-day period as a prescriptive period and condition precedent, running from the consignee’s discovery of the loss, and held that failure to file a formal or provisional claim barred the complaint.
• PPA Administrative Order No. 10-81 — Incorporated in the liability clause and the Existing Management Contract between the PPA and ICTSI. The SC considered the 15-day claim requirement in light of this administrative order and the arrastre contract.
• Rule 45, Rules of Court — Governed ICTSI’s Petition for Review; the SC granted the petition, set aside the CA ruling, and reinstated the RTC decision.