Philippines First Insurance Co., Inc. vs. Wallem Phils. Shipping, Inc.

A common carrier by sea is liable for cargo damage caused by stevedores during unloading when those stevedores operate under the carrier’s supervision, as the carrier’s duty to properly and carefully discharge the goods is non‑delegable. The carrier’s extraordinary responsibility subsists from receipt of the cargo until actual or constructive delivery, and the fact that an arrastre operator’s personnel perform the physical handling does not sever the carrier’s custody or its liability for mishandling that occurs under the carrier’s direction.

On 2 October 1995, Anhui Chemicals Import & Export Corporation shipped 10,000 bags of sodium sulphate anhydrous from a foreign port to Manila on board M/S Offshore Master for consignee L.G. Atkimson Import-Export, Inc. The cargo was insured with petitioner Philippines First Insurance Co., Inc. against all risks in the amount of ₱2,470,213.50. The vessel’s owner and charterer were unknown; Wallem Philippines Shipping, Inc. acted as local ship agent. When the shipment was discharged on 16 October 1995, 2,426 bags were in bad order, suffering spillages and contamination. The consignee’s claim against Wallem went unsettled, prompting the insurer to pay the consignee ₱397,879.69 and to pursue recovery by subrogation.

• The Shipment and Insurance: On or about 2 October 1995, 10,000 bags of sodium sulphate anhydrous were loaded in good order on board M/S Offshore Master for carriage to Manila, as shown by a clean bill of lading. The gross cargo weight was 500,200 kilograms. The consignee was L.G. Atkimson Import-Export, Inc. The vessel’s owner/charterer was unknown; Shanghai Fareast Ship Business Company was the shipper, and Wallem Philippines Shipping, Inc. acted as local ship agent. The consignee insured the shipment with petitioner Philippines First Insurance Co., Inc. against all risks for ₱2,470,213.50.

• Discharge and Damage: The shipment arrived at Manila on 16 October 1995. During discharge, it was discovered that 2,426 bags were in bad order, with varying degrees of spillage and loss. The Turn Over Survey of Bad Order Cargoes issued by the arrastre operator, Asian Terminals, Inc., and its Request for Bad Order Survey documented the damage. Asia Star Freight Services, Inc. delivered the shipment to the consignee’s warehouse in Quezon City, where a joint inspection by the consignee and a cargo surveyor confirmed that 63,065 kilograms were unrecovered spillage and 58,235 kilograms were contaminated and depreciated.

• Claim and Subrogation: The consignee filed a formal claim with Wallem on 29 April 1996, but it went unanswered. The consignee then claimed against petitioner under the marine insurance policy. After evaluating the invoices, survey reports, and other documents, petitioner paid the consignee ₱397,879.69 and received a subrogation receipt. Petitioner sent a demand letter to Wallem for the same amount, but Wallem neither settled nor responded.

• Trial Court Findings: The RTC found that the damage and losses were caused by the arrastre operator’s mishandling during discharge—specifically, the use of steel hooks/spikes in piling cargo bags onto pallet boards and in pushing bags to tugboats. Despite attributing fault to the arrastre operator, the trial court held the carrier and the arrastre operator solidarily liable under the doctrine in Eastern Shipping Lines, Inc. v. Court of Appeals, reasoning that both are charged with delivering the goods in good condition.

• Testimony of Mr. Talens: Cargo surveyor Maximino Velasquez Talens testified that the stevedores who handled the cargo were under the supervision of the vessel’s head checker, an employee or contractor of Wallem. He further stated that the master of the vessel was on board supervising the discharge and that the head checker managed the operations inside the vessel. His survey notes recorded that the bags were torn due to stevedores’ use of steel hooks/spikes both “at the vessel’s cargo holds and at the pier designated area before and after discharged.”

• Carrier’s Duty to Safely Discharge Cargo: Petitioner argued that as a common carrier, the vessel’s duties extend to the obligation to safely discharge the cargo from the vessel, and that the damage occurred while the cargo was still in the carrier’s custody.

• Liability for Damaged Shipment: Petitioner contended that the carrier should be held liable for the cost of the damaged shipment because the loss or damage was sustained before delivery to the consignee and while under the carrier’s supervision.

• Implied Admission: Petitioner maintained that Wallem’s failure to answer the extrajudicial demand letter constituted an implied admission of liability for the damaged goods.

• Credibility of Mr. Talens: Petitioner questioned whether the courts below erred in giving credence to the testimony of cargo surveyor Talens, apparently to underscore that his testimony actually supported the carrier’s responsibility.

• Sole Liability of Arrastre Operator: Respondents countered that the damage and losses were caused exclusively by the mishandling of the arrastre operator’s stevedores during discharge, and that the carrier should not be held liable for a third party’s fault.

• Cessation of Carrier’s Responsibility: Respondents argued that the carrier’s responsibility ceased upon discharge of the goods from the vessel, and that the arrastre operator, as custodian from that point, bore sole responsibility for any subsequent loss or damage.

• Carrier’s Liability During Unloading: Whether the carrier may be held liable for cargo damage caused by stevedores of the arrastre operator during the unloading of the shipment, given that the stevedores were acting under the supervision of the carrier’s head checker.

• Implied Admission: Whether Wallem’s failure to answer petitioner’s demand letter amounts to an implied admission of liability.

• Credibility of Witness: Whether the lower courts erred in giving credence to the testimony of cargo surveyor Maximino Velasquez Talens.

• Carrier’s Liability During Unloading: The carrier was held liable for the damage sustained during unloading. Under Section 3(2) of the COGSA, the carrier’s responsibilities include properly and carefully discharging the goods. Article 619 of the Code of Commerce holds the ship captain liable from receipt until delivery at the port of unloading, a liability ultimately attributed to the shipowner. The bill of lading itself provided that the carrier’s responsibility ceases only after discharge from the vessel. The duty of care over the cargo is non‑delegable, and a carrier remains responsible for the acts of the master, crew, stevedores, and other agents. The evidence established that the stevedores who caused the damage worked under the supervision of Wallem’s head checker, while the master of the vessel was on board overseeing the operation. Thus, the cargo remained in the carrier’s custody during unloading, and the carrier was answerable for the resulting loss.

• Implied Admission: The failure to answer a demand letter does not constitute an implied admission of liability. A party cannot create evidence unilaterally by sending a letter and treating the recipient’s silence as an admission. No legal duty to respond to a private demand exists in the absence of circumstances making an answer requisite or natural.

• Credibility of Witness: The trial court’s assessment of the credibility of Mr. Talens was accorded the highest respect and upheld. The trial court had the opportunity to observe the witness’s demeanor, and no facts of substance were overlooked that would warrant disturbing its finding.

• Non‑Delegable Duty of Care of the Carrier — The duty of a common carrier over the cargo is non‑delegable. The carrier is responsible for the acts of the master, crew, stevedores, and other agents, and cannot escape liability by attributing mishandling to the arrastre operator when the stevedores were operating under the carrier’s supervision.

• Duration of Extraordinary Responsibility of Common Carriers — Under Article 1736 of the Civil Code, the extraordinary responsibility of common carriers lasts from the time the goods are unconditionally placed in the possession of the carrier for transportation until they are delivered, actually or constructively, to the consignee. For maritime carriage, Article 619 of the Code of Commerce holds the ship captain (and vicariously the shipowner) liable from the time the cargo is turned over at the port of loading until delivery at the port of unloading, unless agreed otherwise.

• Liability of Arrastre Operator and Carrier — The legal relationship between the consignee and the arrastre operator is akin to that of depositor and warehouseman; both the carrier and the arrastre operator are charged with delivering the goods in good condition. However, they are not always solidarily liable; liability depends on which party had custody when the damage occurred.

• Implied Admission by Silence — A party’s failure to respond to a demand letter does not, by itself, constitute an implied admission of the facts stated therein. A man cannot make evidence for himself by writing a letter and treating the addressee’s silence as an admission.

• “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.”

• “Cargoes while being unloaded generally remain under the custody of the carrier. In the instant case, the damage or losses were incurred during the discharge of the shipment while under the supervision of the carrier. Consequently, the carrier is liable for the damage or losses caused to the shipment.”

• “A man cannot make evidence for himself by writing a letter containing the statements that he wishes to prove. He does not make the letter evidence by sending it to the party against whom he wishes to prove the facts [stated therein]. He no more can impose a duty to answer a charge than he can impose a duty to pay by sending goods.”

• Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 97412, 12 July 1994, 234 SCRA 78 — The Court relied on this case for the rule that both arrastre operator and carrier are charged with delivering goods in good condition, but clarified that solidary liability is not automatic; it distinguished the case because here custody remained with the carrier during unloading.

• Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. 256 (1921) — Invoked to support the principle that the ship captain’s liability under the Code of Commerce is ultimately that of the shipowner, the captain being the owner’s representative.

• Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., G.R. No. 83613, 21 February 1990, 182 SCRA 455 — Cited for the proposition that the arrastre operator’s relationship with the consignee is akin to that of a warehouseman, and that both carrier and arrastre operator bear the responsibility to deliver goods in good condition.

• Nichimen Company v. M./V. Farland, 462 F.2d 319 (2d Cir. 1972) — Persuasive authority confirming that the carrier’s duty of care over the cargo is non-delegable and that the carrier is responsible for stevedores’ acts.

• Ravago Equipment Rentals, Inc. v. Court of Appeals, 337 Phil. 584 (1997) — Quoted in support of the rule that failure to answer a letter does not constitute an admission.

• Civil Code, Article 1733 — Common carriers are bound to observe extraordinary diligence in the vigilance over goods transported. Applied to gauge the carrier’s responsibility.

• Civil Code, Article 1734 — Enumerates the exclusive causes that exempt common carriers from liability; none were present in this case.

• Civil Code, Article 1736 — The extraordinary responsibility of common carriers lasts from possession until actual or constructive delivery; the damage occurred within that window.

• Code of Commerce, Article 619 — The ship captain is liable for cargo from receipt at the port of loading until delivery at the port of unloading; this liability inures to the shipowner.

• Carriage of Goods by Sea Act (COGSA), Commonwealth Act No. 65, Sections 1, 2, and 3(2) — The COGSA applies to contracts of carriage of goods by sea in foreign trade. Section 2 subjects the carrier to the Act’s responsibilities, and Section 3(2) expressly requires the carrier to properly and carefully load, handle, stow, carry, keep, care for, and discharge the goods. The shipment’s bill of lading mirrored this allocation of risk.

Associate Justice Ma. Alicia Austria-Martinez, Associate Justice Renato C. Corona, Associate Justice Presbitero J. Velasco, Jr., and Associate Justice Arturo D. Brion concurred.

No dissenting opinion was recorded.