Unknown Owner of the Vessel MN China Joy vs. Asian Terminals, Inc.

An arrastre operator’s claim for damage to its equipment caused by a foreign object concealed in cargo unloaded from a vessel is governed by quasi-delict under Article 2176 of the Civil Code when no contractual relation exists with the shipowner, and the doctrine of res ipsa loquitur applies to infer the shipowner’s negligence where the accident is of a kind that does not ordinarily occur without negligence, the instrumentality was within the shipowner’s exclusive control, and no contributory negligence appears.

Asian Terminals, Inc. (ATI) operated the Mariveles Grain Terminal Wharf. On 25 January 1997, the cargo ship M/V China Joy arrived carrying bulk soybean meal shipped by ContiQuincyBunge L.L.C. under a Charter Party Agreement. ATI, acting as arrastre operator, used its Siwertell pneumatic unloader to discharge the cargo from Hold No. 2. During operations, a flat mild steel bar measuring approximately 8–10 inches by 4 inches by 1¼ inches, embedded in the soybean meal, struck and cracked two vertical screws of the unloader. The vessel’s Master refused responsibility, claiming the metal came from the cargo and not from the vessel. ATI sent demands to Inter-Asia Marine Transport, Inc., the Philippine agent, which rejected the claim and identified Samsun Shipping Ltd. as the shipowner’s agent. Settlement failed, and ATI sued the unknown shipowner, Samsun, and Inter-Asia.

• The Vessel and the Charter Party: M/V China Joy arrived at the Mariveles Grain Terminal on 25 January 1997 carrying bulk soybean meal shipped by ContiQuincyBunge L.L.C. under a Charter Party Agreement. The Charter Party designated ContiQuincyBunge as Charterer, San Miguel Foods, Inc. as Co-Charterer, and Samsun Shipping Ltd. as Agent of the Shipowners. Samsun, a foreign corporation not doing business in the Philippines, transacted through its local agent, Inter-Asia Marine Transport, Inc. The cargo was carried under a clause denominated Free-In-and-Spout-Trimmed-and-Free-Out (FISTFO), which the petitioners alternately referred to as a Free-In-and-Out-Stowed-and-Trimmed (FIOST) arrangement.

• The Unloading Accident: On 3 February 1997, ATI deployed its Siwertell Unloader No. 2, a pneumatic vacubator, to discharge soybean meal from Hold No. 2. A flat mild steel bar, approximately 8–10 inches long, 4 inches wide, and 1¼ inches thick, lodged between the vertical screws, shearing and cracking portions of screws No. 2 and No. 3. The manufacturer, BMH Marine AB Sweden, quoted the replacement cost of the two screws at US$24,790.00, plus US$3,510.00 freight and an estimated US$2,000.00 labor cost for removal and reassembly.

• Demand and Denial of Liability: ATI filed a Note of Protest with the Vessel’s Master on 4 February 1997. The Master inscribed on the protest that the vessel was not responsible because the metal bar came from the cargo and not from the ship. ATI sent a claim to Inter-Asia on 5 March 1997 for US$37,185.00 plus US$2,000.00 labor cost. Inter-Asia rejected the claim, stating it was not the shipowner’s agent, that its principal was Samsun, and that the vessel owner was Trans-Pacific Shipping Co. Inter-Asia nonetheless offered to relay the claim through Samsun.

• Proceedings and Defenses: ATI filed a complaint for damages on 9 March 1999. In their Answer, the petitioners maintained that under the FIOST (or FISTFO) clause the loading and discharge were performed exclusively by the shipper/charterer without the vessel’s participation, that the hatch had been inspected and found clean before loading, and that tests indicated the metal bar was not part of the vessel. They concluded the metal bar must have been co-mingled with the soybean meal at the loadport by ContiQuincyBunge. The RTC found that while damage to the unloader was proven, it could not determine who caused the metal to mix with the cargo, and dismissed the complaint.

• Misapplication of Res Ipsa Loquitur: Petitioners argued that the metal bar was found in the middle of the cargo, logically establishing it came with the cargo rather than from the vessel, and that they had neither knowledge of nor opportunity to detect the object; thus, res ipsa loquitur should support their non-liability, not negligence.

• Free-In-and-Out Clause: Petitioners contended that the FIOST (or FISTFO) clause meant the charterer selected and controlled the stevedores who loaded and discharged the cargo, with no participation by the vessel or its complement, thereby exculpating them from liability for acts during loading.

• Master’s Control Merely Figurative: Notwithstanding Clause 22 of the Charter Party stating that loading stevedores were under the Master’s direction and control, petitioners maintained such control was only figurative and limited to preserving the vessel’s seaworthiness, not to detecting covert negligence that even the charterer could not have known about.

• Liability Lies with Cargo Owner: Because the offending factor was the cargo itself, not the vessel, petitioners asserted that liability should rest with the cargo owner, which was never impleaded.

• Proper Application of Res Ipsa Loquitur: ATI countered that the doctrine does not distinguish between “covert” and “evident” negligence; the accident was unusual and occurred within Hold No. 2, an area within the shipowner’s exclusive control, with no evidence of ATI’s contributory fault.

• Exclusive Knowledge and Proof: ATI stressed that it did not witness the loading at the Port of New Orleans and could not provide direct evidence of the condition of the hold or cargo, whereas petitioners’ sole witness, former Inter-Asia Operations Manager Alejandro Gilhang, admitted he was not present during loading and could not attest that the cargo was free of foreign metal objects.

• No Conclusive Evidence on Location of Metal Bar: ATI pointed out that petitioners presented no conclusive evidence that the metal bar was actually in the middle, rather than at the top or bottom, of the soybean meal cargo.

• Absence of Clear Exculpatory Clause: ATI argued that petitioners failed to quote any specific provision of the Charter Party Agreement that made the charterer exclusively responsible for loading operations, and emphasized that ATI was not privy to that agreement in any event.

• Applicability of Res Ipsa Loquitur: Whether the doctrine of res ipsa loquitur may be applied to infer the shipowner’s negligence for damage to the arrastre operator’s unloader caused by a foreign object concealed in bulk cargo.

• Liability for Loading under Charter Party: Whether the terms of the Charter Party Agreement, particularly the FIOST/FISTFO clause and the Master’s supervisory role, absolve the shipowner and its agents of liability for the presence of the foreign object in the cargo.

• Applicability of Res Ipsa Loquitur: The doctrine was properly applied. All three requisites were present: the co-mingling of a steel bar with soybean meal and the resulting damage to an unloader is an occurrence that does not ordinarily happen absent negligence; the steel bar was found inside Hold No. 2, an instrumentality within the exclusive control of the shipowner and its agents; and the record contained no evidence that ATI’s negligence contributed to the accident. The burden of evidence shifted to the petitioners to explain the accident, and they failed to do so because their witness had no personal knowledge of the loading conditions. The presumption of negligence stood unrebutted.

• Liability for Loading under Charter Party: The shipowner and its agents were not absolved. Although the Court agreed with the CA’s conclusion that petitioners were liable, the basis was quasi-delict under Article 2176 of the Civil Code, not the maritime law on contracts of carriage. No contract of carriage existed between ATI and the vessel interests; ATI’s functions as an arrastre operator were not maritime in character, and its rights and obligations were governed by its cargo-handling contract with the Philippine Ports Authority and the law on quasi-delict. The negligence inferred through res ipsa loquitur satisfied the elements of quasi-delict — damage, fault or negligence, and causal connection — without need to analyze the Charter Party’s risk-allocation clauses as between carrier and charterer. The petitioners were thus solidarily liable to ATI, without prejudice to their rights to seek reimbursement among themselves from the party primarily negligent.

• Interest on Damages: Pursuant to Nacar v. Gallery Frames, the amount of US$30,300.00 was subject to legal interest at six percent (6%) per annum reckoned from the finality of this Resolution, the point at which the quantification of damages was deemed reasonably ascertained, until full satisfaction.

• Res Ipsa Loquitur — A presumption of negligence arises when: (a) the accident is of a kind that does not ordinarily occur in the absence of someone’s negligence; (b) the instrumentality causing the injury was under the exclusive control of the defendant; and (c) the plaintiff’s own negligence did not contribute to the occurrence. Once the requisites are established, the burden of evidence shifts to the defendant to explain the accident, failing which the presumption stands. Here, the presence of a steel bar in bulk grain inside the vessel’s hold, damaging an unloader, satisfied all three elements.

• Quasi-Delict under Article 2176, Civil Code — When no pre-existing contractual relation exists, a person who by act or omission causes damage to another through fault or negligence is obliged to pay for the damage done. The three elements are: damage to the plaintiff, fault or negligence of the defendant, and a causal connection between the two. The Court grounded liability on this provision rather than on the Code of Commerce because ATI was not a party to any contract of carriage.

• Legal Character of Arrastre Operations — An arrastre operator’s functions are not maritime in nature; they are akin to those of a warehouseman or depositary. The legal relationship between an arrastre operator and a consignee is comparable to that between a warehouseman and a depositor. The arrastre operator’s liabilities and rights arise primarily from its contract with the Philippine Ports Authority and the general law on obligations, not from contracts of carriage.

• Interest Guidelines under Nacar v. Gallery Frames — For obligations not constituting a loan or forbearance of money, interest at 6% per annum may be imposed on damages awarded from the date the demand is established with reasonable certainty. Where the amount of damages cannot be established with reasonable certainty at the time of demand, interest runs from the date of the court’s judgment quantifying the damages. Here, because the claim was unliquidated until adjudged, interest at 6% per annum was ordered to run from the finality of the Supreme Court’s Resolution.

• “There is no contract of carriage between ATI, on one hand, and the shipowner, Samsun, ContiQuincyBunge L.L.C., and Inter-Asia, on the other. It likewise bears stressing that the subject of the complaint … is not the damage caused to the cargo, but to the equipment of an arrastre operator. Further, ATI’s contractual relation is not with the petitioners, but with the consignee and with the Philippine Ports Authority (PPA).”

• “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.”

• “Notwithstanding the above, the petitioners cannot evade liability for the damage caused to ATI’s unloader in view of Article 2176 of the New Civil Code … The metal bars which caused damage to ATI’s unloader was found co-mingled with the cargo inside Hold No. 2 of the ship, which was then within the exclusive control of the petitioners. Thus, the presumption that it was the petitioners’ collective negligence, which caused the damage, stands.”

• Delgado Brothers, Inc. v. Home Insurance Company, 111 Phil. 452 (1961) — Defined the functions of an arrastre operator as non-maritime, akin to those of a warehouseman; relied upon by the Court to distinguish ATI’s status from that of a party to a maritime contract.

• Taylor v. Manila Electric Railroad and Light Co., 16 Phil. 8 (1910) — Enumerated the three elements of a quasi-delict: damage, negligence, and causal connection; applied as the framework for holding petitioners liable absent a contract.

• Nacar v. Gallery Frames, G.R. No. 189871, August 13, 2013, 703 SCRA 439 — Set forth the adjusted guidelines on legal interest; prompted the modification of the interest imposed by the CA to run from the finality of the Resolution.

• Insurance Company of North America v. Asian Terminals, Inc., G.R. No. 180784, February 15, 2012, 666 SCRA 226 — Affirmed that the liabilities of an arrastre operator are governed by its contract with the PPA, not by maritime law.

• Asian Terminals, Inc. v. Philam Insurance Co., Inc., G.R. No. 181163, July 24, 2013, 702 SCRA 88 — Reiterated that an arrastre operator’s duty is to take good care of discharged goods and deliver them to the consignee, reinforcing its non-carrier role.

• Article 2176, New Civil Code — Provided the basis for quasi-delictual liability. The petitioners’ unrebutted negligence, inferred through res ipsa loquitur, gave rise to the obligation to pay for the damage to ATI’s unloader.

• Articles 587 and 590, Code of Commerce — Invoked by the Court of Appeals as the foundation for the shipowner’s and agent’s civil liability for acts of the captain. The Supreme Court declined to apply these provisions because no contract of carriage existed between the parties; liability instead rested on quasi-delict.

• Clause 22, Charter Party Agreement — Stated that stevedores at the loadport, though arranged by the charterer, were to be under the direction and control of the Master. The CA relied on this to hold that the shipowner had actual, not merely presumed, exclusive control during loading; the Supreme Court did not base its ruling on the clause but noted it as consistent with the shipowner’s control.

Presbitero J. Velasco, Jr. (Chairperson), Diosdado M. Peralta, Martin S. Villarama, Jr., Francis H. Jardeleza — all concurred.