Westwind Shipping Corporation and Orient Freight International, Inc. vs. UCPB General Insurance Co., Inc.

A common carrier's duty of extraordinary diligence extends until the goods are actually or constructively delivered to the consignee, and this responsibility includes the unloading process where the cargo remains under the carrier's custody despite the involvement of an independent arrastre operator; moreover, a customs broker who undertakes to deliver goods for compensation is considered a common carrier under Article 1732 of the New Civil Code regardless of whether carriage is its principal or ancillary business.

Kinsho-Mataichi Corporation shipped 197 containers of tin-free steel from Kobe, Japan to San Miguel Corporation (SMC) in the Philippines aboard M/V Golden Harvest owned by Westwind Shipping Corporation. The shipment arrived in Manila on August 31, 1993 and was discharged to Asian Terminals, Inc. (ATI), the arrastre operator. During unloading operations conducted by ATI's stevedores, six containers were damaged by forklift operations. Subsequently, Orient Freight International, Inc. (OFII), acting as SMC's customs broker, withdrew the cargo and engaged J.B. Limcaoco Trucking to deliver the goods to SMC's warehouse in Calamba, Laguna, whereupon nine additional containers were discovered to have been damaged.

• On August 23, 1993, Kinsho-Mataichi Corporation shipped 197 metal containers/skids of tin-free steel from Kobe, Japan for delivery to San Miguel Corporation (SMC) in the Philippines.
• The shipment was loaded on board M/V Golden Harvest Voyage No. 66, a vessel owned and operated by Westwind Shipping Corporation, under Bill of Lading No. KBMA-1074.
• SMC insured the cargo with UCPB General Insurance Co., Inc. for US$184,798.97 (equivalent to P6,209,245.28).
• The shipment arrived in Manila on August 31, 1993 and was discharged into the custody of Asian Terminals, Inc. (ATI), the arrastre operator.
• During unloading operations conducted by ATI's stevedores using forklifts, six containers/skids valued at P117,093.12 sustained dents and punctures.
• On September 7, 1993, Orient Freight International, Inc. (OFII), acting as SMC's customs broker, withdrew all 197 containers from ATI and arranged for their delivery to SMC's warehouse in Calamba, Laguna through J.B. Limcaoco Trucking (JBL).
• Upon inspection at the warehouse, nine additional containers/skids valued at P175,639.68 were found to have been damaged, bringing the total damaged containers to fifteen.
• On August 15, 1994, SMC filed a claim against UCPB, Westwind, ATI, and OFII.
• After UCPB paid SMC P292,732.80, SMC executed a subrogation receipt in favor of UCPB.
• UCPB instituted the complaint for damages on August 30, 1994 against Westwind, ATI, and OFII.

• Westwind Shipping Corporation argued that its responsibility as carrier ceased the moment the cargo was delivered to ATI, the arrastre operator, pursuant to the bill of lading stipulations and Article 1736 of the New Civil Code; contended that ATI was an independent entity with exclusive control over stevedoring operations and that Westwind had no participation in the unloading operations where the damage occurred.
• Orient Freight International, Inc. maintained that it is merely a customs broker, not a common carrier, and its participation was limited to facilitating the withdrawal and documentation of the shipment without participating in the physical handling; asserted that the damage was caused by forklifts owned and operated by ATI (during loading onto trucks) and SMC (during unloading at warehouse), not by OFII; argued that mere undertaking to deliver or acknowledgment of delivery does not make one a common carrier.

• UCPB General Insurance Co., Inc. contended that Westwind remained liable for the six damaged containers because a common carrier's duty of extraordinary diligence lasts until actual or constructive delivery to the consignee, and the unloading process falls within this period; argued that OFII is a common carrier bound to observe extraordinary diligence and is presumed negligent under Article 1735 of the New Civil Code for the nine containers damaged while in its custody during inland transport.

• Procedural Issues:
  • N/A
• Substantive Issues:
  • Whether Westwind Shipping Corporation is liable for the damage to six containers that occurred during unloading operations conducted by the arrastre operator.
  • Whether Orient Freight International, Inc. qualifies as a common carrier liable for the damage to nine containers that occurred during inland transport from the port to the consignee's warehouse.
  • Whether the claim against Asian Terminals, Inc. has prescribed.

• Procedural:
  • N/A
• Substantive:
  • The Supreme Court held that Westwind is liable for the six damaged containers. The extraordinary responsibility of a common carrier lasts from the time the goods are unconditionally placed in its possession until they are delivered, actually or constructively, to the consignee. Cargoes while being unloaded generally remain under the custody of the carrier, and the duty of care is non-delegable. The carrier is responsible for the acts of the master, crew, stevedore, and other agents during unloading. Since the discharging of the containers had not yet been completed when the damage occurred, there was no constructive delivery to ATI.
  • The Court ruled that OFII is a common carrier liable for the nine damaged containers. Article 1732 of the New Civil Code does not distinguish between one whose principal business is carrying goods and one who does so as an ancillary activity. As a customs broker undertaking cargo forwarding services including delivery to the consignee, OFII is considered a common carrier. Having received the goods in good order and condition from ATI but delivering them with additional damage, OFII is presumed negligent under Article 1735 and failed to rebut this presumption by proving extraordinary diligence.
  • The Court sustained the finding that the claim against ATI has prescribed based on the stipulation in the Cargo Gate Passes requiring claims to be filed within 15 days from the consignee's knowledge of damage.

• Extraordinary Diligence of Common Carriers — Common carriers are bound to observe extraordinary diligence in the vigilance over goods from the time they are unconditionally placed in the carrier's possession until actual or constructive delivery to the consignee; this duty requires the greatest skill and foresight to prevent damage or destruction of goods.
• Non-Delegable Duty of Care During Unloading — The carrier's responsibility for the cargo remains during the unloading process, and this duty is non-delegable such that the carrier remains liable for damage caused by stevedores or arrastre operators during discharge until the goods are completely unloaded and delivered.
• Presumption of Negligence (Res Ipsa Loquitur in Carriage) — Under Article 1735 of the New Civil Code, if goods are lost, destroyed, or deteriorated while in the possession of a common carrier, the carrier is presumed to have been at fault or to have acted negligently unless it proves that it observed extraordinary diligence.
• Customs Broker as Common Carrier — A customs broker who undertakes to transport or deliver goods as part of its services is considered a common carrier under Article 1732, regardless of whether carriage is its principal or merely ancillary business activity.

• "Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods transported by them."
• "The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them."
• "It is settled in maritime law jurisprudence that cargoes while being unloaded generally remain under the custody of the carrier."
• "Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carrying only as an ancillary activity."
• "As long as a person or corporation holds itself to the public for the purpose of transporting goods as a business, it is already considered a common carrier regardless of whether it owns the vehicle to be used or has to actually hire one."

• Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc. — Applied as controlling precedent establishing that cargoes while being unloaded generally remain under the custody of the carrier, and that the carrier's duty of care is non-delegable.
• International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co. Inc. — Cited by the RTC regarding the 15-day prescription period for claims against arrastre operators.
• Delsan Transport Lines, Inc. v. American Home Assurance Corp. — Followed for the principle that the carrier's responsibility continues until the discharging of cargo is completed.
• Schmitz Transport & Brokerage Corporation v. Transport Venture, Inc. — Cited for the doctrine that customs brokers may be regarded as common carriers.
• A.F. Sanchez Brokerage, Inc. v. Court of Appeals — Referenced to support the interpretation of Article 1732 that there is no distinction between principal and ancillary carriage activities.
• Fireman's Fund Insurance Co. v. Metro Port Service, Inc. — Cited for the analogy between the relationship of consignee and arrastre operator to that of depositor and warehouseman, and the parallel responsibility of carrier and arrastre operator.
• Eastern Shipping Lines, Inc. v. Court of Appeals — Cited for the clarification that arrastre operators and carriers are not always solidarily liable.
• Nichimen Company v. M/V Farland — Referenced for the principle that the duty of care of the cargo is non-delegable and the carrier is responsible for the acts of stevedores.
• Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co. and Asian Terminals, Inc. v. Philam Insurance Co., Inc. — Cited to echo the doctrine that cargoes while being unloaded remain under the carrier's custody.

• Article 1732, New Civil Code — Defines common carriers as persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods for compensation, offering services to the public; cited to establish that customs brokers undertaking delivery are common carriers regardless of whether it is their principal or ancillary activity.
• Article 1733, New Civil Code — Mandates common carriers to observe extraordinary diligence in the vigilance over goods; requires carriers to know and follow required precautions for avoiding damage, and to use all reasonable means to ascertain the nature of goods and exercise due care in handling.
• Article 1735, New Civil Code — Establishes the presumption of fault or negligence against common carriers when goods are lost, destroyed, or deteriorated, unless they prove extraordinary diligence.
• Article 1736, New Civil Code — Cited by Westwind regarding the cessation of carrier responsibility upon delivery to the arrastre operator, but interpreted by the Court as not applicable until unloading is complete.
• Article 619, Code of Commerce — Holds the ship captain liable for cargo from the time it is turned over to him at the port of loading until delivery at the port of unloading; interpreted as imposing responsibility on the shipowner through the captain as representative.
• Section 2, Carriage of Goods by Sea Act (COGSA) — States that the carrier is subject to responsibilities for loading, handling, stowage, carriage, custody, care, and discharge of goods.
• Section 3(2), COGSA — Enumerates the carrier's responsibilities to properly and carefully load, handle, stow, carry, keep, care for, and discharge goods carried; cited to establish carrier liability during unloading.
• Section 3(6), COGSA — Cited by the RTC regarding the one-year prescription period for actions against carriers.