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Transpo - Midterm 2nd Set – 56 Westwind v UCPB

TOPIC: Arrastre Services
G.R. No. 200289, November 25, 2013 delivered the same at SMC’s warehouse in Calamba, Laguna through J.B. Limcaoco Trucking
(JBL). It was discovered upon discharge that additional nine containers/skids valued at
WESTWIND SHIPPING CORPORATION, Petitioners, v. UCPB GENERAL INSURANCE CO., Philippine Pesos: One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine and Sixty-Eight
INC. AND ASIAN TERMINALS, INC., Respondents. Centavos (P175,639.68) were also damaged due to the forklift operations; thus, making the total
number of 15 containers/skids in bad order.
[G.R. NO. 200314]
Almost a year after, on August 15, 1994, SMC filed a claim against UCPB, Westwind, ATI, and
ORIENT FREIGHT INTERNATIONAL, INC., Petitioners, v. UCPB GENERAL INSURANCE OFII to recover the amount corresponding to the damaged 15 containers/skids. When UCPB
CO., INC. AND ASIAN TERMINALS, INC., Respondent. paid the total sum of Philippine Pesos: Two Hundred Ninety-Two Thousand Seven Hundred
Thirty-Two and Eighty Centavos (P292,732.80), SMC signed the subrogation receipt. Thereafter,
DECISION in the exercise of its right of subrogation, UCPB instituted on August 30, 1994 a complaint for
damages against Westwind, ATI, and OFII.6
PERALTA, J.: After trial, the RTC dismissed UCPB’s complaint and the counterclaims of Westwind, ATI, and
OFII. It ruled that the right, if any, against ATI already prescribed based on the stipulation in the
These two consolidated cases challenge, by way of petition for certiorari under Rule 45 of the 16 Cargo Gate Passes issued, as well as the doctrine laid down in International Container
1997 Rules of Civil Procedure, the September 13, 2011 Decision1 and January 19, 2012 Terminal Services, Inc. v. Prudential Guarantee & Assurance Co. Inc.7 that a claim for
Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 86752, which reversed and set reimbursement for damaged goods must be filed within 15 days from the date of consignee’s
aside the January 27, 2006 Decision3 of the Manila City Regional Trial Court Branch (RTC) 30. knowledge. With respect to Westwind, even if the action against it is not yet barred by
prescription, conformably with Section 3 (6) of the Carriage of Goods by Sea Act (COGSA) and
The facts, as established by the records, are as follows: Our rulings in E.E. Elser, Inc., et al. v. Court of Appeals, et al.8 and Belgian Overseas Chartering
and Shipping N.V. v. Phil. First Insurance Co., Inc.,9 the court a quo still opined that Westwind is
On August 23, 1993, Kinsho-Mataichi Corporation shipped from the port of Kobe, Japan, 197 not liable, since the discharging of the cargoes were done by ATI personnel using forklifts and
metal containers/skids of tin-free steel for delivery to the consignee, San Miguel Corporation that there was no allegation that it (Westwind) had a hand in the conduct of the stevedoring
(SMC). The shipment, covered by Bill of Lading No. KBMA-1074,4 was loaded and received operations. Finally, the trial court likewise absolved OFII from any liability, reasoning that it never
clean on board M/V Golden Harvest Voyage No. 66, a vessel owned and operated by Westwind undertook the operation of the forklifts which caused the dents and punctures, and that it merely
Shipping Corporation (Westwind). facilitated the release and delivery of the shipment as the customs broker and representative of
SMC.
SMC insured the cargoes against all risks with UCPB General Insurance Co., Inc. (UCPB) for
US Dollars: One Hundred Eighty-Four Thousand Seven Hundred Ninety-Eight and Ninety-Seven On appeal by UCPB, the CA reversed and set aside the trial court. The fallo of its September 13,
Centavos (US$184,798.97), which, at the time, was equivalent to Philippine Pesos: Six Million 2011 Decision directed:chanRoblesvirtualLawlibrary
Two Hundred Nine Thousand Two Hundred Forty-Five and Twenty-Eight Centavos
(P6,209,245.28). WHEREFORE, premises considered, the instant appeal is hereby GRANTED. The Decision
dated January 27, 2006 rendered by the court a quo is REVERSED AND SET ASIDE. Appellee
The shipment arrived in Manila, Philippines on August 31, 1993 and was discharged in the Westwind Shipping Corporation is hereby ordered to pay to the appellant UCPB General
custody of the arrastre operator, Asian Terminals, Inc. (ATI), formerly Marina Port Services, Insurance Co., Inc., the amount of One Hundred Seventeen Thousand and Ninety-Three Pesos
Inc.5 During the unloading operation, however, six containers/skids worth Philippine Pesos: One and Twelve Centavos (Php117,093.12), while Orient Freight International, Inc. is hereby ordered
Hundred Seventeen Thousand Ninety-Three and Twelve Centavos (P117,093.12) sustained to pay to UCPB the sum of One Hundred Seventy-Five Thousand Six Hundred Thirty-Nine
dents and punctures from the forklift used by the stevedores of Ocean Terminal Services, Inc. Pesos and Sixty-Eight Centavos (Php175,639.68). Both sums shall bear interest at the rate of
(OTSI) in centering and shuttling the containers/skids. As a consequence, the local ship agent of six (6%) percent per annum, from the filing of the complaint on August 30, 1994 until the
the vessel, Baliwag Shipping Agency, Inc., issued two Bad Order Cargo Receipt dated judgment becomes final and executory. Thereafter, an interest rate of twelve (12%) percent per
September 1, 1993. annum shall be imposed from the time this decision becomes final and executory until full
payment of said amounts.
On September 7, 1993, Orient Freight International, Inc. (OFII), the customs broker of SMC,
withdrew from ATI the 197 containers/skids, including the six in damaged condition, and SO ORDERED.10
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Transpo - Midterm 2nd Set – 56 Westwind v UCPB
TOPIC: Arrastre Services
Westwind were the owners/operators of the forklifts. It asserts that the loading to the trucks were
While the CA sustained the RTC judgment that the claim against ATI already prescribed, it made by way of forklifts owned and operated by ATI and the unloading from the trucks at the
rendered a contrary view as regards the liability of Westwind and OFII. For the appellate court, SMC warehouse was done by way of forklifts owned and operated by SMC employees. Lastly,
Westwind, not ATI, is responsible for the six damaged containers/skids at the time of its OFII avers that neither the undertaking to deliver nor the acknowledgment by the consignee of
unloading. In its rationale, which substantially followed Philippines First Insurance Co., Inc. v. the fact of delivery makes a person or entity a common carrier, since delivery alone is not the
Wallem Phils. Shipping, Inc.,11 it concluded that the common carrier, not the arrastre operator, is controlling factor in order to be considered as such.
responsible during the unloading of the cargoes from the vessel and that it is not relieved from
liability and is still bound to exercise extraordinary diligence at the time in order to see to it that Both petitions lack merit.
the cargoes under its possession remain in good order and condition. The CA also considered
that OFII is liable for the additional nine damaged containers/skids, agreeing with UCPB’s The case of Philippines First Insurance Co., Inc. v. Wallem Phils. Shipping, Inc.12 applies, as it
contention that OFII is a common carrier bound to observe extraordinary diligence and is settled the query on which between a common carrier and an arrastre operator should be
presumed to be at fault or have acted negligently for such damage. Noting the testimony of responsible for damage or loss incurred by the shipment during its unloading. We elucidated at
OFII’s own witness that the delivery of the shipment to the consignee is part of OFII’s job as a length:chanRoblesvirtualLawlibrary
cargo forwarder, the appellate court ruled that Article 1732 of the New Civil Code (NCC) does
not distinguish between one whose principal business activity is the carrying of persons or goods Common carriers, from the nature of their business and for reasons of public policy, are bound to
or both and one who does so as an ancillary activity. The appellate court further ruled that OFII observe extraordinary diligence in the vigilance over the goods transported by them. Subject to
cannot excuse itself from liability by insisting that JBL undertook the delivery of the cargoes to certain exceptions enumerated under Article 1734 of the Civil Code, common carriers are
SMC’s warehouse. It opined that the delivery receipts signed by the inspector of SMC showed responsible for the loss, destruction, or deterioration of the goods. The extraordinary
that the containers/skids were received from OFII, not JBL. At the most, the CA said, JBL was responsibility of the common carrier lasts from the time the goods are unconditionally placed in
engaged by OFII to supply the trucks necessary to deliver the shipment, under its supervision, to the possession of, and received by the carrier for transportation until the same are delivered,
SMC. actually or constructively, by the carrier to the consignee, or to the person who has a right to
receive them.
Only Westwind and OFII filed their respective motions for reconsideration, which the CA denied;
hence, they elevated the case before Us via petitions docketed as G.R. Nos. 200289 and For marine vessels, Article 619 of the Code of Commerce provides that the ship captain is liable
200314, respectively. for the cargo from the time it is turned over to him at the dock or afloat alongside the vessel at
the port of loading, until he delivers it on the shore or on the discharging wharf at the port of
Westwind argues that it no longer had actual or constructive custody of the containers/skids at unloading, unless agreed otherwise. In Standard Oil Co. of New York v. Lopez Castelo, the
the time they were damaged by ATI’s forklift operator during the unloading operations. In Court interpreted the ship captain’s liability as ultimately that of the shipowner by regarding the
accordance with the stipulation of the bill of lading, which allegedly conforms to Article 1736 of captain as the representative of the shipowner.
the NCC, it contends that its responsibility already ceased from the moment the cargoes were
delivered to ATI, which is reckoned from the moment the goods were taken into the latter’s Lastly, Section 2 of the COGSA provides that under every contract of carriage of goods by sea,
custody. Westwind adds that ATI, which is a completely independent entity that had the right to the carrier in relation to the loading, handling, stowage, carriage, custody, care, and discharge of
receive the goods as exclusive operator of stevedoring and arrastre functions in South Harbor, such goods, shall be subject to the responsibilities and liabilities and entitled to the rights and
Manila, had full control over its employees and stevedores as well as the manner and procedure immunities set forth in the Act. Section 3 (2) thereof then states that among the carriers’
of the discharging operations. responsibilities are to properly and carefully load, handle, stow, carry, keep, care for, and
discharge the goods carried.
As for OFII, it maintains that it is not a common carrier, but only a customs broker whose
participation is limited to facilitating withdrawal of the shipment in the custody of ATI by xxx
overseeing and documenting the turnover and counterchecking if the quantity of the shipments
were in tally with the shipping documents at hand, but without participating in the physical On the other hand, the functions of an arrastre operator involve the handling of cargo deposited
withdrawal and loading of the shipments into the delivery trucks of JBL. Assuming that it is a on the wharf or between the establishment of the consignee or shipper and the ship’s tackle.
common carrier, OFII insists that there is no need to rely on the presumption of the law – that, as Being the custodian of the goods discharged from a vessel, an arrastre operator’s duty is to take
a common carrier, it is presumed to have been at fault or have acted negligently in case of good care of the goods and to turn them over to the party entitled to their possession.
damaged goods – considering the undisputed fact that the damages to the containers/skids were
caused by the forklift blades, and that there is no evidence presented to show that OFII and Handling cargo is mainly the arrastre operator’s principal work so its drivers/operators or
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Transpo - Midterm 2nd Set – 56 Westwind v UCPB
TOPIC: Arrastre Services
employees should observe the standards and measures necessary to prevent losses and
damage to shipments under its custody. In Regional Container Lines (RCL) of Singapore v. The Netherlands Insurance Co. (Philippines),
Inc.14 and Asian Terminals, Inc. v. Philam Insurance Co., Inc.,15 the Court echoed the doctrine
In Fireman’s Fund Insurance Co. v. Metro Port Service, Inc., the Court explained the relationship that cargoes, while being unloaded, generally remain under the custody of the carrier.
and responsibility of an arrastre operator to a consignee of a cargo, to
quote:chanRoblesvirtualLawlibrary We cannot agree with Westwind’s disputation that “the carrier in Wallem clearly exercised
supervision during the discharge of the shipment and that is why it was faulted and held liable for
The legal relationship between the consignee and the arrastre operator is akin to that of a the damage incurred by the shipment during such time.” What Westwind failed to realize is that
depositor and warehouseman. The relationship between the consignee and the common carrier the extraordinary responsibility of the common carrier lasts until the time the goods are actually
is similar to that of the consignee and the arrastre operator. Since it is the duty of the or constructively delivered by the carrier to the consignee or to the person who has a right to
ARRASTRE to take good care of the goods that are in its custody and to deliver them in good receive them. There is actual delivery in contracts for the transport of goods when possession
condition to the consignee, such responsibility also devolves upon the CARRIER. Both the has been turned over to the consignee or to his duly authorized agent and a reasonable time is
ARRASTRE and the CARRIER are therefore charged with and obligated to deliver the given him to remove the goods.16 In this case, since the discharging of the containers/skids,
goods in good condition to the consignee. (Emphasis supplied) (Citations omitted) which were covered by only one bill of lading, had not yet been completed at the time the
damage occurred, there is no reason to imply that there was already delivery, actual or
The liability of the arrastre operator was reiterated in Eastern Shipping Lines, Inc. v. Court of constructive, of the cargoes to ATI. Indeed, the earlier case of Delsan Transport Lines, Inc. v.
Appeals with the clarification that the arrastre operator and the carrier are not always and American Home Assurance Corp.17 serves as a useful guide, thus:chanRoblesvirtualLawlibrary
necessarily solidarily liable as the facts of a case may vary the rule.
Delsan’s argument that it should not be held liable for the loss of diesel oil due to backflow
Thus, in this case, the appellate court is correct insofar as it ruled that an arrastre because the same had already been actually and legally delivered to Caltex at the time it
operator and a carrier may not be held solidarily liable at all times. But the precise entered the shore tank holds no water. It had been settled that the subject cargo was still in the
question is which entity had custody of the shipment during its unloading from the custody of Delsan because the discharging thereof has not yet been finished when the backflow
vessel? occurred. Since the discharging of the cargo into the depot has not yet been completed at the
time of the spillage when the backflow occurred, there is no reason to imply that there was actual
The aforementioned Section 3 (2) of the COGSA states that among the carriers’ delivery of the cargo to the consignee. Delsan is straining the issue by insisting that when the
responsibilities are to properly and carefully load, care for and discharge the goods diesel oil entered into the tank of Caltex on shore, there was legally, at that moment, a complete
carried. The bill of lading covering the subject shipment likewise stipulates that the delivery thereof to Caltex. To be sure, the extraordinary responsibility of common carrier lasts
carrier’s liability for loss or damage to the goods ceases after its discharge from the from the time the goods are unconditionally placed in the possession of, and received by, the
vessel. Article 619 of the Code of Commerce holds a ship captain liable for the cargo from carrier for transportation until the same are delivered, actually or constructively, by the carrier to
the time it is turned over to him until its delivery at the port of unloading. the consignee, or to a person who has the right to receive them. The discharging of oil products
to Caltex Bulk Depot has not yet been finished, Delsan still has the duty to guard and to preserve
In a case decided by a U.S. Circuit Court, Nichimen Company v. M/V Farland, it was ruled the cargo. The carrier still has in it the responsibility to guard and preserve the goods, a duty
that like the duty of seaworthiness, the duty of care of the cargo is non-delegable, and the incident to its having the goods transported.
carrier is accordingly responsible for the acts of the master, the crew, the stevedore, and
his other agents. It has also been held that it is ordinarily the duty of the master of a To recapitulate, common carriers, from the nature of their business and for reasons of public
vessel to unload the cargo and place it in readiness for delivery to the consignee, and policy, are bound to observe extraordinary diligence in vigilance over the goods and for the
there is an implied obligation that this shall be accomplished with sound machinery, safety of the passengers transported by them, according to all the circumstances of each case.
competent hands, and in such manner that no unnecessary injury shall be done thereto. The mere proof of delivery of goods in good order to the carrier, and their arrival in the place of
And the fact that a consignee is required to furnish persons to assist in unloading a destination in bad order, make out a prima facie case against the carrier, so that if no
shipment may not relieve the carrier of its duty as to such unloading. explanation is given as to how the injury occurred, the carrier must be held responsible. It is
incumbent upon the carrier to prove that the loss was due to accident or some other
xxx circumstances inconsistent with its liability.18

It is settled in maritime law jurisprudence that cargoes while being unloaded generally The contention of OFII is likewise untenable. A customs broker has been regarded as a common
remain under the custody of the carrier x x x.13 carrier because transportation of goods is an integral part of its business.19In Schmitz Transport
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Transpo - Midterm 2nd Set – 56 Westwind v UCPB
TOPIC: Arrastre Services
& Brokerage Corporation v. Transport Venture, Inc.,20 the Court already by exercising extraordinary diligence in the carriage thereof. It failed to do so. Hence, its
reiterated:chanRoblesvirtualLawlibrary presumed negligence under Article 1735 of the Civil Code remains unrebutted.

It is settled that under a given set of facts, a customs broker may be regarded as a common WHEREFORE, premises considered, the petitions of Westwind and OFII in G.R. Nos. 200289
carrier. Thus, this Court, in A.F. Sanchez Brokerage, Inc. v. The Honorable Court of and 200314, respectively, are DENIED. The September 13, 2011 Decision and January 19,
Appeals held: 2012 Resolution of the Court of Appeals in CA-G.R. CV No. 86752, which reversed and set
The appellate court did not err in finding petitioner, a customs broker, to be also a common aside the January 27, 2006 Decision of the Manila City Regional Trial Court, Branch 30,
carrier, as defined under Article 1732 of the Civil Code, to wit, are AFFIRMED.

Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the SO ORDERED.
business of carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public.
CASE DIGEST
xxx

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. The contention, therefore, of
petitioner that it is not a common carrier but a customs broker whose principal function is to
prepare the correct customs declaration and proper shipping documents as required by law is
bereft of merit. It suffices that petitioner undertakes to deliver the goods for pecuniary
consideration.
And in Calvo v. UCPB General Insurance Co. Inc., this Court held that as the transportation of
goods is an integral part of a customs broker, the customs broker is also a common carrier. For
to declare otherwise “would be to deprive those with whom [it] contracts the protection which the
law affords them notwithstanding the fact that the obligation to carry goods for [its] customers, is
part and parcel of petitioner’s business.”21

That OFII is a common carrier is buttressed by the testimony of its own witness, Mr. Loveric
Panganiban Cueto, that part of the services it offers to clients is cargo forwarding, which includes
the delivery of the shipment to the consignee.22 Thus, for undertaking the transport of cargoes
from ATI to SMC’s warehouse in Calamba, Laguna, OFII is considered a common carrier. 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.

As a common carrier, OFII is mandated to observe, under Article 1733 of the Civil
Code,23 extraordinary diligence in the vigilance over the goods 24 it transports according to the
peculiar circumstances of each case. In the event that the goods are lost, destroyed or
deteriorated, it is presumed to have been at fault or to have acted negligently, unless it proves
that it observed extraordinary diligence.25 In the case at bar, it was established that, except for
the six containers/skids already damaged, OFII received the cargoes from ATI in good order and
condition; and that upon its delivery to SMC, additional nine containers/skids were found to be in
bad order, as noted in the Delivery Receipts issued by OFII and as indicated in the Report of
Cares Marine & Cargo Surveyors. Instead of merely excusing itself from liability by putting the
blame to ATI and SMC, it is incumbent upon OFII to prove that it actively took care of the goods