ALFREDO VILLARUEL, PLAINTIFF-APPELLEE, VS. MANILA PORT SERVICE, ET AL., DEFENDANTS, MANILA PORT SERVICE AND MANILA RAILROAD COMPANY, DEFENDANTS-APPELLANTS.

On January 18, 1962, a shipment of one tractor (Hyster D7L, Tractor Donkey), consigned to appellee Al­fredo Villaruel, was
unloaded from the M/S “Eastern Ga­laxy”, with freight and other
charges in the total amount of $357.08 actually paid to the carrier.  This tractor was bought from the Pacific Trade
& Surety Co., Inc. of San Francisco, California.  The price of $10,381.00 was paid through the
letter of credit FMC No. 1122 drawn by the Philippine Commercial and Industrial
Bank, Manila.  The shipment was unloaded to the custody of
the Manila Port Service, a subsidiary of the Manila Railroad Company, which was
the arrastre operator in the port
of Manila.  The value of the shipment was not specified
in the bill of lading nor in the inward manifest of the carrier.

On January 24, 1962, having been notified of the arrival of the
shipment, the appellee filed a provisional claim with
the Manila Port Service for the value of the shipment pursuant to section 15 of
the management con­tract entered into between the Bureau of Customs and the
Manila Port Service.  On February 20, 1962, appellee’s broker tried to secure the delivery of the
shipment from the Manila Port Service under authority of the warehouse permit
No. 9098, but the shipment could not be located and so no delivery could be
made.  On March 2, 1962, in order to
comply with the requirements for the release of the shipment and to enable the
Bureau of Customs to com­pute the duties, taxes and other charges based on the
cost, insurance and freightage, the appellee filed an
applica­tion for marine insurance on the shipment with the Agricultural Fire
Insurance & Surety Co., Inc. Not knowing that the shipment had already
arrived, the Agricultural Fire Insurance & Surety Co., Inc. issued a marine
insur­ance policy on March 3, 1962,
covering the shipment, and it appeared in the policy that the value of the
shipment was P20,917.72.

On March 24, 1962,
the Manila Port Service collected from the appellee
the amount of P40.50 as fees for the ar­rastre
service, based on measurement and/or weight of the shipment.  On May
18, 1962, the Manila Port Service is­sued a certificate stating
that the shipment was lost or missing while it was under its custody.  On October
23, 1962, the appellee filed with the
Manila Port Service a formal claim for the value of the shipment and the
freight charges thereof.  The Manila Port
Service and/or Manila Railroad Company did not act – either to admit or reject
-on appellee’s provisional claim of January 24, 1962 nor on the formal
claim of October 23, 1962,
and neither was pay­ment made to the appellee for the
value of the tractor.  On August 1, 1962, the appellee also filed a formal claim with the Agricultural
Fire Insurance & Surety Co., Inc. for the payment of the value of the
shipment in accordance with the marine insurance policy covering the shipment,
but the claim was denied.  In view of the
denials of the claims, both by the Manila Port Service and/or Manila Railroad
Company and by the Agricultural Fire Insurance & Surety Co., Inc., the appellee brought an action against these entities in the
Court of First Instance of Manila on March
6, 1963 (Civil Case No. 53301).

After the submission of documentary evidence by the parties, in
addition to the stipulation of facts, the Court of First Instance of Manila, on
December 23, 1963, rendered a decision ordering the Manila Port Service and
Manila Railroad Company to pay appellee Alfredo Villaruel the sum of TWENTY THOUSAND SEVEN HUNDRED
SIXTY-TWO (P20,762.00) PESOS representing the value of the lost shipment, and
the sum of SIX HUNDRED FIFTY-FOUR PESOS AND TEN CENTAVOS (P654.10) representing
the freight charges on the shipment, both with interest at the legal rate from
the date of the fil­ing of the complaint on March 6, 1963 until fully paid, and
to pay the costs.  The complaint against
the Agricultural Insurance & Surety Co., Inc. was dismissed.  The counter­claim of the Agricultural Fire
Insurance & Surety Co., Inc. against plaintiff Alfredo Villaruel
was also dismissed.  Likewise, the
cross-claim of the Agricultural Insurance & Surety Co., Inc. against the
Manila Port Service and/or Manila Railroad Company was dismissed.

Not satisfied with the decision of the lower court, defendants
Manila Port Service and Manila Railroad Company appealed directly to this
Court, on questions of law.

In the present appeal, appellants Manila Port Service and Manila
Railroad Company contend:  (1) that the
trial court erred in not holding that appellee’s
complaint is barred pursuant to section 15 of the management contract between
the Bureau of Customs and the arrastre operator; and
(2) that, assuming that appellee’s complaint was
filed within the reglementary period, the trial court
erred in not holding that appellants’ liability, if any, should not exceed
P500.00, also pursuant to section 15 of the manage­ment contract.

In support of the first contention, the appellants invoke the
pertinent portion of section 15 of the manage­ment contract which provides as
follows:

“’x x x in any event the CONTRACTOR
shall be relieved and released of any and all res­ponsibility or liability for
loss, damage, mis­delivery and/or non-delivery of
goods, unless suit in the court of proper jurisdiction is brought within a
period of one (1) year from the date of the discharge of goods, or from the
date when the claim for the value of such goods have been rejected or denied by
the CONTRACTOR, provided that such claim shall have been filed with the
CONTRACTOR within fifteen (15) days from the date of the dis­charge of the last
package from the carrying vessel.  x x x’”

The appellants point out that the shipment in ques­tion was
discharged from the carrying vessel on January
18, 1962, and the appellee filed his
complaint only on March 6, 1963,
or more than one year after the discharge of the shipment.  The appellants also point out that the claims
of the appellee – the provisonal
claim of January 24, 1962
and the formal claim of October 23,
1962 – were not acted upon by the appellants Manila Port Service
and Manila Railroad Company.  Then said
appellants maintain that appellee’s complaint was
barred under the provisions of section 15 of the management contract because of
his failure to file the complaint within one year from the date of the
discharge of the shipment.

It is the position of the appellants that under sec­tion 15 of
the management contract the claimant – appellee in
the present case, has the choice of one of two periods within which to file the
complaint, namely:  (1) within one year
from the date of the discharge of the goods, without waiting for the action on
the claim; or (2) within one year from the date of the rejection or denial of
the claim.  With respect to the second
period, the appellants maintain that this (second) period may only be availed
of if the arrastre operator had rejected or denied
the claim, because the re­jection or denial is a condition sine qua
non before the claimant may bring suit, and that the rejection or denial
must always take place within one year from the date of the discharge of the
goods.  And so, in the case at bar, it is
the contention of the appellants that because the shipment was discharged on January 18, 1962, and the claims of
the appellee had not been acted upon by the arrastre operator within the one-year period from January 18, 1962, the appellee should have filed his complaint on or before January 18, 1963.  The appellants, therefore, claim that appellee’s complaint, which was filed on March 6, 1963, was already barred.

The contention of the appellants cannot be sustain­ed.  It is now the settled ruling of this Court,
in a series of recent decisions, that when the arrastre
opera­tor fails to act on the claim within the period of one year from the date
of the discharge of the goods the claim is deemed rejected as of the expiration
of one year from the date of discharge of the last package, in which case the
action should be filed within one year from said rejection.^[1]  The procedure under section 15 of the manage­ment
contract may, therefore, be restated, as follows:  the claimant must file a claim with the arrastre oper­ator within fifteen days from the date of the
discharge of the last package from the carrying vessel; and then he may choose
one of two alternatives in enforcing his rights before the courts, either (1)
to file his complaint within one year from the date of the discharge of the
last pack­age, without awaiting the action of the arrastre
operator on his claim; or (2) to await the action of the arrastre
operator on his claim, and if the claim is rejected or denied, to file the
complaint within one year from the date of the rejection or denial, it being
understood that if the claim has not been acted within one year from the date
of the discharge of the last package the claim is deemed re­jected.

In the case now at bar the shipment was discharged from the
carrying vessel on January 18, 1962, and the ap­pellee
filed a provisional claim on January 24, 1962, well within the reglementary period of fifteen days as provided in section
15 of the management contract, and also a formal claim on October 23, 1962, and
those claims were not acted upon by the appellants as of January 18, 1963, so
that the claim of the appellee was deemed rejected as
of January 18, 1963.  The appellee, therefore, had a period of one year from January
18, 1963 within which to file his complaint. 
Inasmuch as the complaint was filed on March 6, 1963, it is clear that
said complaint was filed on time.

The other point raised by the appellants is the al­leged error
committed by the lower court in not holding that the liability of the
appellants, if any, should not exceed P500.00 in accordance with section 15 of
the manage­ment contract.  The pertinent
portion of section 15 of the management contract, invoked in this connection by
the ap­pellants, reads as follows:

“‘Sec. 15. x x x
and the CONTRACTOR shall be solely responsible as an independent contractor
for, and promptly pay to the steam­ship company, consignee, consignor, or other
interested party or parties the invoice value of each package but which in no
case shall be more than five hundred pesos (P500.00) for each package unless
value is otherwise specified or manifested and the corresponding arrastre charges had been paid.  x x x'”

Appellants contend that since the value of the shipment is
question was not specified in the bill of lading or in the shipping manifest
and that appellee paid ar­rastre
charges only on the basis of measurement or weight, their liability for said
shipment, if any, should be li­mited to P500.00.  The lower court found, however, that on March
2, 1962, or before the amount of P40.50 was col­lected by the appellant Manila
Port Service from the ap­pellee as arrastre charges on the shipment, appellee
filed with the Agricultural Fire Insurance & Surety Co., Inc. an
application for marine insurance covering the shipment – which insurance policy
was issued on March 3, 1962 – in or­der to comply with a condition required for
the release of the shipment and to enable the Bureau of Customs to compute the
taxes and other legal charges on the shipment based on the value of the goods,
insurance and freight; so much so that when appellant Manila Port Service
collected the ar­rastre service fee of P40.50 on
March 24, 1962, said ap­pellant already knew the value of appellee’s
shipment, and said appellant could have collected from the appellee
the corresponding arrastre charges based on the value
of the shipment as appearing in the insurance policy.

We agree with the lower court when it said “that the
submission of the marine insurance policy, Exhibit ‘C’, to the Bureau of
Customs is sufficient compliance with the re­quirement of Sec. 15 of the
Management Contract whereby the liability of the Manila Port Service for lost
or destroyed cargo may exceed P500.00 and such liability may be for the value
of the shipment by specifying or manifesting such value because the said marine
insurance policy is one of the documents required to be presented by the
plaintiff in clearing the merchandize from the customs.”^[2]

“The provision in par. 15 of the Management Contract limiting
the contractor’s liability for the loss, des­truction or damage of any
merchandise to P500 for each package, unless the value is otherwise specified
and the corresponding arrastre charges have been
paid, is neither unfair nor arbi­trary, because the consignee, if he so
desires, can make the arrastre operator responsible
for the full value of his merchandise by merely specifying it in any of the
various documents required of him in clearing the merchandise from the customs
and paying the corres­ponding charges on the basis of the de­clared
value.”  (Jose Bernabe
& Co. v. Delgado Brothers, Inc., 58 0.G., 1104)

Indeed, as the lower court has declared, appellant Manila Port
Service cannot escape liability for the value of the shipment by its own act of
not charging the ap­pellee the corresponding arrastre fees based on the value of the shipment after it
came to know of such declared value from the marine insurance policy.  Settled is the rule that the value of the
merchandise or shipment may be declared or stated not only in the bill of
lading or ship­ping manifest but also in other documents required by law before
the shipment is cleared from the piers.^[3]

We find, therefore, that the lower court committed no error when
it declared the appellants, Manila Port Ser­vice and Manila Railroad Company,
liable for the payment of the value of the shipment as stated in the marine
insur­ance policy as well as the freight charges on the shipment, it being
admitted that the shipment, consisting of a tract­or, was lost while it was in
the custody of appellant Manila Port Service.

IN VIEW OF THE FOREGOING, the decision appealed from is
affirmed, with costs against the defendants-appellants.

IT IS SO ORDERED.

Reyes, Acting C.J., Dizon, Makalintal, Bengzon, Sanchez,
Angeles, and Fernando, JJ., concur.

Castro, J., did not take part.

Concepcion, C.J., on official leave.

^[1]
Continental Insurance Co. v. Manila
Port Service, et al., G.R. No. L-22208,
March 30, 1966; Delgado
Brothers, Inc., et al. v. Manila
Port Service, et al., G.R. No. L-21781,
June 30, 1966; The American
Insurance Co. v. Manila Port
Service, et al., G.R. No. L-22780, February
18, 1967.

^[2]
Record on Appeal, pp. 108-109.

^[3]
Jose Bernabe & Co., Inc. v. Delgado
Brothers, Inc., G.R. No. L-14360, February
29, 1960.  See also The
Liverpool & London & Globe Insurance Co., Ltd. v. Manila Port
Service, et al., G.R. No. L-23338, November
18, 1967.