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

Villaruel versus Manila Port Service

The Case

This is an action by Alfredo Villaruel, a consignee, against the Manila Port Service and the Manila Railroad Company, the arrastre operator in the port of Manila, to recover the value of a tractor that was lost while it was in the arrastre operator's custody, plus the freight charges paid on the shipment. The case matters because it settles two questions that arise in every arrastre claim: when is a claim deemed rejected if the operator never acts on it, and when may the operator's liability exceed the five hundred peso limit fixed in the management contract.

Procedural History

Alfredo Villaruel filed the complaint in the Court of First Instance of Manila against the Manila Port Service, the Manila Railroad Company, and the Agricultural Fire Insurance and Surety Company. After the parties submitted documentary evidence and a stipulation of facts, the trial court rendered judgment ordering the Manila Port Service and the Manila Railroad Company to pay the value of the lost shipment and the freight charges, with legal interest from the filing of the complaint, and to pay the costs. The complaint against the insurer was dismissed, and so were the insurer's counterclaim and cross-claim. The Manila Port Service and the Manila Railroad Company appealed directly to the Supreme Court on questions of law.

Facts

On January 18, 1962, a shipment consisting of one tractor, consigned to Alfredo Villaruel, was unloaded from the vessel Eastern Galaxy, with freight and other charges in the total amount of three hundred fifty-seven dollars and eight cents actually paid to the carrier. The tractor had been bought from the Pacific Trade and Surety Company of San Francisco, California, and its price of ten thousand three hundred eighty-one dollars was paid through a letter of credit drawn by the Philippine Commercial and Industrial Bank. The shipment was unloaded to the custody of the Manila Port Service, the arrastre operator. Its value 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, Villaruel filed a provisional claim with the Manila Port Service pursuant to Section 15 of the management contract between the Bureau of Customs and the arrastre operator. On February 20, 1962, his broker tried to secure delivery under a warehouse permit, but the shipment could not be located. On March 2, 1962, to comply with the requirements for the release of the shipment and to enable the Bureau of Customs to compute the duties and taxes based on cost, insurance and freightage, he applied for marine insurance. Not knowing that the shipment had already arrived, the insurer issued a policy on March 3, 1962, showing the value of the shipment as twenty thousand nine hundred seventeen pesos and seventy-two centavos. On March 24, 1962, the Manila Port Service collected forty pesos and fifty centavos as arrastre fees based on measurement or weight.

On May 18, 1962, the Manila Port Service issued a certificate stating that the shipment was lost or missing while under its custody. On October 23, 1962, Villaruel filed a formal claim for the value of the shipment and the freight charges. The arrastre operator neither admitted nor rejected the provisional claim nor the formal claim, and made no payment. The insurer also denied its own claim. Villaruel then brought suit on March 6, 1963.

Issues

• Whether or not the complaint was barred for having been filed more than one year from the discharge of the shipment under Section 15 of the management contract.
• Whether or not the liability of the arrastre operator should be limited to five hundred pesos under Section 15 of the management contract because the value of the shipment was not specified in the bill of lading or in the manifest.

Applicable Provisions

Section 15 of the management contract, on the one-year period to sue, provides:

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 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 days from the date of the discharge of the last package from the carrying vessel.

This is the provision the appellants invoke to say the complaint was filed too late.

Section 15 of the same management contract, on the limit of liability, provides:

Section 15. 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 for each package unless value is otherwise specified or manifested and the corresponding arrastre charges had been paid.

This is the provision the appellants invoke to cap their liability at five hundred pesos.

Ruling

On the first issue, the Court held that the complaint was filed on time. It restated the settled rule that when the arrastre operator fails to act on the claim within one year from the discharge of the goods, the claim is deemed rejected as of the expiration of that year, and the action may be filed within one year from that deemed rejection. The claimant must file his claim within fifteen days from discharge, and then may either sue within one year from discharge without awaiting action, or await the operator's action and sue within one year from rejection or denial, it being understood that if the claim is not acted upon within one year from discharge, the claim is deemed rejected. Here the shipment was discharged on January 18, 1962, the provisional claim was filed on January 24, 1962, well within the fifteen-day period, and the formal claim on October 23, 1962. The claims were not acted upon as of January 18, 1963, so the claim was deemed rejected on that date, and the complaint filed on March 6, 1963 was within the one-year period counted from the deemed rejection.

On the second issue, the Court held that the five hundred peso limit did not apply. The exception in the contract requires that the value be otherwise specified or manifested and that the corresponding arrastre charges be paid. The Court agreed with the trial court that the submission of the marine insurance policy to the Bureau of Customs was sufficient compliance, because that policy is one of the documents required to be presented in clearing the merchandise from customs, and it showed the value of the shipment. The Court quoted with approval the rule that the value may be declared 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. The arrastre operator, having come to know the declared value, could not escape liability for that value by its own act of not charging arrastre fees based on it.

Doctrine

First, under Section 15 of the management contract, if the arrastre operator does not act on the claim within one year from the discharge of the last package, the claim is deemed rejected as of the expiration of that year, and the consignee has one year from that deemed rejection within which to sue. Second, the five hundred peso limit on the arrastre operator's liability does not apply where the value of the shipment is otherwise specified or manifested in a document required by law for the clearance of the goods, such as a marine insurance policy submitted to the Bureau of Customs, and the corresponding arrastre charges are paid. The operator cannot take advantage of its own failure to charge fees based on a value it already knew.

Disposition

The Supreme Court affirmed the decision of the trial court, with costs against the Manila Port Service and the Manila Railroad Company.

Remember This

Memorize this line: silence of the arrastre operator for one year is deemed rejection, and the one-year period to sue runs from that deemed rejection. Examiners use this case to test the arrastre claim periods and the five hundred peso limit, especially the rule that value may be specified in other documents required for customs clearance.