UNION CARBIDE PHILIPPINES, INC. (FORMERLY NATIONAL CARBON PHILIPPINES, INC.), PLAINTIFF-APPELLANT, VS. MANILA RAILROAD CO., SUBSTITUTED BY THE PHILIPPINE NATIONAL RAIL­WAYS, MAN…

This is an admiralty and arrastre case. On December 18, 1961 the vessel Daishin Maru arrived in
Manila with a cargo of 1,000 bags of synthetic resin consigned to General Base
Metals, Inc. which later sold the cargo to Union Carbide Philippines, Inc.

On the following day, December 19, that cargo was deli­vered to
the Manila Port Service in good order and condition except for twenty-five bags
which were in bad order (Par. IV and Annexes C to C-25 of Stipulation of
Facts).

On January 20 and February 6 and 8, 1962 eight hundred
ninety-eight (898) bags of resin (out of the 1,000 bags) were delivered by the
customs broker to the consignee. One
hundred two bags were missing. The
contents of twenty-five bags were damaged or pilfered while they were in the
custody of the arrastre operator (Par. XII and Annexes D and H of Stipulation
of Facts). All in all fifty bags out of
the 898 bags were damaged (Annex D-5).

The 152 bags of resin (102 missing and 50 damaged) were valued at
$12.65 a bag or a total value of $1,992.80, which amount, at the prevailing
rate of exchange of P3.85 to the American dollar, is equivalent to P7,402.78
(Annex I of Stipulation of Facts).

The consignee, through the customs broker, filed on January 3,
1962 with the Manila Port Service, as arrastre operator, and the American
Steamship Agencies, Inc., as agent of the carrier, a provisional claim advising
them that the shipment in question was “shortlanded, shortdelivered and/or
landed in bad order” (Annexes E and F of Stipulation of Facts).

Formal claims dated June 11, 1962 were made by the consignee with
the arrastre operator and the agent of the carrier (Annexes I and I-1 of
Stipulation of Facts). The claims were
re­iterated by the consignee’s lawyer in his letters dated Septem­ber 26, 1962
which were received by the carrier’s agent and the arrastre operator on October
4, 1962 (Annexes J and J-1 of Stipulation of Facts).

As the claims were not paid, Union Carbide Philippines, Inc.
filed a complaint on December 21, 1962 in the Court of First Instance of Manila
against the Manila Railroad Company, the Manila Port Service and the American
Steamship Agencies, Inc. for the recovery of damages amounting to P7,402.78 as
the value of the undelivered 102 bags of resin and the damaged 50 bags plus
legal rate of interest from the filing of the complaint and P1,000 as
attorney’s fees.

Union Carbide’s complaint was a double-barrelled action or a
joinder of two causes of action. One
was an action in ad­miralty under the Carriage of Goods by Sea Act against the
carrier’s agent for the recovery of P1,217.56 as the value of twenty-five bags
of resin which were damaged before they were landed (Annex C-25).

The other was an action under the management con­tract between
the Bureau of Customs and the Manila Port Service, a subsidiary of the Manila
Railroad Company, for the recovery of P6,185.22 as the value of the undelivered
102 bags of resin and twenty-five bags, the contents of which were damaged or
pilfered while in the custody of the arrastre operator.

The case was submitted for decision on the basis of a stipulation
of facts. The trial court in its
decision of January 15, 1964 dismissed the case as to the carrier’s agent on
the ground that the action had already prescribed because it was not
“brought within one year after delivery of the goods”, as
contemplated in section 3(6) of the Carriage of Goods by Sea Act. The one-year period was counted from
December 19, 1961 when the cargo was delivered to the arrastre operator. As above-stated, the action was brought on
December 21, 1962 or two days late, according to the trial court’s reckoning
(Civil Case No. 52562).

With respect to the consignee’s claim against the arrastre
operator, the trial court found that the provisional claim was filed within the
fifteen-day period fixed in paragraph 15 of the arrastre contract. Yet, in spite of that finding, the trial
court dismissed the action against the arrastre operator (p. 65, Record on
Appeal).

Union Carbide appealed to the Court of Appeals on questions of
fact and of law. That Appellate Court
elevated the case to this Court because in its opinion the appeal raises only
the legal issue of prescription (Resolution of May 10, 1967 in CA-G. R. No.
33743-R).

Union Carbide contends that the trial court erred (1) in finding
that its action was barred by the statute of limitations and (2) in not holding
that the carrier and the arrastre operator were liable for the value of the
undelivered and damaged cargo.

Claim against the carrier’s agent. – There is no question that, as shown in the
twenty-five tally sheets, 975 bags of resin were delivered by the carrier in
good order to the arrastre operator and that only twenty-five (25) bags were
damaged while in the car­rier’s custody (Annexes C to C-25 and K-1 of
Stipulation of Facts).

The one-year period within which the consignee should sue the
carrier is computed from “the delivery of the goods or the date when the
goods should have been delivered”. The Carriage of Goods by Sea Act provides:

“RESPONSIBILITIES AND LIABILITIES

“SEC. 3. x x x x x x x x x

“(6)  Unless notice of loss or damage and the
general nature of such loss or damage be given in writing to the carrier or his
agent at the port of dis­charge before or at the time of the removal of
the goods into the custody of the person entitled to delivery thereof
under the contract of carriage, such removal shall be prima facie evidence of
the delivery by the carrier of the goods as described in the bill of
lading. If the loss or damage is not
apparent, the notice must be given within three days of the delivery.

“Said notice of loss or damage may be endorsed upon the
receipt for the goods given by the person taking delivery thereof.

“The notice in writing need not be given if the state of the
goods has at the time of their receipt been the subject of joint survey or
inspection.

“In any event the carrier and the ship shall be discharged
from all liability in respect of loss or damage unless suit is brought within
one year after delivery of the goods or the date when the goods should
have been delivered:

“Provided, That if a notice of loss or damage, either
apparent or concealed, is not given as provided for in this section, that fact
shall not affect or pre­judice the right of the shipper to bring suit within
one year after the delivery of the goods or the date when the goods should have
been delivered.

“In the case of any actual or apprehended loss or damage the
carrier and the receiver shall give all reasonable facilities to each other for
inspecting and tallying the goods.” (Commonwealth Act No. 65, adopting U. S.
Public Act No. 521 of April 16, 1936).

What is the meaning of “delivery” in section 3(6) of
the Carriage of Goods by Sea Act? The
trial court construed delivery as referring to the discharge or landing of
the cargo.

Union Carbide contends that “delivery” does not mean
the discharge of goods or the delivery thereof to the arrastre operator but the
actual delivery of the goods to the consignee by the customs broker.

The carrier contends that delivery means discharge from the
vessel into the custody of the customs arrastre operator because under
sections1201 and 1206 of the Tariff and Customs Code mer­chandise cannot be
directly delivered by the carrier to the consignee but should first pass
through the customhouse at a port of entry for the collection of customs
duties.

The carrier cites the following provisions of the bill of lading
to support its contention:

“9.  Delivery. The Carrier retains the option of delivery at all times from
ship’s side or from craft, hulk, customhouse, warehouse, wharf or quay, at the
risk of the shippers, consignees or owners of the goods, and all expenses
incurred by delivery other­wise than from ship’s side shall be borne by the
shippers, consignees or owners of the goods.

“11.   Discharge of Goods. The goods may be discharged, without notice,
as soon as the ship is ready to unload, continuously day and night, Sundays and
holidays included, on to wharf or quay or into ware­house, or into hulk,
lazaretto or craft or on any other place and be stored there at the risk and
expense of the shippers, consignees or owners of the goods, any custom of the
port to the contrary notwithstanding. In
any case, the Carrier’s liability is to cease as soon as the goods are lifted
from ship’s deck or leave the ship’s tackle, any custom of the port to the
contrary notwithstanding. Consignees to
pay charges for sorting and stacking the goods on wharf or in shed.

“If the
consignees fail to take delivery of their goods immediately the ship is ready
to discharge them, the Carrier shall be at liberty to land and warehouse or
discharge the said goods into hulk or craft, or at any other place at the risk
and expense of the shippers, consignees or owners of the goods without notice.

“15.   Notice of Claim. Any claim for loss of or damage to the goods
must be preferred in writing to the Carrier’s Agents at the place of delivery
within 3 days after the ship’s discharge thereof, and before the goods are
removed from the quay or ships or place of discharge, and in the event of such
claim not being preferred as above specified, the claim shall be deemed as
waived, and the Carrier shall be discharged therefrom.

“Suit for the
recovery of loss or damage shall not in any event be maintainable against the
Carrier or the ship, unless instituted within one year after the delivery of
the written notice above specified. The
amount of claim shall be restricted to the Cash Value of the goods at the place
and time of original shipment plus all charges actually paid thereon, and all
claims for either partial or total loss or damage shall be entertained and
adjusted upon this basis of value.” (Annex B).

In this connection, it is pertinent to state that the Tariff and
Customs Code allows the delivery of imported merchandise to the arrastre
operator:

“SEC. 1213. Receiving,
Handling, Custody and Delivery of Articles. – The Bureau of Customs shall have exclusive supervision and
control over the re­ceiving, handling, custody and delivery of articles on the
wharves and piers at all ports of entry and in the exercise of its functions it
is hereby authorized to acquire, take over, operate and superintend such plants
and facilities as may be necessary for the receiving, handling, custody and
delivery of articles, and the convenience and comfort of passengers and the
handling of baggage, as well as to acquire fire protection equipment for use in
the piers:

“Provided, That whenever in his judgment the receiving,
handling, custody and delivery of articles can be carried on by private parties
with greater efficiency, the Commissioner may, after public bidding and subject
to the approval of the department head, contract with any private party for the
service of receiving, handling, custody and delivery of articles, and in such
event, the contract may include the sale or lease of government-owned equipment
and facilities used in such service.”

The sensible and practical interpretation is that delivery within
the meaning of section 3(6) of the Carriage of Goods by Sea Law means delivery
to the arrastre operator. That delivery
is evidenced by tally sheets which show whether the goods were landed in good
order or in bad order, a fact which the consignee or shipper can easily
ascertain through the customs broker.

To use as basis for computing the one-year period the delivery to
the consignee would be unrealistic and might generate confusion between the
loss or damage sustained by the goods while in the carrier’s custody and the
loss or damage caused to the goods while in the arrastre operator’ s
possession.

Apparently, section 3(6) adheres to the common-law rule that the
duty imposed upon water carriers was merely to transport from wharf to wharf
and that the carrier was not bound to deliver the goods at the warehouse of the
consignee (Tan Hi vs. United States, 94 Fed. Supp. 432, 435).

In the Tan Hi case, it was held that a requirement of
Philippine law that all cargo unloaded at Manila be delivered to the consignee
through the arrastre operator acting as cus­toms’ agent was not
unreasonable. The common-law require­ments
as to the proper delivery of goods by water carrier apply only when customs
regulations at the port of destination do not otherwise provide. The delivery must be in accordance with the
usages of the port in order that such delivery would discharge the carrier of
responsibility. (Notes 50 and 51, 80
C.J.S. 922; 58 C. J. 372 note, 24. See
70 Am Jur 2nd 613, note 19).

Under the facts of this case, we hold that the one-year period
was correctly reckoned by the trial court from December 19, 1961, when, as
agreed upon by the parties and as shown in the tally sheets, the cargo was
discharged from the carrying vessel and delivered to the Manila Port
Service. That one-year period expired
on December 19, 1962. Inasmuch as the
action was filed on December 21, 1962, it was barred by the statute of
limitations.

Defendant American Steamship Agencies, Inc., as agent of the
carrier, has no more liability to the consignee’s assignee, Union Carbide
Philippines, Inc., in connection with the damaged twenty-five bags of resin.

Prescription was duly pleaded by the said defendant in its answer
and motion to dismiss. That defense was
correctly entertained by the trial court.

Claim against the arrastre operator. – The liability of the arrastre contractor
has a factual and legal basis different from that of the carrier’s. The management contract between the Manila
Port Service and the Bureau of Customs provides:

“15.  xxx xxx; 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 the 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 discharge of the
last package from the carrying vessel. x x x.” (Annex A of Stipulation of Facts).

Under the foregoing contractual provisions, the action against
the arrastre operator to enforce liability for loss of the cargo or damage thereto
should be filed within one year from the date of the discharge of the goods or
from the date when the claim for the value of such goods has been rejected or
denied by the arrastre operator.

However, before such action can be filed a condition precedent
should be complied with and that is, that a claim (provisional or final) shall
have been previously filed with the arrastre operator within fifteen days from
the date of the dis­charge of the last package from the carrying vessel
(Continental Insurance Company vs. Manila Port Service, L-22208, March 30,
1966, 16 SCRA 425).

In this case, the consignee’ s customs broker filed with the
Manila Port Service a provisional claim advising the latter that the cargo was
“shortlanded, shortdelivered and/or landed in bad order”. That claim was filed on January 3, 1962 or
on the fifteenth day following December 19, 1961, the date of the discharge of
the last package from the carrying vessel. That claim was never formally rejected or denied by the Manila Port
Service.

Having complied with the condition precedent for the filing of a
claim within the fifteen-day period, Union Carbide could file the court action
within one year, either from Decem­ber 19, 1961 or from December 19, 1962. This second date is regarded as the
expiration of the period within which the Manila Port Service should have acted
on the claim (Philippine Education Co., Inc. vs. Manila Port Service, L-24091,
21 SCRA, 174, 178).

In other words, the claimant or consignee has a two-year
prescriptive period, counted from the date of the discharge of the goods,
within which to file the action in the event that the arrastre contractor, as
in this case, has not rejected nor admitted liabi­lity (Continental Insurance
Company vs. Manila Port Service, supra. Philippine Education Company vs. Manila Port Service, L-23444, October
29, 1971, 42 SCRA 31).

Since the action in this case against the arrastre operator was
filed on December 21, 1962, or within the two-year period expiring on December
19, 1963, that action was filed on time. The trial court erred in dismissing the action against the Manila Port
Service and its principal, the Manila Railroad Company.

As shown in the statement of facts, the arrastre operator is
responsible for the value of 102 bags of resin, which were not delivered, and
twenty-five bags, which were damaged, or a total, of one hundred twenty-seven
bags valued at P6,185.22.

The arrastre operator should pay attorney’s fees to the plaintiff
for not having satisfied its plainly valid, just and demand­able claim (Art.
2208, Civil Code). We fix the
attorney’s fees and the litigation expenses in the sum of one thousand pesos.

WHEREFORE, the trial court’s judgment is affirmed
insofar as it dismissed plaintiff-appellant’ s claim against de­fendant
American Steamship Agencies, Inc. on the ground of prescription.

The trial court’ s decision is reversed insofar as it
dismissed plaintiff’s claim against the Manila Railroad Company, as arrastre
operator. The Philippine National
Railways, as the successor of the Manila Railroad Company (Sec. 22, Republic
Act No. 4156), is hereby ordered to pay plaintiff Union Carbide Philippines,
Inc. the sum of P6,185.22, as the value of the 127 bags of resin (102 bags
missing and 25 bags damaged), with legal rate of interest from the filing of
the complaint on December 21, 1962 up to the date of payment, plus P1,000 as
attorney’s fees and litigation expenses, and the costs.

SO ORDERED.

Fernando, (Chairman), Barredo, Antonio, and Fernandez, JJ., concur.

Concepcion, Jr., J., on leave.