GOVERNMENT SERVICE INSURANCE SYSTEM (AS ADMINISTRATOR OF THE PROPERTY INSURANCE FUND UNDER R. A. NO. 656.), PLAINTIFF AND APPELLANT, VS. MANILA RAILROAD COMPANY AND MANILA PORT …

Government Service Insurance System versus Manila Railroad Company

The Case

This is an appeal by the Government Service Insurance System, as administrator of the Property Insurance Fund, against the Manila Railroad Company and the Manila Port Service. The insurer paid its assured, the National Marketing Corporation, for eleven tractor parts that were short-delivered at the Port of Manila, and then sued the arrastre operator to recover what it had paid. The case matters because it fixes the standing of a cargo consignee, and of the insurer who steps into the consignee's shoes, under the Management Contract governing arrastre operations at the Port of Manila, and because it tests how the fifteen-day claim period in that contract operates when the goods are delivered late.

Procedural History

The case began in the Court of First Instance of Manila. In its original decision, the trial court held that the provisions of the Management Contract were not binding on the Government Service Insurance System, and rendered judgment against the Manila Railroad Company and the Manila Port Service for the sum claimed, plus costs. On motion for reconsideration by the defendants, the trial court set aside that original decision and rendered an amended decision dismissing the case, without costs. The plaintiff then appealed to the Supreme Court.

Facts

On April 16, 1956, the Industria Americana and Company shipped at Long Beach, California, on board the vessel Steel Architect of the Isthmian Lines, one box and forty pieces of tractor parts, consigned to the National Marketing Corporation through the Philippine National Bank. The vessel arrived at the Port of Manila, and on May 22, 1956, the consignment was discharged into the possession of the Manila Port Service, the arrastre operator.

On June 12, 1956, the consignee, through its customs broker, received the consignment from the Manila Port Service short of eleven pieces of tractor parts, valued at 2,046 pesos and 50 centavos. On July 12, 1956, the consignee, again through its broker, filed a formal claim for that value against the Manila Port Service.

The consignment had been insured with the Government Service Insurance System, and because of the short delivery the insurer paid the consignee the value of the missing eleven pieces. The defendants defended on the ground that no claim had been filed against them within the fifteen-day period from discharge of the last package at the Port of Manila, and that under the law and the Management Contract with the Bureau of Customs, the arrastre operator was completely relieved of liability for shortage or loss.

Issues

• Whether or not the Management Contract covering the arrastre service for the Port of Manila is binding upon the consignee and, through it, upon the insurer who paid the consignee and succeeded to its rights.
• Whether or not the fifteen-day period for filing a claim under the Management Contract is an impossible condition, given that delivery to the consignee took place twenty-one days after discharge.

Applicable Provisions

The decision does not quote any article of the Civil Code in full. It refers to Articles 1183 and 1188 of the Civil Code, which the plaintiff invoked in its third assignment of error, and it quotes the stipulation of the Management Contract itself. The contract provides:

A claim is filed with the Company within 15 days from the date of arrival of the goods.

This stipulation is the condition precedent whose breach the defendants set up as a complete defense, and its interpretation decides both issues.

Ruling

On the first issue, the Court held that the plaintiff is bound by the stipulation requiring the filing of a claim within fifteen days from discharge of the goods as a condition precedent to the accrual of a cause of action against the defendants. The Court noted that this question had already been settled in earlier cases adversely to the plaintiff's pretense. By availing himself of the services of the arrastre operator and taking delivery in pursuance of a permit and a pass issued by the latter, which were subject to all the terms and conditions of the management contract, the consignee became bound by its provisions. The insurer, as successor to the rights of the consignee, is bound in the same way. The second assignment of error was therefore untenable.

On the second issue, the Court held that the possibility or impossibility of complying with the condition did not depend upon the date on which the consignee had chosen to take delivery of the goods. It depended upon the time of the notice, if there was any, of the arrival of the goods placing them at the consignee's disposal, and upon the consignee's diligence thereafter in examining the goods before delivery. The record showed that as early as June 2, 1956, the consignee had expressed its readiness to take delivery, indicating that it knew of the arrival before that date. But the record did not show how it learned of the arrival, or whether notice was given by the arrastre operator and on what date. The Court therefore found it necessary that evidence on these points be taken, to ascertain whether the consignee had a reasonable opportunity to comply with the disputed condition and, if not, whether it should be deemed to have acted with the diligence required by the spirit and purpose of that condition in filing its claim on June 16, 1956.

Doctrine

A consignee who avails himself of the services of the arrastre operator and takes delivery of the goods under a permit and a pass issued subject to all the terms and conditions of the Management Contract is bound by that contract, including the requirement that a claim be filed within fifteen days from the date of arrival of the goods. The insurer who pays the consignee for a short delivery succeeds to the consignee's rights and is bound by the same terms. The fifteen-day period is not an impossible condition merely because the consignee takes delivery after it has run; the question of compliance turns on when the consignee was notified of the arrival of the goods and on its diligence in examining them before delivery.

Disposition

The amended decision was set aside and the case was remanded to the lower court for further proceedings, without special pronouncement as to costs.

Remember This

The single line worth memorizing is that the consignee, and the insurer as its successor, is bound by the fifteen-day claim period in the Management Contract because it accepted the benefits of the arrastre service. Examiners use this case to test the binding effect of arrastre contracts on third parties and the treatment of the claim period as a condition measured by notice and diligence, not by the date of delivery.