DELGADO BROTHERS, INC., AND DELGADO BROKERAGE CORPORATION, PLAINTIFFS AND APPELLEES, VS. MANILA PORT SERVICE AND MANILA RAILROAD COMPANY, DEFENDANTS AND APPELLANTS.

Delgado Brothers versus Manila Port Service

The Case

This is an appeal from a decision of the Manila Court of First Instance holding the Manila Port Service and the Manila Railroad Company liable to Delgado Brothers, Incorporated and Delgado Brokerage Corporation for a shortage in a shipment of relief supplies. The plaintiffs, a broker among them, had paid the consignee for the loss and stepped into the consignee's shoes. The case matters because it construes the two periods fixed in the arrastre Management Contract — the fifteen-day period to file a claim and the one-year period to file suit — and settles when a claim is deemed rejected if the arrastre contractor simply keeps silent.

Procedural History

The plaintiffs first filed a complaint with the municipal court of Manila, which found the defendants liable for 243 pesos and 96 centavos. The defendants elevated the case to the Manila Court of First Instance, which after trial likewise decided in favor of the plaintiffs, holding the defendants liable jointly and severally for the same amount with legal interest from the filing of the complaint. The defendants then appealed to the Supreme Court.

Facts

A shipment consigned to the Catholic Relief Services, National Catholic Welfare Conference, consisting of 256 units of miscellaneous relief supplies, arrived in the port of Manila on July 4, 1959. All the packages were unloaded from the carrying vessel, the last of them on July 6, 1959. The shipment suffered a shortage in weight before the Manila Port Service delivered it to the broker, and the broker paid the consignee 243 pesos and 96 centavos, for which it was subrogated to the consignee's rights.

As early as July 8, 1959, only two days after the discharge of the last package, a provisional claim was filed with the arrastre contractor, the Manila Port Service. On November 22, 1960, a formal claim was presented, and its receipt was acknowledged by the Manila Port Service, which stated that the claim was under careful consideration and that the claimant would be informed of its action in due time. On December 25, 1960, the Delgado Brokerage Corporation, as broker for the consignee, sent a follow-up letter.

Only on March 17, 1961 did the arrastre contractor notify the broker that the claim had prescribed, because suit was not commenced within one year from July 6, 1959, the date of discharge of the last package. On May 6, 1961, the plaintiffs filed their complaint.

Issues

• Whether or not the complaint of May 6, 1961 was filed within the period contemplated in paragraph 15 of the Management Contract under which the defendants operate the arrastre service.
• Whether or not the one-year period to sue runs in every event from the date of arrival of the goods, as the defendants contend.

Applicable Provisions

Paragraph 15 of the Management Contract 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 is filed in the Court of proper jurisdiction within a period of one (1) year from the date of the arrival of the goods, or from the date when the claim for the value of such goods has 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 arrival of the goods.

This clause supplies both the fifteen-day period to file the claim and the two alternative one-year periods to file suit, and the entire appeal turns on how those periods are counted.

Ruling

The Court held that both periods mentioned in the contract have been recognized and made effective in earlier cases. The first period applies when the claimant takes action without waiting for the ruling of the contractor, in which case the action should be filed within one year from the date of discharge of the goods. The second applies when the claimant prefers to wait for such ruling, in which case the action should be filed within one year from the date of rejection.

The Court rejected the defendants' insistence that the suit must in any event be filed within one year from the date of arrival of the goods. To uphold that contention would make it unfair to the consignee, for all that the arrastre contractor would need to do to bar the claimant from suing would be to assure the latter that his claim is under consideration and that he would be informed of its decision in due time, wait for one year, and then send notice that the claim has prescribed.

The Court then applied its ruling in the Continental Insurance case: when the arrastre contractor fails to act on the claim within the period of one year from the date of discharge of the goods, the claim must be deemed rejected as of the expiration of one year from the date of discharge of the last package or cargo, in which case the action should be filed within one year from said rejection. Here, the date of discharge of the last cargo was July 6, 1959, so the claim is deemed rejected as of July 6, 1960. The complaint was filed on May 6, 1961, less than one year from July 6, 1960, and was therefore filed well within the period required under the management contract.

Doctrine

Under paragraph 15 of the arrastre Management Contract, there are two alternative one-year periods within which suit must be filed: one year from the date of arrival or discharge of the goods, if the claimant sues without waiting for the contractor's ruling; or one year from the date the claim is rejected or denied, if the claimant waits for that ruling. The claim itself must be filed with the contractor within fifteen days from the date of arrival of the goods.

When the arrastre contractor fails to act on the claim within one year from the date of discharge of the goods, the claim is deemed rejected as of the expiration of that one-year period, and the claimant then has one year from that deemed rejection within which to sue. A contractor cannot defeat the claim by assuring the claimant that the claim is under consideration, waiting out the year, and then pleading prescription.

Disposition

The Supreme Court affirmed the decision appealed from, with costs against the appellants, and the plaintiffs recovered the amount of the loss.

Remember This

The one line to memorize: if the arrastre contractor sits on the claim for a year, the claim is deemed rejected at the end of that year, and the claimant has a fresh year from that point to sue. Examiners use this case to test the two-period rule of the Management Contract and the doctrine of deemed rejection in arrastre claims.