BANKERS & MANUFACTURERS ASSURANCE CORP., PETITIONER, VS. COURT OF APPEALS, F.E. ZUELLIG & CO., INC. AND E. RAZON, INC., RESPONDENTS.

Bankers and Manufacturers Assurance versus Court of Appeals

The Case

This is a petition for review on certiorari brought by Bankers and Manufacturers Assurance Corporation, an insurer, against the Court of Appeals, the arrastre operator E. Razon, Incorporated, and the vessel's Philippine agent F. E. Zuellig and Company, Incorporated. The insurer had paid its insured importer for copper tubings allegedly lost to theft and pilferage, and then sued the carrier and the arrastre operator in subrogation to recover what it had paid. The case matters because it fixes where the burden of proof lies when a containerized shipment is delivered sealed by the shipper and later found short only after it has left the pier: the insurer's bare assertion of loss does not by itself shift the burden of proving non-liability onto the carrier and the arrastre operator.

Procedural History

The insurer filed a complaint for recovery of the amount it had paid its insured with Branch Sixteen of the Regional Trial Court of Manila. The trial court dismissed the complaint. On appeal, the Court of Appeals affirmed the dismissal in a decision promulgated in July 1987. The insurer then came to the Supreme Court through the present petition for review on certiorari, and the Court dismissed the petition and affirmed the Court of Appeals.

Facts

One hundred eight cases of copper tubings were imported by Ali Trading Company and insured by the petitioner insurer. The tubings arrived in Manila aboard the vessel Oriental Ambassador on November 4, 1978, and upon discharge at the waterfront were turned over to the private respondent E. Razon, the Manila arrastre operator. The carrying vessel was represented in the Philippines by its agent, the other private respondent, F. E. Zuellig and Company, Incorporated.

The shipment was containerized. The goods were stuffed, packed, and loaded by the shipper at a place of his choice, usually his own warehouse, in the absence of the carrier. The container was sealed by the shipper and thereafter picked up by the carrier. The copper tubings were placed in three containers. Upon arrival, the shipment was discharged in apparent good order and condition, and from the pier's docking apron the containers were shifted to the container yard of Pier Three for safekeeping.

Three weeks later, one container van said to contain nineteen cases was stripped in the presence of the insurer's surveyors, and three cases were found in bad order, though their contents remained good and intact. Those three cases were not the subject of the claim. The two other container vans were never moved from the container yard and were never stripped. On December 8, 1978, the cargo was released to the consignee's authorized customs broker, RGS Customs Brokerage, which accepted the shipment without exception as to bad order and caused the delivery of the vans to the consignee's warehouse in Makati. Only there, when the contents of the two containers were removed and inspected, did the insurer's surveyors report that the shipment in one container was short of seven cases. The insurer compensated the importer in the amount of 31,014 pesos and sued in subrogation.

Issues

• Whether or not the insurer's claim that a portion of the shipment was lost through theft and pilferage shifted the burden of proof of non-liability onto the carrier and the arrastre operator.
• Whether or not the carrier and the arrastre operator are liable for the alleged shortage, considering that the containerized shipment was accepted by the consignee's broker without exception and the loss was discovered only at the consignee's warehouse.

Applicable Provisions

The decision does not quote any statutory provision. It rests instead on the nature of a containerized shipment and on the evidentiary weight of the bill of lading, which the Court describes in these terms:

The recital of the bill of lading for goods thus transported ordinarily would declare “Said to Contain”, “Shipper's Load and Count”, “Full Container Load”, and the amount or quantity of goods in the container in a particular package is only prima facie evidence of the amount or quantity which may be overthrown by parol evidence.

This matters because the quantity recited in the bill of lading is not conclusive against the carrier, so the insurer cannot rest on that recital alone to establish that the goods were lost while in the carrier's custody.

Ruling

On the first issue, the Court held that the insurer's premises may be well taken but its conclusions are not borne out by the record. The shipment was containerized, sealed by the shipper, and not inspected or inventoried by the carrier, whose duty is only to transport and deliver the containers in the same condition as when it received and accepted them. The carrier's duty is therefore measured against the containers as received, not against a quantity the carrier never counted.

On the second issue, the Court held that no loss or damage was shown to have occurred while the shipment was under the care of the carrier or the arrastre operator. The shipment was discharged in apparent good order and condition. The two unstripped containers, together with the nineteen cases removed from the stripped third container, were delivered to and received by the customs broker for the consignee without any exception or notation of bad order or shortlanding. The stripping of the subject container was done at the consignee's warehouse, the evidence was not settled whether the defendants' representatives were notified of and present at the unsealing, and it was unclear how much time elapsed between release from the pier and stripping at the bodega. All these failed to discount the possibility that the loss took place after the containers had left the pier. The Court stressed that if any van was found in bad condition, or if any inspection was to be done, it should have been done at pierside, at the pier warehouse, or at any time and place while the vans were under the care and custody of the carrier or the arrastre operator. Because the shipment was accepted by the insurer's own broker without exception, to all appearances it was accepted in good order. It followed that there was no occasion to discuss the diligence required of a carrier or the theory of prima facie liability of the carrier.

Doctrine

An insurer suing in subrogation must first prove that the loss occurred while the goods were in the custody of the party it sues. In a containerized shipment, the carrier's undertaking is to transport and deliver the containers in the same condition as when it received and accepted them, and the quantity recited in the bill of lading is only prima facie evidence that may be overthrown by parol evidence. Acceptance of the shipment by the consignee's broker without exception as to bad order or shortlanding, followed by discovery of a shortage only at the consignee's warehouse, does not shift the burden of proving non-liability onto the carrier or the arrastre operator. The extraordinary diligence of a carrier and its prima facie liability are reached only once the claimant has shown that the loss occurred within the period of the carrier's custody.

Disposition

The petition was dismissed and the decision of the Court of Appeals was affirmed, with costs against the petitioner insurer.

Remember This

Memorize the line that a containerized shipment sealed by the shipper is delivered by the carrier in the condition received, and a shortage discovered only after the goods leave the pier does not shift the burden of proof to the carrier. Examiners use this case to test subrogation, the burden of proof in cargo claims, and the limited duty of a carrier over shipper-loaded and shipper-sealed containers.