This Supreme Court decision clarifies the responsibilities of arrastre operators (now known as Asian Terminals, Inc.) in cargo loss claims. The Court ruled in favor of the arrastre operator, MPSI, finding that they had successfully demonstrated the delivery of goods in good condition to the consignee’s representative. This means that unless there is clear evidence the arrastre operator was negligent or at fault, they will not be held liable for shortages or damages, particularly when goods are shipped under a ‘Shipper’s Load and Count’ arrangement. The ruling emphasizes the importance of proper documentation, inspection, and timely reporting of discrepancies in cargo handling.

Lost in Transit: Who Bears the Burden When Cargo Goes Missing?

The case of Marina Port Services, Inc. v. American Home Assurance Corporation arose from a claim for missing bags of flour from a shipment that arrived in Manila. American Home Assurance Corporation (AHAC), as the insurer, paid MSC Distributor (MSC) for the loss and then sought to recover damages from Marina Port Services, Inc. (MPSI), the arrastre operator responsible for the cargo while it was at the port. The central legal question was whether MPSI was liable for the missing goods, or whether they had fulfilled their duty of care in handling the shipment.

The factual backdrop reveals that Countercorp Trading PTE., Ltd. shipped ten container vans of wheat flour to MSC, insured by AHAC. Upon arrival, the Bureau of Customs inspected the containers, resealing them. MSC’s representative, AD’s Customs Services (ACS), picked up the containers over several days, but MSC later discovered significant shortages in the delivered flour. MPSI denied responsibility, arguing that the containers were sealed upon receipt and delivered in the same condition. The Regional Trial Court (RTC) initially dismissed AHAC’s complaint, but the Court of Appeals (CA) reversed this decision, holding MPSI liable. The Supreme Court then took up the case to resolve conflicting findings.

The Supreme Court began by emphasizing the nature of the relationship between an arrastre operator and a consignee. This relationship, the Court stated, is similar to that of a warehouseman and a depositor, or a common carrier and the owner of goods. Therefore, an arrastre operator must exercise a high degree of diligence in safeguarding and delivering the cargo entrusted to them. This level of care is legally equivalent to that expected of warehousemen or common carriers, as outlined in Section 3[b] of the Warehouse Receipts Act and Article 1733 of the Civil Code. The Court quoted Article 1733:

Article 1733. Common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.

The Court acknowledged that in cases involving claims for loss, the burden of proof rests on the arrastre operator to demonstrate compliance with their obligation to deliver the goods to the correct party. They must prove that any losses were not due to their negligence or the negligence of their employees. Should the arrastre operator fail to meet this burden, it is presumed that the loss resulted from their fault. However, the Supreme Court found that MPSI successfully demonstrated that the shipment was delivered to MSC in good order and condition.

MPSI presented gate passes, signed by MSC’s representative, as evidence of delivery. These gate passes served as acknowledgment that the goods were received in satisfactory condition, unless a ‘bad order’ certificate was issued. The Supreme Court cited International Container Terminal Services, Inc. v. Prudential Guarantee & Assurance Co., Inc., emphasizing that a consignee’s signature on a gate pass is strong evidence of receipt in good condition. Furthermore, MPSI employees testified that the containers appeared intact when the gate passes were issued and the containers were released. Crucially, MSC’s representative did not register any complaints or request an inspection at the time of pick-up.

The Court rejected AHAC’s argument that ACS (MSC’s representative) could not have discovered the loss immediately because stripping of containers was allegedly not allowed in the pier area. AHAC failed to provide proof that stripping was prohibited and did not demonstrate that MSC took precautionary measures to protect against potential loss. The Court also addressed the presumption of fault under Article 1981 of the Civil Code, which states:

Article 1981. When the thing deposited is delivered closed and sealed, the depositary must return it in the same condition, and he shall be liable for damages should the seal or lock be broken through his fault.

Fault on the part of the depositary is presumed, unless there is proof to the contrary.

The Court found that this presumption did not apply in this case because AHAC failed to prove that the containers were re-opened or that their locks and seals were broken a second time after the Customs inspection. AHAC relied on a survey report to support its claim that the seals were tampered with, but the surveyor who prepared the report was not presented as a witness. Consequently, the report was deemed inadmissible hearsay evidence, lacking probative value.

The Supreme Court further emphasized that the goods were shipped under a ‘Shipper’s Load and Count’ arrangement. Under this arrangement, the shipper is solely responsible for loading the container, and the carrier (in this case, the arrastre operator) is unaware of the shipment’s contents. Therefore, protection against pilferage becomes the consignee’s responsibility. The arrastre operator is only obliged to deliver the container as received, without needing to verify its contents against the shipper’s declaration. Citing International Container Terminal Services, Inc. (ICTSI) v. Prudential Guarantee & Assurance Co., Inc., the Court underscored that the arrastre operator’s duty is to care for the goods received and turn them over to the entitled party, subject to valid contractual qualifications.

In conclusion, the Supreme Court reversed the Court of Appeals’ decision and reinstated the RTC’s dismissal of the complaint, finding that MPSI was not liable for the loss of the bags of flour.

FAQs

What was the key issue in this case?	The key issue was determining whether the arrastre operator, MPSI, was liable for the loss of bags of flour during shipment, or if they had met their duty of care in handling the cargo.
What is an arrastre operator?	An arrastre operator is a company responsible for handling and storing cargo that has been unloaded from a vessel at a port, before it is released to the consignee or recipient. They act as custodians of the goods during this transit phase.
What does ‘Shipper’s Load and Count’ mean?	‘Shipper’s Load and Count’ refers to an arrangement where the shipper is solely responsible for loading and counting the contents of a container, without verification by the carrier. In this scenario, the carrier is not liable for discrepancies in the contents.
What is the significance of the gate pass in this case?	The gate passes signed by the consignee’s representative served as evidence that the goods were received in good order and condition, absent any notation of damage or loss. This acknowledgment was crucial to the court’s decision.
Why was the survey report deemed inadmissible?	The survey report was considered hearsay evidence because the person who prepared it was not presented in court to testify about its contents. This prevented the opposing party from cross-examining the report’s findings.
What burden of proof lies on the arrastre operator in loss claims?	The arrastre operator bears the burden of proving that the loss of goods was not due to their negligence or that of their employees, and that they observed the required diligence in handling the shipment.
What is the effect of Article 1981 of the Civil Code in this case?	Article 1981 presumes fault on the part of the depositary if a sealed item is delivered with a broken seal. However, this presumption did not apply because there was insufficient evidence the containers were re-opened.
What degree of diligence is expected of arrastre operators?	Arrastre operators are expected to exercise the same degree of diligence as that legally expected of a warehouseman or a common carrier, ensuring the safekeeping and proper delivery of goods.

This case provides valuable guidance on the responsibilities and potential liabilities of arrastre operators in the Philippines. It highlights the importance of clear documentation, proper inspection procedures, and the impact of shipping arrangements like ‘Shipper’s Load and Count’ on liability for cargo losses.

For inquiries regarding the application of this ruling to specific circumstances, please contact ASG Law through contact or via email at frontdesk@asglawpartners.com.

Disclaimer: This analysis is provided for informational purposes only and does not constitute legal advice. For specific legal guidance tailored to your situation, please consult with a qualified attorney.
Source: MARINA PORT SERVICES, INC. VS. AMERICAN HOME ASSURANCE CORPORATION, G.R. No. 201822, August 12, 2015