G.R. No. 165647 March 26, 2009
PHILIPPINES FIRST INSURANCE CO., INC., Petitioner, vs. WALLEM PHILS. SHIPPING, INC., UNKNOWN OWNER AND/OR UNKNOWN CHARTERER OF THE VESSEL M/S “OFFSHORE MASTER” AND “SHANGHAI FAREAST SHIP BUSINESS COMPANY,” Respondents.

FACTS

On or about October 2, 1995, Anhui Chemicals Import & Export Corporation loaded a shipment of 10,000 bags of sodium sulphate anhydrous on board M/S Offshore Master for transportation to Manila, consigned to L.G. Atkimson Import-Export, Inc., covered by a Clean Bill of Lading. The vessel’s owner/charterer was unknown, and the shipper was Shanghai Fareast Ship Business Company, both represented locally by respondent Wallem Philippines Shipping, Inc. The shipment arrived in Manila on or about October 16, 1995. Upon discharge, the arrastre operator, Asian Terminals, Inc., documented that 2,426 bags were in bad order with spillages and losses. A final inspection at the consignee’s warehouse revealed further losses and contamination. The consignee, having insured the shipment with petitioner Philippines First Insurance Co., Inc., filed a claim. Petitioner paid the consignee ₱397,879.69 and was subrogated to its rights. Petitioner then demanded payment from Wallem, which was ignored, leading to the filing of a complaint for damages. The Regional Trial Court (RTC) held the carrier and arrastre operator solidarily liable. The Court of Appeals reversed, holding the arrastre operator solely liable, finding that the damage was caused by the arrastre operator’s mishandling during discharge, based on the testimony of a cargo surveyor who stated the torn bags resulted from the use of steel hooks/spikes and mishandling by the arrastre operator’s stevedores.

ISSUE

The primary issue, as consolidated from the petition, is whether the carrier (respondent Wallem) should be held liable for the damage to the shipment that occurred during the unloading/discharge operation, or if liability rests solely with the arrastre operator.

RULING

The Supreme Court ruled in favor of the petitioner and held the carrier (respondent Wallem) liable. The Court found that the carrier’s period of responsibility and duty of extraordinary diligence extends to the proper discharge of the cargo. The Bill of Lading in this case stated the carrier’s responsibility commences upon loading and ceases upon discharge from the vessel, and the Carriage of Goods by Sea Act (COGSA) imposes a duty on the carrier to properly and carefully discharge the goods carried. The Court rejected the appellate court’s conclusion that the arrastre operator’s fault absolved the carrier. It held that the act of discharging the cargo from the vessel is the exclusive responsibility of the carrier, and the arrastre operator’s role begins only after the cargo is discharged onto the pier. The testimony of the surveyor indicated that the damage (tearing of bags) occurred during the discharge process itself (“before discharge”), which was within the carrier’s period of responsibility. The carrier failed to overcome the presumption of fault under Article 1735 of the Civil Code and did not prove it exercised extraordinary diligence. Therefore, the carrier was liable for the damage sustained by the shipment. The Court reinstated the RTC decision with modification, ordering respondents to pay the petitioner the sum of ₱397,879.69 with legal interest.