G.R. No. 180784; February 15, 2012
INSURANCE COMPANY OF NORTH AMERICA, Petitioner, vs. ASIAN TERMINALS, INC., Respondent.

FACTS

Petitioner Insurance Company of North America insured a shipment of electrolytic tin free steel for San Miguel Corporation. The cargo arrived at the Port of Manila on November 19, 2002, with seven packages already damaged. Respondent Asian Terminals, Inc. (ATI) received the shipment for safekeeping on November 21, 2002. Withdrawals by the consignee’s broker occurred on November 22, 23, and 29, 2002. A joint inspection on November 29, 2002, prior to the final withdrawal, revealed an additional five packages were damaged while in ATI’s custody. The consignee filed a claim, and petitioner, as insurer, paid the amount of ₱431,592.14. After being subrogated to the consignee’s rights, petitioner demanded compensation from ATI and, upon its failure to pay, filed a complaint for damages.
The Regional Trial Court (RTC) found ATI negligent for the additional damage incurred during its custody and held that ATI’s contractual liability limit of ₱5,000 per package was inapplicable because the shipper had declared the value of the goods. However, the RTC dismissed the complaint, ruling that the one-year prescriptive period under the Carriage of Goods by Sea Act (COGSA) applied and had lapsed. The RTC computed the period from the date of discharge from the vessel (November 19, 2002) until the filing of the complaint (May 17, 2005), finding it time-barred.

ISSUE

Whether the RTC erred in applying COGSA’s one-year prescriptive period to bar petitioner’s action against ATI, an arrastre operator.

RULING

Yes, the RTC committed reversible error. The Supreme Court ruled that COGSA’s one-year prescriptive period governs the liability of the carrier (sea vessel) and does not apply to an arrastre operator like ATI. An arrastre operator’s service is separate and distinct from the contract of carriage; it is a land-based service involving cargo handling and storage after discharge from the vessel. Consequently, the prescriptive period for filing a suit against an arrastre operator is governed by the Civil Code, not COGSA.
Under Article 1144 of the Civil Code, an action upon a written contract prescribes in ten years. Since ATI’s liability arises from its contractual undertaking as an arrastre service provider, the ten-year period applies. The complaint, filed on May 17, 2005, was well within this period from the date of the loss in November 2002. Therefore, the action was not prescribed. The Court reversed the RTC’s dismissal and remanded the case for further proceedings on the merits of petitioner’s claim for damages.