In Asian Terminals, Inc. v. Allied Guarantee Insurance, Co., Inc., the Supreme Court affirmed the liability of an arrastre operator for damage to goods under its custody, emphasizing the high standard of diligence required. The Court found that Asian Terminals, Inc. (ATI) failed to prove that the additional damage to a shipment did not occur while in its possession, thus upholding the lower courts’ decisions. This case underscores the responsibility of arrastre operators to ensure the safe handling and delivery of goods, and it clarifies the burden of proof when goods are found damaged after being in their custody.

From Ship to Shore: Who Pays When Cargo is Damaged in Transit?

This case arose from a shipment of kraft linear board that sustained damage during its transport and handling in Manila. Allied Guarantee Insurance, Co., Inc., as the insurer of the shipment, sought to recover losses incurred due to damaged goods against various parties involved, including Asian Terminals, Inc. (ATI), the arrastre operator. The central legal question was whether ATI could be held liable for additional damage to the goods that occurred while in its custody, even if some damage was already present upon receipt from the vessel. This decision hinged on establishing the point at which the additional damage occurred and whether ATI exercised the required diligence in handling the cargo.

The factual backdrop involves a shipment of kraft linear board transported to Manila via the vessel M/V Nicole. Upon arrival, some of the goods were already damaged. However, upon withdrawal from the arrastre operator, Marina Port Services, Inc. (later Asian Terminals, Inc. or ATI), and delivery to the consignee, San Miguel Corporation, additional rolls were found to be damaged. Allied Guarantee Insurance, after compensating San Miguel for the losses, sought to recover from the parties involved, including ATI. The initial lawsuit alleged that the shipment was in good condition at the port of origin and that the damages were due to the defendants’ negligence.

ATI denied the allegations, contending that the goods were already damaged when they were turned over to the consignee’s broker. They argued that they had exercised due care and diligence in handling the goods and that any damage was attributable to other parties. The Regional Trial Court (RTC) found all defendants liable for the losses, attributing portions of the damage to the shipping company, the arrastre operator (ATI), and the broker. ATI appealed, arguing that the additional damages occurred after the goods left its custody. The Court of Appeals (CA) affirmed the RTC’s decision, holding ATI liable for the additional damage.

The Supreme Court denied ATI’s petition, emphasizing that it was essentially asking the Court to re-evaluate the factual findings of the lower courts. The Court reiterated the principle that petitions for review on certiorari under Rule 45 of the Rules of Court should raise only questions of law, not questions of fact. A question of law arises when the issue can be resolved without reviewing the probative value of the evidence. In contrast, a question of fact requires a review of the evidence presented. In this case, ATI was challenging the lower courts’ assessment of the evidence, particularly the Turn Over Survey of Bad Order Cargoes and the Requests for Bad Order Survey. The Court noted that such a challenge constitutes a question of fact, which is outside the scope of a Rule 45 petition.

The Court acknowledged exceptions to the rule that only questions of law may be entertained, such as when the conclusion is based on speculation, there is a misapprehension of facts, or the appellate court overlooked certain relevant facts. However, none of these exceptions applied in this case. The Court found that the trial court had sufficiently explained why it gave little or no credence to the surveys presented by ATI. The testimony indicated that ATI employees used improper equipment during loading, contributing to the damage. This factual finding was crucial in upholding the lower courts’ decision.

The Court highlighted that an arrastre operator’s duty is to take good care of the goods and to turn them over to the party entitled to their possession in good condition. This responsibility requires the arrastre operator to prove that any losses were not due to its negligence or that of its employees. The standard of diligence required of an arrastre operator is similar to that of a common carrier and a warehouseman. In this context, ATI had to demonstrate that it exercised due care in handling the cargo, which it failed to do. The Turn Over Survey of Bad Order Cargoes pertained to damage that occurred during shipment, prior to ATI’s custody, and the Requests for Bad Order Survey did not automatically absolve ATI from liability.

The Supreme Court also addressed ATI’s reliance on the customs broker’s representative signing off on the receipt of the shipment. The Court stated that a mere sign-off does not absolve the arrastre operator from liability, as it only signifies that the representative frees the arrastre from liability while the cargo is in the representative’s custody. The consignee or its subrogee still has the right to prove that the damage occurred while the goods were under the arrastre operator’s control. In this case, the trial court found that at least some of the damage occurred during ATI’s custody, a finding that the Supreme Court upheld.

Building on this principle, the Court emphasized the burden of proof on the arrastre operator to show compliance with the obligation to deliver the goods in good condition and that any losses were not due to its negligence. ATI failed to meet this burden. The Court of Appeals had noted that ATI did not present the Turn Over Inspector and the Bad Order Inspector as witnesses to verify the correctness of the surveys. These inspectors could have provided crucial testimony regarding when the additional damage occurred and whose fault it was. The absence of this testimony proved detrimental to ATI’s case.

The Court concluded that ATI and the broker, Dynamic, were solidarily liable for the loss of the additional 54 rolls of kraft linear board due to negligence in their handling, storage, and delivery of the shipment. However, the Court agreed with ATI’s stance on the award of attorney’s fees, stating that such an award requires factual, legal, and equitable justification. The Court noted that there was no compelling reason cited by the lower courts that would entitle the respondent to attorney’s fees. The mere fact of litigating to protect one’s interest does not automatically justify an award of attorney’s fees. Therefore, the Supreme Court deleted the award of attorney’s fees.

FAQs

What was the key issue in this case?	The key issue was whether the arrastre operator, Asian Terminals, Inc. (ATI), was liable for additional damage to goods that occurred while the goods were in its custody.
What is an arrastre operator?	An arrastre operator is a company that handles cargo at piers and wharves. They are responsible for taking good care of the goods and delivering them in good condition to the party entitled to possession.
What standard of care is required of an arrastre operator?	An arrastre operator must observe the same degree of diligence as that required of a common carrier and a warehouseman, ensuring the goods are handled with care to prevent loss or damage.
Who has the burden of proof when goods are damaged?	When a consignee claims loss or damage, the burden of proof is on the arrastre operator to show that it complied with its obligation to deliver the goods in good condition and that the losses were not due to its negligence or that of its employees.
Does a customs broker’s signature absolve the arrastre operator?	No, a customs broker’s representative’s signature merely signifies that the representative frees the arrastre from liability for loss or damage while the cargo is in the representative’s custody. It does not foreclose the consignee’s right to prove that damage occurred while the goods were under the arrastre operator’s control.
What evidence did ATI present to prove its diligence?	ATI presented Turn Over Surveys of Bad Order Cargoes and Requests for Bad Order Survey, but the courts found that these documents either pertained to damage that occurred prior to ATI’s custody or did not sufficiently prove that no additional damage occurred while in ATI’s possession.
Why was ATI held liable for the additional damage?	ATI was held liable because it failed to present sufficient evidence to prove that the additional damage did not occur while the goods were in its custody. The courts also noted that ATI employees used improper equipment during loading, contributing to the damage.
What was the Supreme Court’s ruling on attorney’s fees?	The Supreme Court deleted the award of attorney’s fees, stating that there was no compelling reason cited by the lower courts that would entitle the respondent to such fees.

This case serves as a critical reminder of the responsibilities and potential liabilities faced by arrastre operators in the Philippines. The decision underscores the importance of meticulous cargo handling practices and thorough documentation to protect against claims of negligence. Understanding these obligations is vital for all parties involved in the transportation and storage of goods.

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: Asian Terminals, Inc. vs. Allied Guarantee Insurance, Co., Inc., G.R. No. 182208, October 14, 2015