This was a petition for review on certiorari of the decision of the Regional Trial Court (RTC) of Makati City, Branch 138, on the ground that the trial Court committed a reversible error of law in dismissing the petitioner's complaint for damages on the ground of prescription under the Carriage of Goods by Sea Act (COGSA).

On 9 November 2002, Macro-Lite Korea Corp shipped 185 packages (231,000 sheets) of electrolytic tin free steel to San Miguel Corp on the M/V Dimi P under a bill of lading. The shipment had a declared value of USD 169,850.35, and was insured with the petitioner against all risks under a marine policy. On discharge, it was noted that seven packages were damaged and in bad order. The shipment was then turned over to the custody of the respondent, Asian Terminals Inc (ATI), on 21 November 2002 for storage and safekeeping pending its withdrawal by the consignee's authorised customs broker, RV Marzan Brokerage Corp (Marzan). On withdrawal by Marzan, an additional five packages were found to be damaged and in bad order.

On 6 January 2003, the consignee, San Miguel Corp, filed separate claims against the respondent and the petitioner for the damage to 11,200 sheets of electrolytic tin free steel. The petitioner paid the consignee PHP 431,592.14 for the damage caused to the shipment, and brought an action as subrogee against the respondent.

The trial Court found that ATI was estopped from claiming that there was no additional damage suffered by the shipment. It was logical to conclude that the damage to the additional five packages was caused solely by the negligence of ATI. ATI invoked the Contract for Cargo Handling Services executed between the Philippine Ports Authority and Marina Ports Services Inc (now ATI). Under this contract, ATI's liability for damage to cargoes in its custody is limited to PHP 5,000 for each package, unless the value of the cargo shipment is otherwise specified or manifested or communicated in writing, together with the declared bill of lading value, and supported by a certified packing list, to the contractor by the interested party or parties before the goods are discharged or loaded onto the vessel. The trial Court found that the shipper and consignee had complied with this requirement, so as to overcome the limitation of liability of the arrastre operator. [An arrastre is defined by the Philippine Ports Authority as a 'person/entity who/which performs portside cargo handling operations, e.g. receiving, handling, custody, security and delivery of cargo passing over piers, quays or wharves, transit sheds/warehouses and open storages within the jurisdictional area of responsibility of the authorized contractor/operator'.]

However, the trial Court dismissed the complaint on the ground that the petitioner's claim was already barred by the statute of limitations. It held that COGSA, embodied in Commonwealth Act (CA) No 65, applied to this case, since the goods were shipped from a foreign port to the Philippines. The trial Court stated that under s 3(6) of COGSA, the shipper must bring a suit within one year after the delivery of the goods or the date when the goods should have been delivered, in respect of loss or damage thereto.

The petitioner appealed to the Supreme Court. The petitioner contended that the one-year limitation period for bringing a suit under COGSA was not applicable to this case, because the prescriptive period applies only to the carrier and the ship. It argued that the respondent, which is engaged in the warehousing, arrastre, and stevedoring business, is not a carrier as defined by the COGSA, because it is not engaged in the business of transportation of goods by sea in international trade as a common carrier. The petitioner argued that since the complaint was filed against respondent arrastre operator only, without impleading the carrier, the prescriptive period under COGSA was not applicable. Moreover, the petitioner contended that the term 'carriage of goods' in COGSA covers the period from the time the goods are loaded to the vessel to the time they are discharged. It points out that it sued the respondent only for the additional five packages that were found damaged while in the respondent’s custody, long after the shipment was discharged from the vessel.

Held: The petition is granted. The decision of the trial Court is reversed and set aside. The respondent is ordered to pay the petitioner damages of PHP 164,428.76.

The Carriage of Goods by Sea Act (COGSA), Public Act No 521 of the 74th US Congress, was accepted to be made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade by virtue of CA No 65. Section 1 of CA No 65 states:

That the provisions of Public Act Numbered Five hundred and twenty-one of the Seventy-fourth Congress of the United States, approved on April sixteenth, nineteen hundred and thirty-six, be accepted, as it is hereby accepted to be made applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade: Provided, That nothing in the Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application.

In COGSA the term 'carriage of goods' covers the period from the time when the goods are loaded to the time when they are discharged from the ship; thus, it can be inferred that the period of time when the goods have been discharged from the ship and given to the custody of the arrastre operator is not covered by COGSA. Under s 3(6) of COGSA, the carrier and the ship may put up the defence of prescription if the action for damages is not brought within one year after the delivery of the goods or the date when the goods should have been delivered. It has been held that not only the shipper, but also the consignee or legal holder of the bill may invoke the prescriptive period. However, COGSA does not mention that an arrastre operator may invoke the prescriptive period of one year; hence, it does not cover the arrastre operator.

The respondent arrastre operator's responsibility and liability for losses and damages is set forth in s 7.01 of the Contract for Cargo Handling Services. The contract stipulates that the consignee has a period of 30 days from the date of delivery of the package to the consignee within which to request a certificate of loss from the arrastre operator. From the date of the request for a certificate of loss, the arrastre operator has a period of 15 days within which to issue a certificate of non-delivery/loss, either actually or constructively. Moreover, from the date of issuance of a certificate of non-delivery/loss, the consignee has 15 days within which to file a formal claim covering the loss, injury, damage or non-delivery of such goods with all accompanying documentation against the arrastre operator.

As early as 29 November 2002, the date of the last withdrawal of the goods from the arrastre operator, ATI was able to verify that five packages of the shipment were in bad order while in its custody. The certificate of non-delivery referred to in the contract is similar to, or identical with, the examination report on the request for a bad order survey. The verification and ascertainment of liability by ATI had been accomplished within 30 days from the date of delivery of the package to the consignee and within 15 days from the date of issuance by ATI of the examination report on the request for a bad order survey. Although the formal claim was filed beyond the 15-day period from the issuance of the examination report on the request for a bad order survey, the purpose of the time limitations for the filing of claims had already been fully satisfied, as the arrastre operator had become aware of, and had verified, the facts giving rise to its liability. Hence, the arrastre operator suffered no prejudice by the lack of strict compliance with the 15-day limitation to file a formal complaint.