On 18 December 1961, the Daishin Maru arrived in Manila with a cargo of 1,000 bags of synthetic resin consigned to General Base Metals Inc, which later sold the cargo and assigned its rights to Union Carbide Philippines Inc (UCP). On the following day, the cargo was delivered to the Manila Port Service in good order and condition, except for 25 bags which were in bad order. On 20 January and 6 and 8 February 1962, 898 bags of resin were delivered by the customs broker to the consignee. A further 25 bags were damaged or pilfered while they were in the custody of the arrastre operator. [An arrastre is defined by the Philippine Ports Authority (PPA) 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'.] The 152 bags of resin (102 missing and 50 damaged) were valued at USD 12.65 a bag, or a total of USD 1,992.80.

On 21 December 1962, UCP brought claims against the Manila Railroad Co, the Manila Port Service, and the American Steamship Agencies Inc in the Court of First Instance of Manila. UCP's first claim was brought under the Carriage of Goods by Sea Act (COGSA) against the carrier's agent for the value of the 25 bags of resin which were damaged before they were landed. The other claim was an action under the management contract between the Bureau of Customs and the Manila Port Service, a subsidiary of the Manila Railroad Co, for the value of the undelivered 102 bags of resin and 25 bags, the contents of which were damaged or pilfered while in the custody of the arrastre operator.

The trial Court dismissed UCP's case against the carrier's agent on the ground that the action had already prescribed, because it was not 'brought within one year after delivery of the goods', as contemplated in s 3(6) of the Carriage of Goods by Sea Act. The one-year period was counted from 19 December 1961, when the cargo was delivered to the arrastre operator. The action was brought on 21 December 1962, or two days late, according to the trial Court's reckoning. With respect to UCP's claim against the arrastre operator, the trial Court found that the provisional claim was filed within the 15-day period fixed in para 15 of the arrastre contract. Yet, in spite of that finding, the trial Court also dismissed the action against the arrastre operator.

UCP appealed to the Court of Appeals (CA) on questions of fact and of law. The CA elevated the case to this Court on the basis that the appeal raised only the legal issue of prescription.

Held: The trial court's judgment is affirmed in so far as it dismissed UCP's claim against American Steamship Agencies Inc on the ground of prescription. The trial Court's decision is reversed in so far as it dismissed UCP's claim against the Manila Railroad Co as arrastre operator.

The one-year period within which the consignee should sue the carrier is computed under s 3(6) of COGSA as from 'the delivery of the goods or the date when the goods should have been delivered'. What is the meaning of 'delivery' in s 3(6)? The trial Court construed delivery as referring to the discharge or landing of the cargo. UCP contends that 'delivery' does not mean the discharge of goods or their delivery to the arrastre operator, but the actual delivery of the goods to the consignee by the customs broker. The carrier contends that delivery means discharge from the vessel into the custody of the customs arrastre operator, because under ss 1201 and 1206 of the Tariff and Customs Code merchandise cannot be directly delivered by the carrier to the consignee, but should first pass through the customhouse at a port of entry for the collection of customs duties.

The sensible and practical interpretation is that delivery within the meaning of s 3(6) of COGSA means delivery to the arrastre operator. That delivery is evidenced by tally sheets which show whether the goods were landed in good order or in bad order, a fact which the consignee or shipper can easily ascertain through the customs broker. To use the actual delivery to the consignee as the basis for computing the one-year period would be unrealistic, and might generate confusion between the loss or damage sustained by the goods while in the carrier's custody, and the loss or damage caused to the goods while in the arrastre operator's possession.

Apparently, s 3(6) of COGSA adheres to the common-law rule that the duty imposed on water carriers was merely to transport from wharf to wharf, and that the carrier was not bound to deliver the goods at the warehouse of the consignee: see Tan Hi v United States 94 Fed Supp 432, 435. In Tan Hi, it was held that a requirement of Philippine law that all cargo unloaded at Manila be delivered to the consignee through the arrastre operator acting as customs agent was not unreasonable. The common-law requirements as to the proper delivery of goods by water carrier apply only when customs regulations at the port of destination do not otherwise provide. The delivery must be in accordance with the usages of the port in order that such delivery would discharge the carrier of responsibility.

On the facts of this case, the one-year period was correctly reckoned by the trial Court from 19 December 1961, when the cargo was discharged from the carrying vessel and delivered to the Manila Port Service. That one-year period expired on 19 December 1962. As the action was filed on 21 December 1962, it was barred by the statute of limitations. American Steamship Agencies Inc, as agent of the carrier, has no liability to UCP in connection with the damaged 25 bags of resin.

The action against the arrastre operator was filed on the same date. That action was filed on time, because of a longer limitation period arising from the management contract between the Manila Port Service and the Bureau of Customs. The trial Court erred in dismissing the action against the Manila Port Service and its principal, the Manila Railroad Co. The arrastre operator is responsible for the value of the 102 bags of resin which were not delivered, and the 25 bags which were damaged.