Arrastre Operator Liability: Proving Diligence in Cargo Handling

When goods are damaged while in the custody of an arrastre operator, who bears the burden of proof? The Supreme Court's 2015 decision in Asian Terminals, Inc. v. Allied Guarantee Insurance Co., Inc. (G.R. No. 182208) provides a clear answer: the arrastre operator must prove it exercised due diligence, and mere paperwork may not be enough to escape liability.

The case involved a shipment of kraft linear board imported from the United States for delivery to San Miguel Corporation. After the vessel arrived in Manila, the cargo was discharged to the arrastre operator, Asian Terminals, Inc. (ATI, formerly Marina Port Services). Of the total shipment, 158 rolls were found damaged during the sea voyage, and an additional 54 rolls were damaged while in the custody of ATI and the customs broker, Dynamic Brokerage Co., Inc.

The insurer, Allied Guarantee Insurance, paid San Miguel P755,666.84 for the losses and, as subrogee, sued the shipping company, the arrastre operator, and the broker.

The Legal Relationship of an Arrastre Operator

The Court explained that the relationship between a consignee and an arrastre operator is akin to that of a depositor and a warehouseman. An arrastre operator's principal duty is to handle cargo at piers and wharves, take good care of the goods in its custody, and deliver them in good condition to the party entitled to possession.

Because of this relationship, an arrastre operator must observe the same degree of diligence required of a common carrier and a warehouseman. This is a heightened standard of care, reflecting the operator's exclusive control over the goods while they are in its possession.

The Burden of Proof on the Arrastre Operator

When a consignee claims loss or damage, the burden of proof shifts to the arrastre operator. It must show that it complied with its obligation to deliver the goods and that the losses were not due to its negligence or that of its employees.

In this case, ATI failed to discharge this burden. The Court noted that ATI did not present the Turn Over Inspector and Bad Order Inspector who prepared the survey documents. These witnesses could have testified on when the additional damage was sustained and by whose fault. Without them, the private documents were not authenticated and were correctly disregarded as hearsay.

Why Sign-Offs Do Not Automatically Absolve the Arrastre

ATI argued that the Requests for Bad Order Survey, signed by the broker's representative, showed only 158 rolls were damaged at the time of transfer, thereby absolving it of liability for the additional 54 rolls.

The Court rejected this argument. A mere sign-off from a customs broker's representative that goods were received "in good order and condition" does not foreclose the consignee's (or its subrogee's) right to prove that damage occurred while the cargo was under the arrastre's custody. The signature only frees the arrastre from liability for damage occurring after the representative takes custody—it does not shield the arrastre from claims for damage that occurred before or during the transfer.

The Importance of Proper Cargo Handling Equipment

The trial court found that ATI's employees used a "grabbed lift" to load the goods onto the broker's trucks, which contributed to the damage. The Court emphasized that arrastre operators must provide appropriate cargo handling equipment and ensure their employees observe standards and measures necessary to prevent losses and damage to shipments.

Proving diligence requires more than showing the possibility that another party could be responsible. The arrastre must affirmatively prove it exercised due care in handling the goods.

The Rule 45 Limitation: Questions of Law Only

A significant procedural point in this case: a petition for review on certiorari under Rule 45 of the Rules of Court may raise only questions of law, not questions of fact. The Court noted that ATI's petition essentially asked it to re-examine and re-weigh the evidence—a task outside the scope of a Rule 45 petition.

The Court enumerated exceptions to this rule (e.g., when findings are grounded on speculation, when the Court of Appeals overlooked relevant facts, or when findings are contrary to the admissions of both parties), but found none applicable. The trial court and the Court of Appeals had made consistent factual findings, and ATI could not point to any overlooked or misapprehended fact.

Attorney's Fees: Not Automatically Awarded

While the Court affirmed ATI's liability for the damaged goods, it deleted the award of attorney's fees. The Court held that an award of attorney's fees requires factual, legal, and equitable justification. The mere fact that a party was forced to litigate to protect its interest does not amount to the compelling legal reason required for such an award. In this case, the trial court failed to provide the necessary justification, so the award was deleted.

Practical Takeaways

• Arrastre operators bear the burden of proving due diligence when goods in their custody are damaged. They must present credible evidence, including witnesses who can authenticate inspection documents.
• Sign-off documents are not automatic shields. A broker's receipt of goods "in good order" does not bar the consignee or insurer from proving damage occurred during the arrastre's custody.
• Use proper equipment and train personnel. Negligent handling, such as using the wrong lifting equipment, can establish liability.
• Preserve and authenticate documentary evidence. Unauthenticated private documents may be excluded as hearsay under the Rules of Court.
• For insurers and consignees, the case confirms that subrogation claims against arrastre operators are viable where the operator cannot prove it exercised the diligence of a warehouseman and common carrier.

This article is general information and not legal advice. For your specific situation, consult a lawyer or ask ASG Legal AI.