Contractual Obligations Prevail: Storage Fees Due Despite Customs Hold Order

Asian Terminals, Inc. v. Padoson Stainless Steel Corporation (G.R. No. 211876, June 25, 2018) settles a recurring question for importers and port operators: does a Bureau of Customs (BOC) hold order transfer liability for storage fees from the consignee to the government? The Supreme Court said no, reaffirming that contractual obligations remain binding even when government agencies issue orders affecting the goods.

The Dispute

Padoson Stainless Steel Corporation engaged Asian Terminals, Inc. (ATI) to provide arrastre, wharfage, and storage services for two shipments of steel coils at the Port of Manila. The shipments arrived in October 2001 and were stored in ATI's premises.

Before the goods arrived, the BOC issued a Hold-Order against the shipments on September 7, 2001, because of Padoson's tax liability. A customs case followed. The shipments remained in ATI's custody until July 29, 2006.

ATI billed Padoson P8,914,535.28 for storage fees. Padoson refused to pay. ATI sued for sum of money.

The Lower Courts' Ruling

The Regional Trial Court dismissed ATI's complaint. Relying on Subic Bay Metropolitan Authority v. Rodriguez (633 Phil. 196 [2010]), the trial court held that the BOC acquired constructive possession over the shipments when it issued the Hold-Order. Consequently, the BOC—not Padoson—should bear the storage fees. Since ATI did not implead the BOC, the court dismissed the case.

The Court of Appeals affirmed.

The Supreme Court's Ruling

The Supreme Court reversed. The Court found that the lower courts misapplied the SBMA doctrine.

In SBMA, the BOC had actual possession because the Hold-Order directed port officers to transfer the goods to a security warehouse. Here, the goods remained physically in ATI's premises. The BOC never took actual custody.

More importantly, the Court clarified that the BOC's jurisdiction over seized goods exists "for the purpose of enforcing customs laws"—to collect duties due the State. This has nothing to do with a private company's right to collect storage fees for services rendered to its client.

Relativity of Contracts

The Court anchored its ruling on the principle of relativity of contracts: contracts bind only the parties who entered into them. Padoson, not the BOC, contracted with ATI for storage services. Padoson benefited from those services. The BOC was never privy to the contract.

The Hold-Order was directed at Padoson's tax liability—a separate obligation. As the Court put it, Padoson had "two monetary obligations, albeit of different characters": one to ATI for storage fees, and one to the BOC for taxes.

The BOC was also not an indispensable party to ATI's collection suit. Its interest in the shipments (collecting taxes) was distinct from ATI's claim (collecting storage fees under contract).

Failure to Prove Damage

Padoson also claimed the shipments deteriorated while in ATI's custody. The Court rejected this. The photographs Padoson presented were not admitted because they were not pre-marked during pre-trial. The sheriff's reports came from the customs case, in which ATI was not a party and had no opportunity to contest the findings. The sheriff himself never testified. The Court held that ATI could not be bound by proceedings to which it was a stranger.

Interest and Damages

The Court ordered Padoson to pay the full P8,914,535.28. Applying Nacar v. Gallery Frames (716 Phil. 267 [2013]), the Court imposed 12% interest per annum from August 4, 2006 (when ATI filed its complaint) to June 30, 2013, and 6% per annum from July 1, 2013, until full satisfaction, following Bangko Sentral Circular No. 799.

ATI's claims for exemplary damages and attorney's fees were denied because ATI did not prove entitlement to moral, temperate, liquidated, or compensatory damages, and no ground under Article 2208 of the Civil Code existed.

Practical Takeaways

• A BOC hold order does not extinguish a consignee's contractual obligation to pay storage fees to an arrastre operator. The consignee remains liable under its contract.
• The BOC's jurisdiction over goods subject to a hold order is limited to enforcing customs laws. It does not automatically make the government liable for private storage charges.
• The doctrine of relativity of contracts protects parties from liability to third persons—but it also binds them to their own contracts.
• Evidence not formally offered and admitted during trial cannot be considered by courts, even if it appears in related cases where the party was not impleaded.
• Interest on unpaid storage fees runs from judicial demand: 12% per annum until June 30, 2013, and 6% per annum thereafter.

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