Bad Order Certificate
ON January 11, 1986, Union Corporation USA shipped from New York, 50 drums of brake fluid on board the vessel SS John Mark consigned to Union Corpo-ration Phils. Upon arrival of the ship in Manila, the shipment was discharged unto the control, custody and safekeeping of Arrastre Operator, complete and in good order. The cargo was subsequently released from the custody of the Arrastre Operator for delivery to the consignee. But out of the 50 drums comprising the shipment, three drums were released in the condition described in the "Request for Bad Order Survey", that is "in apparent good order, contents complete except each dented at rims".
At the consignee's warehouse, the three drums were declared as "no longer saleable in the local market" by the marine surveyor. Thus, Union Corporation Philippines filed a claim against the Arrastre Operator for the damage sustained by the three drums of brake fluid. But the Arrastre Operator refused to pay the claim of the consignee. Hence, the insurer of the shipment paid the claim of the consignee and it subsequently instituted an action in Court as subrogee of the consignee. After trial on the merits, the trial court adjudged the Arrastre Operator not liable for the damages sustained by the shipment. The insurer elevated the case to the Court of Appeals.
But the appellate court certified the case to the Supreme Court on the ground that the question involved was purely legal. And the Supreme Court ruled in the following tenor: "Upon the Stipulation of Facts and the documentary evidence submitted by the parties, we find that the conclusion drawn therefrom in the appealed judgment calls for reversal. The real issue to resolve is, did the loss of the contents of the three drums of brake fluid occur while the drums were in the custody of the defendant arrastre operator? Of crucial significance is the condition of the cargo as described in defendant's (Arrastre Operator) Request for Bad Order Survey prepared before the release of the goods to the consignee's broker as follows" "3 drums brake fluid, in apparent good order, contents complete except each dented at rims."
The said Certificate was signed not only by the defendant's inspector but also by the consignee's representative. It shows that while the rims of the drums were dented, the contents thereof were complete. If, as the marine survey showed, "it was evident that the contents had leaked as shown by stain marks on various parts of the containers", then, those stain marks should have been evident as well when defendant's Bad Order Certificate was prepared. The consignee's representative would surely have noticed it and would have caused a notation to that effect to have been made in the Bad Order Certificate.
The fact that the Certificate was silent on that point but that instead it specifically indicated that the contents were complete cannot but lead to the conclusion that the leakage of the contents, as detected upon survey at the consignee's warehouse, must have occurred after the cargo had left defendant's custody. x x x ". Thus, when the Certificate of Bad Order Survey shows the loss/damage occurred after the goods have left the custody of the Arrastre Operator, then the Arrastre Operator is absolved from any liability. For inquiries, contact the author at jtb@pac-atlantic.com.ph.
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Is a Customs Broker a Common Carrier?
CAN a charterer's agent be considered a ship agent?
YES. And this is the story.
On 16 February 1991, at Vancouver, Canada, LOTEX SHIPPING,
INC. as the shipper-charterer of the M/V Trade Carrier
shipped and loaded on board the said vessel 5,000 metric
tons of potash in bulk for transportation and delivery
at the port of Toledo City, Cebu, in favor of ALTAS
FERTILIZER CORPORATION (AFC). The said shipment was
insured with TRIDENT INSURANCE CORP. (TIC) against all
risks.
When the shipment arrived in Cebu, AFC claimed a shortage
of 476.140 metric tons valued at P1,657,700.95. TIC
as the insurer, paid the insurance claim of AFC. And
as subrogee, it filed a complaint with the Regional
Trial Court of Manila against MACON & Co. ( MC)
as the charterer's agent and TRADE AND TRANSPORT as
the owner/operator of the MV Trade Carrier.
As summons could not be served to TRADE AND TRANSPORT,
the case against it was considered dismissed, without
prejudice.
MC interposed the defense that it was not the agent
of the owner/operator of the vessel. But it admitted
that it was the agent of the charterer. And as such,
it attended to the formalities and the needs of the
vessel.
After trial on the merits, the trial court dismissed
the case as it found out that MC was not the ship agent
of the owner/operator of the vessel.
But the Court of Appeals ruled that MC can still be
held liable for the shortage of the shipment because
it was the ship agent of the shipper-charterer of the
vessel.
MC elevated the case to the Supreme Court. And the
Supreme Court held:
"In the present case, we find no compelling reason
to overturn the Court of Appeals in its categorical
finding that petitioner (MC) was the ship agent. Such
factual finding was not in conflict with the trial court's
ruling, which merely stated that petitioner was not
the ship agent of Trade and Transport. Indeed, although
it is not an agent of Trade and Transport, petitioner
can still be the ship agent of the vessel MV "Trade
Carrier".
Article 586 of the Code of Commerce states that a ship
agent is "person entrusted with provisioning or
representing the vessel in the port in which it may
be found.
Hence, whether acting as agent of the owner or as agent
of the charterer, petitioner will be considered as the
ship agent and may be liable as such, as long as the
latter is the one that provisions or represents the
vessel.
x x x "
Thus, let us bear in mind that when a charterer's agent
prepares the needs of a vessel such as money, provisions,
water and fuel, it shall be considered as the ship agent
within the context of Article 586 of the Code of Commerce.
For comments or inquiries, please contact the author
at jtb@pac-atlantic.com.ph.
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Is a Customs Broker a Common Carrier?
YES. And this is the story. In 1992,
WS Laboratories, Inc. (WS) imported via airfreight from
Germany oral contraceptives which were packed in one
aluminum container and in two pallets. WS insured the
shipment with LGU Insurance (LGU).
Upon arrival of the shipment at the Ninoy Aquino International
Airport, it was discharged "without exception"
and delivered to the PSI Warehouse for safekeeping.
Swift Brokerage, Inc. (Swift) as the customs broker
of WS through its representatives, paid the corresponding
duties, taxes and fees.
Upon receipt of the shipment, a representative
of Swift acknowledged that he received the cargoes consisting of three pieces
in good condition. Swift delivered the cargoes to WS. A representative of WS acknowledged
the delivery of the cargoes. But upon inspection, he discovered some cartons were
in bad order. Thus, he placed a notation on the delivery receipt that 44 cartons
of oral contraceptives were in bad order condition. The rest were accepted as
complete and in good order. WS later demanded from Swift the
payment of the value of its loss arising from the damaged contraceptives. But
the latter refused. WS filed an insurance claim against LGU and LGU paid the claim
of WS. And WS issued a subrogation receipt in favor of LGU. On demand by LGU,
Swift disclaimed any liability. Hence, LGU filed a complaint for damages before
the Regional Trial Court. But the trial court after trial on the merits, dismissed
the complaint. On appeal, the Court of Appeals reversed the
decision of the trial court, holding that Swift was engaged not only in the business
of customs brokerage but also in the transportation and delivery of the cargo
of its clients hence, a common carrier within the context of the Civil Code. The
motion for reconsideration of Swift was denied by the Court of Appeals, prompting
Swift to elevate the case to the Supreme Court. The Supreme Court ruled: "The
appellate court did not err in finding petitioner (Swift), a customs broker, to
be also a common carrier, as defined under Article 1732 of the Civil Code x x
x. Article 1732 does not distinguish between one whose principal
business activity is the carrying of goods and one who does such carrying only
as an ancillary activity. The contention, therefore, of petitioner that it is
not a common carrier but a customs broker whose principal function is to prepare
the correct customs declaration and proper shipping documents as required by law
is bereft of merit. It suffices that petitioner undertakes
to deliver the goods for pecuniary consideration. In this light, petitioner as
a common carrier is mandated to observe, under Article 1733 of the Civil Code,
extraordinary diligence in the vigilance over the goods it transports according
to all circumstances of each case. In the event that the goods are lost, destroyed
or deteriorated, it is presumed to have been at fault or to have acted negligently,
unless it proves that it observed extraordinary diligence. "
Let us bear in mind that a customs broker engaged not only in the business of
customs brokerage but also in the transportation and delivery of the cargo/es
of its clients is a common carrier within the context of the Civil Code.
For
comment or inquiries, contact the writer at jtb@pac-atlantic.com.ph.
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