G.R. No. L-18965 October 30, 1964

COMPAIA MARITIMA, petitioner, vs. INSURANCE COMPANY OF NORTH AMERICA, respondent.

Rafael Dinglasan for petitioner. Ozaeta Gibbs & Ozaeta for respondent.

BAUTISTA ANGELO, J.:

Sometime in October, 1952, Macleod and Company of the Philippines contracted by telephone the services of the Compaia Maritima, a shipping corporation, for the shipment of 2,645 bales of hemp from the former's Sasa private pier at Davao City to Manila and for their subsequent transhipment to Boston, Massachusetts, U.S.A. on board the S.S. Steel Navigator. This oral contract was later on confirmed by a formal and written booking issued by Macleod's branch office in Sasa and handcarried to Compaia Maritima's branch office in Davao in compliance with which the latter sent to Macleod's private wharf LCT Nos. 1023 and 1025 on which the loading of the hemp was completed on October 29, 1952. These two lighters were manned each by a patron and an assistant patron. The patrons of both barges issued the corresponding carrier's receipts and that issued by the patron of Barge No. 1025 reads in part:

Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

Thereafter, the two loaded barges left Macleod's wharf and proceeded to and moored at the government's marginal wharf in the same place to await the arrival of the S.S. Bowline Knot belonging to Compaia Maritima on which the hemp was to be loaded. During the night of October 29, 1952, or at the early hours of October 30, LCT No. 1025 sank, resulting in the damage or loss of 1,162 bales of hemp loaded therein. On October 30, 1952, Macleod promptly notified the carrier's main office in Manila and its branch in Davao advising it of its liability. The damaged hemp was brought to Odell Plantation in Madaum, Davao, for cleaning, washing, reconditioning, and redrying. During the period from November 1-15, 1952, the carrier's trucks and lighters hauled from Odell to Macleod at Sasa a total of 2,197.75 piculs of the reconditioned hemp out of the original cargo of 1,162 bales weighing 2,324 piculs which had a total value of 116,835.00. After reclassification, the value of the reconditioned hemp was reduced to P84,887.28, or a loss in value of P31,947.72. Adding to this last amount the sum of P8,863.30 representing Macleod's expenses in checking, grading, rebating, and other fees for washing, cleaning and redrying in the amount of P19.610.00, the total loss adds up to P60,421.02.

All abaca shipments of Macleod, including the 1,162 bales loaded on the carrier's LCT No. 1025, were insured with the Insurance Company of North America against all losses and damages. In due time, Macleod filed a claim for the loss it suffered as above stated with said insurance company, and after the same had been processed, the sum of P64,018.55 was paid, which was noted down in a document which aside from being a receipt of the amount paid, was a subrogation agreement between Macleod and the insurance company wherein the former assigned to the latter its rights over the insured and damaged cargo. Having failed to recover from the carrier the sum of P60,421.02, which is the only amount supported by

receipts, the insurance company instituted the present action on October 28, 1953. After trial, the court a quo rendered judgment ordering the carrier to pay the insurance company the sum of P60,421.02, with legal interest thereon from the date of the filing of the complaint until fully paid, and the costs. This judgment was affirmed by the Court of Appeals on December 14, 1960. Hence, this petition for review.

The issues posed before us are: (1) Was there a contract of carriage between the carrier and the shipper even if the loss occurred when the hemp was loaded on a barge owned by the carrier which was loaded free of charge and was not actually loaded on the S.S. Bowline Knot which would carry the hemp to Manila and no bill of lading was issued therefore?; (2) Was the damage caused to the cargo or the sinking of the barge where it was loaded due to a fortuitous event, storm or natural disaster that would exempt the carrier from liability?; (3) Can respondent insurance company sue the carrier under its insurance contract as assignee of Macleod in spite of the fact that the liability of the carrier as insurer is not recognized in this jurisdiction?; (4) Has the Court of Appeals erred in regarding Exhibit NNN-1 as an implied admission by the carrier of the correctness and sufficiency of the shipper's statement of accounts contrary to the burden of proof rule?; and (5) Can the insurance company maintain this suit without proof of its personality to do so?

1. This issue should be answered in the affirmative. As found by the Court of Appeals, Macleod and Company contracted by telephone the services of petitioner to ship the hemp in question from the former's private pier at Sasa, Davao City, to Manila, to be subsequently transhipped to Boston, Massachusetts, U.S.A., which oral contract was later confirmed by a formal and written booking issued by the shipper's branch office, Davao City, in virtue of which the carrier sent two of its lighters to undertake the service. It also appears that the patrons of said lighters were employees of the carrier with due authority to undertake the transportation and to sign the documents that may be necessary therefor so much so that the patron of LCT No. 1025 signed the receipt covering the cargo of hemp loaded therein as follows: .

Received in behalf of S.S. Bowline Knot in good order and condition from MACLEOD AND COMPANY OF PHILIPPINES, Sasa Davao, for transhipment at Manila onto S.S. Steel Navigator.

FINAL DESTINATION: Boston.

The fact that the carrier sent its lighters free of charge to take the hemp from Macleod's wharf at Sasa preparatory to its loading onto the ship Bowline Knot does not in any way impair the contract of carriage already entered into between the carrier and the shipper, for that preparatory step is but part and parcel of said contract of carriage. The lighters were merely employed as the first step of the voyage, but once that step was taken and the hemp delivered to the carrier's employees, the rights and obligations of the parties attached thereby subjecting them to the principles and usages of the maritime law. In other words, here we have a complete contract of carriage the consummation of which has already begun: the shipper delivering the cargo to the carrier, and the latter taking possession thereof by placing it on a lighter manned by its authorized employees, under which Macleod became entitled to the privilege secured to him by law for its safe transportation and delivery, and the carrier to the full payment of its freight upon completion of the voyage.

The receipt of goods by the carrier has been said to lie at the foundation of the contract to carry and deliver, and if actually no goods are received there can be no such contract. The liability and responsibility of the carrier under a contract for the carriage of goods commence on their actual delivery to, or receipt by, the carrier

or an authorized agent. ... and delivery to a lighter in charge of a vessel for shipment on the vessel, where it is the custom to deliver in that way, is a good delivery and binds the vessel receiving the freight, the liability commencing at the time of delivery to the lighter. ... and, similarly, where there is a contract to carry goods from one port to another, and they cannot be loaded directly on the vessel and lighters are sent by the vessel to bring the goods to it, the lighters are for the time its substitutes, so that the bill of landing is applicable to the goods as soon as they are placed on the lighters. (80 C.J.S., p. 901, emphasis supplied)

... The test as to whether the relation of shipper and carrier had been established is, Had the control and possession of the cotton been completely surrendered by the shipper to the railroad company? Whenever the control and possession of goods passes to the carrier and nothing remains to be done by the shipper, then it can be said with certainty that the relation of shipper and carrier has been established. Railroad Co. v. Murphy, 60 Ark. 333, 30 S.W. 419, 46 A. St. Rep. 202; Pine Bluff & Arkansas River Ry. v. MaKenzie, 74 Ark. 100, 86 S.W. 834; Matthews & Hood v. St. L., I.M. & S.R. Co., 123 Ark. 365, 185 S.W. 461, L.R.A. 1916E, 1194. (W.F. Bogart & Co., et al. v. Wade, et al., 200 S.W. 148).

The claim that there can be no contract of affreightment because the hemp was not actually loaded on the ship that was to take it from Davao City to Manila is of no moment, for, as already stated, the delivery of the hemp to the carrier's lighter is in line with the contract. In fact, the receipt signed by the patron of the lighter that carried the hemp stated that he was receiving the cargo "in behalf of S.S. Bowline Knot in good order and condition." On the other hand, the authorities are to the effect that a bill of lading is not indispensable for the creation of a contract of carriage.

Bill of lading not indispensable to contract of carriage. As to the issuance of a bill of lading, although article 350 of the Code of Commerce provides that "the shipper as well as the carrier of merchandise or goods may mutua-lly demand that a bill of lading is not indispensable. As regards the form of the contract of carriage it can be said that provided that there is a meeting of the minds and from such meeting arise rights and obligations, there should be no limitations as to form." The bill of lading is not essential to the contract, although it may become obligatory by reason of the regulations of railroad companies, or as a condition imposed in the contract by the agreement of the parties themselves. The bill of lading is juridically a documentary proof of the stipulations and conditions agreed upon by both parties. (Del Viso, pp. 314-315; Robles vs. Santos, 44 O.G. 2268). In other words, the Code does not demand, as necessary requisite in the contract of transportation, the delivery of the bill of lading to the shipper, but gives right to both the carrier and the shipper to mutually demand of each other the delivery of said bill. (Sp. Sup. Ct. Decision, May 6, 1895). (Martin, Philippine Commercial Laws, Vol. II, Revised Edition, pp. 12-13)

The liability of the carrier as common carrier begins with the actual delivery of the goods for transportation, and not merely with the formal execution of a receipt or bill of lading; the issuance of a bill of lading is not necessary to complete delivery and acceptance. Even where it is provided by statute that liability commences with the issuance of the bill of lading, actual delivery and acceptance are sufficient to bind the carrier. (13 C.J.S., p. 288)

2. Petitioner disclaims responsibility for the damage of the cargo in question shielding itself behind the claim of force majeure or storm which occurred on the night of October 29, 1952. But the evidence fails to bear this out.

Rather, it shows that the mishap that caused the damage or loss was due, not to force majeure, but to lack of adequate precautions or measures taken by the carrier to prevent the loss as may be inferred from the following findings of the Court of Appeals:

Aside from the fact that, as admitted by appellant's own witness, the ill-fated barge had cracks on its bottom (pp. 18-19, t.s.n., Sept. 13, 1959) which admitted sea water in the same manner as rain entered "thru tank man-holes", according to the patron of LCT No. 1023 (exh. JJJ-4) conclusively showing that the barge was not seaworthy it should be noted that on the night of the nautical accident there was no storm, flood, or other natural disaster or calamity. Certainly, winds of 11 miles per hour, although stronger than the average 4.6 miles per hour then prevailing in Davao on October 29, 1952 (exh. 5), cannot be classified as storm. For according to Beaufort's wind scale, a storm has wind velocities of from 64 to 75 miles per hour; and by Philippine Weather Bureau standards winds should have a velocity of from 55 to 74 miles per hour in order to be classified as storm (Northern Assurance Co., Ltd. vs. Visayan Stevedore Transportation Co., CA-G.R. No. 23167-R, March 12, 1959).

The Court of Appeals further added: "the report of R. J. del Pan & Co., Inc., marine surveyors, attributes the sinking of LCT No. 1025 to the 'non-water-tight conditions of various buoyancy compartments' (exh. JJJ); and this report finds confirmation on the above-mentioned admission of two witnesses for appellant concerning the cracks of the lighter's bottom and the entrance of the rain water 'thru manholes'." We are not prepared to dispute this finding of the Court of Appeals.

3. There can also be no doubt that the insurance company can recover from the carrier as assignee of the owner of the cargo for the insurance amount it paid to the latter under the insurance contract. And this is so because since the cargo that was damaged was insured with respondent company and the latter paid the amount represented by the loss, it is but fair that it be given the right to recover from the party responsible for the loss. The instant case, therefore, is not one between the insured and the insurer, but one between the shipper and the carrier, because the insurance company merely stepped into the shoes of the shipper. And since the shipper has a direct cause of action against the carrier on account of the damage of the cargo, no valid reason is seen why such action cannot be asserted or availed of by the insurance company as a subrogee of the shipper. Nor can the carrier set up as a defense any defect in the insurance policy not only because it is not a privy to it but also because it cannot avoid its liability to the shipper under the contract of carriage which binds it to pay any loss that may be caused to the cargo involved therein. Thus, we find fitting the following comments of the Court of Appeals:

It was not imperative and necessary for the trial court to pass upon the question of whether or not the disputed abaca cargo was covered by Marine Open Cargo Policy No. MK-134 isued by appellee. Appellant was neither a party nor privy to this insurance contract, and therefore cannot avail itself of any defect in the policy which may constitute a valid reason for appellee, as the insurer, to reject the claim of Macleod, as the insured. Anyway, whatever defect the policy contained, if any, is deemed to have been waived by the subsequent payment of Macleod's claim by appellee. Besides, appellant is herein sued in its capacity as a common carrier, and appellee is suing as the assignee of the shipper pursuant to exhibit MM. Since, as above demonstrated, appellant is liable to Macleod and Company of the Philippines for the los or damage to the 1,162 bales of hemp after these were received in good order and condition by the patron of appellant's LCT No. 1025, it necessarily follows that appellant is likewise liable to appellee who, as assignee of Macleod, merely

stepped into the shoes of and substi-tuted the latter in demanding from appellant the payment for the loss and damage aforecited.

4. It should be recalled in connection with this issue that during the trial of this case the carrier asked the lower court to order the production of the books of accounts of the Odell Plantation containing the charges it made for the loss of the damaged hemp for verification of its accountants, but later it desisted therefrom on the claim that it finds their production no longer necessary. This desistance notwithstanding, the shipper however pre-sented other documents to prove the damage it suffered in connection with the cargo and on the strength thereof the court a quo ordered the carrier to pay the sum of P60,421.02. And after the Court of Appeals affirmed this award upon the theory that the desistance of the carrier from producing the books of accounts of Odell Plantation implies an admission of the correctness of the statements of accounts contained therein, petitioner now contends that the Court of Appeals erred in basing the affirmance of the award on such erroneous interpretation.

There is reason to believe that the act of petitioner in waiving its right to have the books of accounts of Odell Plantation presented in court is tantamount to an admission that the statements contained therein are correct and their verification not necessary because its main defense here, as well as below, was that it is not liable for the loss because there was no contract of carriage between it and the shipper and the loss caused, if any, was due to a fortuitous event. Hence, under the carrier's theory, the correctness of the account representing the loss was not so material as would necessitate the presentation of the books in question. At any rate, even if the books of accounts were not produced, the correctness of the accounts cannot now be disputed for the same is supported by the original documents on which the entries in said books were based which were presented by the shipper as part of its evidence. And according to the Court of Appeals, these documents alone sufficiently establish the award of P60,412.02 made in favor of respondent.

5. Finally, with regard to the question concerning the personality of the insurance company to maintain this action, we find the same of no importance, for the attorney himself of the carrier admitted in open court that it is a foreign corporation doing business in the Philippines with a personality to file the present action.

WHEREFORE, the decision appealed from is affirmed, with costs against petitioner.

G.R. No. L-36481-2 October 23, 1982

AMPARO C. SERVANDO, CLARA UY BICO, plaintiffs-appellees, vs. PHILIPPINE STEAM NAVIGATION CO., defendant-appellant.

Zoilo de la Cruz, Jr. & Associate for plaintiff-appellee Amparo Servando.

Benedicto, Sumbingco & Associate for appellee Clara Uy Bico.

Ross, Salcedo, del Rosario, Bito & Misa for defendant-appellant.

ESCOLIN, J.:

This appeal, originally brought to the Court of Appeals, seeks to set aside the decision of the Court of First Instance of Negros Occidental in Civil Cases Nos. 7354 and 7428, declaring appellant Philippine Steam Navigation liable for damages for the loss of the appellees' cargoes as a result of a fire which gutted the Bureau of Customs' warehouse in Pulupandan, Negros Occidental.

The Court of Appeals certified the case to Us because only pure questions of law are raised therein.

The facts culled from the pleadings and the stipulations submitted by the parties are as follows:

On November 6, 1963, appellees Clara Uy Bico and Amparo Servando loaded on board the appellant's vessel, FS-176, for carriage from Manila to Pulupandan, Negros Occidental, the following cargoes, to wit:

Clara Uy Bico

1,528 cavans of rice valued

at P40,907.50;

Amparo Servando

44 cartons of colored paper,

toys and general merchandise valued at P1,070.50;

as evidenced by the corresponding bills of lading issued by the appellant. 1

Upon arrival of the vessel at Pulupandan, in the morning of November 18, 1963, the cargoes were discharged, complete and in good order, unto the warehouse of the Bureau of Customs. At about 2:00 in the afternoon of the same day, said warehouse was razed by a fire of unknown origin, destroying appellees' cargoes. Before the fire, however, appellee Uy

Bico was able to take delivery of 907 cavans of rice 2 Appellees' claims for the value of said goods were rejected by the appellant.

On the bases of the foregoing facts, the lower court rendered a decision, the decretal portion of which reads as follows:

WHEREFORE, judgment is rendered as follows:

1. In case No. 7354, the defendant is hereby ordered to pay the plaintiff Amparo C. Servando the aggregate sum of P1,070.50 with legal interest thereon from the date of the filing of the complaint until fully paid, and to pay the costs.

2. In case No. 7428, the defendant is hereby ordered to pay to plaintiff Clara Uy Bico the aggregate sum of P16,625.00 with legal interest thereon from the date of the filing of the complaint until fully paid, and to pay the costs.

Article 1736 of the Civil Code imposes upon common carriers the duty to observe extraordinary diligence from the moment the goods are unconditionally placed in their possession "until the same are delivered, actually or constructively, by the carrier to the consignee or to the person who has a right to receive them, without prejudice to the provisions of Article 1738. "

The court a quo held that the delivery of the shipment in question to the warehouse of the Bureau of Customs is not the delivery contemplated by Article 1736; and since the burning of the warehouse occurred before actual or constructive delivery of the goods to the appellees, the loss is chargeable against the appellant.

It should be pointed out, however, that in the bills of lading issued for the cargoes in question, the parties agreed to limit the responsibility of the carrier for the loss or damage that may be caused to the shipment by inserting therein the following stipulation:

Clause 14. Carrier shall not be responsible for loss or damage to shipments billed 'owner's risk' unless such loss or damage is due to negligence of carrier. Nor shall carrier be responsible for loss or damage caused by force majeure, dangers or accidents of the sea or other waters; war; public enemies; . . . fire . ...

We sustain the validity of the above stipulation; there is nothing therein that is contrary to law, morals or public policy.

Appellees would contend that the above stipulation does not bind them because it was printed in fine letters on the back-of the bills of lading; and that they did not sign the same. This argument overlooks the pronouncement of this Court in Ong Yiu vs. Court of Appeals, promulgated June 29, 1979, 3 where the same issue was resolved in this wise:

While it may be true that petitioner had not signed the plane ticket (Exh. '12'), he is nevertheless bound by the provisions thereof. 'Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation'. It is what is known as a contract of 'adhesion', in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other,

as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent." (Tolentino, Civil Code, Vol. IV, 1962 Ed., p. 462, citing Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49).

Besides, the agreement contained in the above quoted Clause 14 is a mere iteration of the basic principle of law written in Article 1 1 7 4 of the Civil Code:

Article 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.

Thus, where fortuitous event or force majeure is the immediate and proximate cause of the loss, the obligor is exempt from liability for non-performance. The Partidas, 4 the antecedent of Article 1174 of the Civil Code, defines 'caso fortuito' as 'an event that takes place by accident and could not have been foreseen. Examples of this are destruction of houses, unexpected fire, shipwreck, violence of robbers.'

In its dissertation of the phrase 'caso fortuito' the Enciclopedia Juridicada Espanola 5 says: "In a legal sense and, consequently, also in relation to contracts, a 'caso fortuito' presents the following essential characteristics: (1) the cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of the human will; (2) it must be impossible to foresee the event which constitutes the 'caso fortuito', or if it can be foreseen, it must be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (4) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor." In the case at bar, the burning of the customs warehouse was an extraordinary event which happened independently of the will of the appellant. The latter could not have foreseen the event.

There is nothing in the record to show that appellant carrier ,incurred in delay in the performance of its obligation. It appears that appellant had not only notified appellees of the arrival of their shipment, but had demanded that the same be withdrawn. In fact, pursuant to such demand, appellee Uy Bico had taken delivery of 907 cavans of rice before the burning of the warehouse.

Nor can the appellant or its employees be charged with negligence. The storage of the goods in the Customs warehouse pending withdrawal thereof by the appellees was undoubtedly made with their knowledge and consent. Since the warehouse belonged to and was maintained by the government, it would be unfair to impute negligence to the appellant, the latter having no control whatsoever over the same.

The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs. Ossorio 6, where this Court held the defendant liable for damages arising from a fire caused by the negligence of the defendant's employees while loading cases of gasoline and petroleon products. But unlike in the said case, there is not a shred of proof in the present case that the cause of the fire that broke out in the Custom's warehouse was in any way attributable to the negligence of the appellant or its employees. Under the circumstances, the appellant is plainly not responsible.

WHEREFORE, the judgment appealed from is hereby set aside. No costs.

SO ORDERED.

Makasiar (Chairman), Concepcion, Jr., Guerrero, Abad Santos and De Castro, JJ., concur.

Separate Opinions

AQUINO, J., concurring:

I concur. Under article 1738 of the Civil Code "the extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in the warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them".

From the time the goods in question were deposited in the Bureau of Customs' warehouse in the morning of their arrival up to two o' clock in the afternoon of the same day, when the warehouse was burned, Amparo C. Servando and Clara Uy Bico, the consignees, had reasonable opportunity to remove the goods. Clara had removed more than one-half of the rice consigned to her.

Moreover, the shipping company had no more control and responsibility over the goods after they were deposited in the customs warehouse by the arrastre and stevedoring operator.

No amount of extraordinary diligence on the part of the carrier could have prevented the loss of the goods by fire which was of accidental origin.

Under those circumstances, it would not be legal and just to hold the carrier liable to the consignees for the loss of the goods. The consignees should bear the loss which was due to a fortuitous event.

G.R. No. L-28673 October 23, 1984

SAMAR MINING COMPANY, INC., plaintiff-appellee, vs. NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY, INC., defendants-appellants.

CUEVAS, J

This is an appeal taken directly to Us on certiorari from the decision of the defunct Court of First Instance of Manila, finding defendants carrier and agent, liable for the value of goods never delivered to plaintiff consignee. The issue raised is a pure question of law, which is, the liability of the defendants, now appellants, under the bill of lading covering the subject shipment.

The case arose from an importation made by plaintiff, now appellee, SAMAR MINING COMPANY, INC., of one (1) crate Optima welded wedge wire sieves through the M/S SCHWABENSTEIN a vessel owned by defendant-appellant NORDEUTSCHER LLOYD, (represented in the Philippines by its agent, C.F. SHARP & CO., INC.), which shipment is covered by Bill of Lading No. 18 duly issued to consignee SAMAR MINING COMPANY, INC. Upon arrival of the aforesaid vessel at the port of Manila, the aforementioned importation was unloaded and delivered in good order and condition to the bonded warehouse of AMCYL. 1 The goods were however never delivered to, nor received by, the consignee at the port of destination Davao.

When the letters of complaint sent to defendants failed to elicit the desired response, consignee herein appellee, filed a formal claim for P1,691.93, the equivalent of $424.00 at the prevailing rate of exchange at that time, against the former, but neither paid. Hence, the filing of the instant suit to enforce payment. Defendants-appellants brought in AMCYL as third party defendant.

The trial court rendered judgment in favor of plaintiff, ordering defendants to pay the amount of P1,691.93 plus attorney's fees and costs. However, the Court stated that defendants may recoup whatever they may pay plaintiff by enforcing the judgment against third party defendant AMCYL which had earlier been declared in default. Only the defendants appealed from said decision.

The issue at hand demands a close scrutiny of Bill of Lading No. 18 and its various clauses and stipulations which should be examined in the light of pertinent legal provisions and settled jurisprudence. This undertaking is not only proper but necessary as well because of the nature of the bill of lading which operates both as a receipt for the goods; and more importantly, as a contract to transport and deliver the same as stipulated therein. 2 Being a contract, it is the law between the parties thereto 3 who are bound by its terms and conditions 4 provided that these are not contrary to law, morals, good customs, public order and public policy. 5

Bill of Lading No. 18 sets forth in page 2 thereof 6 that one (1) crate of Optima welded wedge wire sieves was received by the carrier NORDEUTSCHER LLOYD at the "port of loading" which is Bremen, Germany, while the freight had been prepaid up to the port of destination or the "port of discharge of goods in this case, Davao, the carrier undertook to transport the goods in its vessel, M/S SCHWABENSTEIN only up to the "port of discharge from ship-Manila. Thereafter, the goods were to be transshipped by the carrier to the port of destination or "port of discharge of goods The stipulation is plainly indicated on the face of the bill which

contains the following phrase printed below the space provided for the port of discharge from ship", thus: t.hqw

if goods are to be transshipped at port of discharge, show destination under the column for "description of contents" 7

As instructed above, the following words appeared typewritten under the column for "description of contents": t.hqw

PORT OF DISCHARGE OF GOODS: DAVAO FREIGHT PREPAID 8

It is clear, then, that in discharging the goods from the ship at the port of Manila, and delivering the same into the custody of AMCYL, the bonded warehouse, appellants were acting in full accord with the contractual stipulations contained in Bill of Lading No. 18. The delivery of the goods to AMCYL was part of appellants' duty to transship the goods from Manila to their port of destination-Davao. The word "transship" means: t.hqw

to transfer for further transportation from one ship or conveyance to another 9

The extent of appellant carrier's responsibility and/or liability in the transshipment of the goods in question are spelled out and delineated under Section 1, paragraph 3 of Bill of Lading No. 18, to wit: t.hqw

The carrier shall not be liable in any capacity whatsoever for any delay, loss or damage occurring before the goods enter ship's tackle to be loaded or after the goods leave ship's tackle to be discharged, transshipped or forwarded ... (Emphasis supplied)

and in Section 11 of the same Bill, which provides: t.hqw

Whenever the carrier or m aster may deem it advisable or in any case where the goods are placed at carrier's disposal at or consigned to a point where the ship does not expect to load or discharge, the carrier or master may, without notice, forward the whole or any part of the goods before or after loading at the original port of shipment, ... This carrier, in making arrangements for any transshipping or forwarding vessels or means of transportation not operated by this carrier shall be considered solely the forwarding agent of the shipper and without any other responsibility whatsoever even though the freight for the whole transport has been collected by him. ... Pending or during forwarding or transshipping the carrier may store the goods ashore or afloat solely as agent of the shipper and at risk and expense of the goods and the carrier shall not be liable for detention nor responsible for the acts, neglect, delay or failure to act of anyone to whom the goods are entrusted or delivered for storage, handling or any service incidental thereto (Emphasis supplied) 10

Defendants-appellants now shirk liability for the loss of the subject goods by claiming that they have discharged the same in full and good condition unto the custody of AMCYL at the port of discharge from ship Manila, and therefore, pursuant to the aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo had ceased. 11

We find merit in appellants' stand. The validity of stipulations in bills of lading exempting the carrier from liability for loss or damage to the goods when the same are not in its actual custody has been upheld by Us in PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674 (1968). Said case matches the present controversy not only as to the material facts but more importantly, as to the stipulations contained in the bill of lading concerned. As if to underline their awesome likeness, the goods in question in both cases were destined for Davao, but were discharged from ship in Manila, in accordance with their respective bills of lading.

The stipulations in the bill of lading in the PHOENIX case which are substantially the same as the subject stipulations before Us, provides: t.hqw

The carrier shall not be liable in any capacity whatsoever for any loss or damage to the goods while the goods are not in its actual custody. (Par. 2, last subpar.)

xxx xxx xxx

The carrier or master, in making arrangements with any person for or in connection with all transshipping or forwarding of the goods or the use of any means of transportation or forwarding of goods not used or operated by the carrier, shall be considered solely the agent of the shipper and consignee and without any other responsibility whatsoever or for the cost thereof ... (Par. 16). 12

Finding the above stipulations not contrary to law, morals, good customs, public order or public policy, We sustained their validity 13 Applying said stipulations as the law between the parties in the aforecited case, the Court concluded that: t.hqw

... The short form Bill of Lading ( ) states in no uncertain terms that the port of discharge of the cargo is Manila, but that the same was to be transshipped beyond the port of discharge to Davao City. Pursuant to the terms of the long form Bill of Lading ( ), appellee's responsibility as a common carrier ceased the moment the goods were unloaded in Manila and in the matter of transshipment, appellee acted merely as an agent of the shipper and consignee. ... (Emphasis supplied) 14

Coming now to the case before Us, We hold, that by the authority of the above pronouncements, and in conformity with the pertinent provisions of the New Civil Code, Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof are valid stipulations between the parties insofar as they exempt the carrier from liability for loss or damage to the goods while the same are not in the latter's actual custody.

The liability of the common carrier for the loss, destruction or deterioration of goods transported from a foreign country to the Philippines is governed primarily by the New Civil Code. 15 In all matters not regulated by said Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws. 16 A careful perusal of the provisions of the New Civil Code on common carriers (Section 4, Title VIII, Book IV) directs our attention to Article 1736 thereof, which reads: t.hqw

Article 1736. The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by

the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of article 1738.

Article 1738 referred to in the foregoing provision runs thus: t.hqw

Article 1738. The extraordinary liability of the common carrier continues to be operative even during the time the goods are stored in a warehouse of the carrier at the place of destination, until the consignee has been advised of the arrival of the goods and has had reasonable opportunity thereafter to remove them or otherwise dispose of them.

There is no doubt that Art. 1738 finds no applicability to the instant case. The said article contemplates a situation where the goods had already reached their place of destination and are stored in the warehouse of the carrier. The subject goods were still awaiting transshipment to their port of destination, and were stored in the warehouse of a third party when last seen and/or heard of. However, Article 1736 is applicable to the instant suit. Under said article, the carrier may be relieved of the responsibility for loss or damage to the goods upon actual or constructive delivery of the same by the carrier to the consignee, or to the person who has a right to receive them. In sales, actual delivery has been defined as the ceding of corporeal possession by the seller, and the actual apprehension of corporeal possession by the buyer or by some person authorized by him to receive the goods as his representative for the purpose of custody or disposal. 17 By the same token, there is actual delivery in contracts for the transport of goods when possession has been turned over to the consignee or to his duly authorized agent and a reasonable time is given him to remove the goods. 18 The court a quo found that there was actual delivery to the consignee through its duly authorized agent, the carrier.

It becomes necessary at this point to dissect the complex relationship that had developed between appellant and appellee in the course of the transactions that gave birth to the present suit. Two undertakings appeared embodied and/or provided for in the Bill of Lading 19 in question. The first is FOR THE TRANSPORT OF GOODS from Bremen, Germany to Manila. The second, THE TRANSSHIPMENT OF THE SAME GOODS from Manila to Davao, with appellant acting as agent of the consignee. 20 At the hiatus between these two undertakings of appellant which is the moment when the subject goods are discharged in Manila, its personality changes from that of carrier to that of agent of the consignee. Thus, the character of appellant's possession also changes, from possession in its own name as carrier, into possession in the name of consignee as the latter's agent. Such being the case, there was, in effect, actual delivery of the goods from appellant as carrier to the same appellant as agent of the consignee. Upon such delivery, the appellant, as erstwhile carrier, ceases to be responsible for any loss or damage that may befall the goods from that point onwards. This is the full import of Article 1736, as applied to the case before Us.

But even as agent of the consignee, the appellant cannot be made answerable for the value of the missing goods, It is true that the transshipment of the goods, which was the object of the agency, was not fully performed. However, appellant had commenced said performance, the completion of which was aborted by circumstances beyond its control. An agent who carries out the orders and instructions of the principal without being guilty of negligence, deceit or fraud, cannot be held responsible for the failure of the principal to accomplish the object of the agency, 21This can be gleaned from the following provisions of the New Civil Code on the obligations of the agent: t.hqw

Article 1884. The agent is bound by his acceptance to carry out the agency, and is liable for the damages which, through his non-performance, the principal may suffer.

xxx xxx xxx

Article 1889. The agent shall be liable for damages if, there being a conflict between his interests and those of the principal, he should prefer his own.

Article 1892. The agent may appoint a substitute if the principal has not prohibited him from doing so; but he shall be responsible for the acts of the substitute:

(1) When he was not given the power to appoint one;

(2) When he was given such power but without designating the person and the person appointed was notoriously incompetent or insolvent.

xxx xxx xxx

Article 1909. The agent is responsible not only for fraud, but also for negligence which shall be judged with more or less rigor by the courts, according to whether the agency was or was not for a compensation.

The records fail to reveal proof of negligence, deceit or fraud committed by appellant or by its representative in the Philippines. Neither is there any showing of notorious incompetence or insolvency on the part of AMCYT, which acted as appellant's substitute in storing the goods awaiting transshipment.

The actions of appellant carrier and of its representative in the Philippines being in full faith with the lawful stipulations of Bill of Lading No. 18 and in conformity with the provisions of the New Civil Code on common carriers, agency and contracts, they incur no liability for the loss of the goods in question.

WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-appellee's complaint is hereby DISMISSED.

No costs.

SO ORDERED.1wp

G.R. No. L-9840 April 22, 1957

LU DO & LU YM CORPORATION, petitioner-defendant, vs. I. V. BINAMIRA, respondent-plaintiff.

Ross, Selph, Carrascoso and Janda for petitioner. I. V. Binamira in his own behalf.

BAUTISTA ANGELO, J.:

On April 4, 1954, plaintiff filed an action in the Court of First Instance of Cebu against defendant to recover the sum of P324.63 as value of certain missing shipment, P150 as actual and compensatory damages, and P600 as moral and pecuniary damages. After trial, the court rendered judgment ordering defendant to pay plaintiff the sum of P216.84, with legal interest. On appeal, the Court of Appeals affirmed the judgment, hence the present petition for review.

On August 10, 1951, the Delta Photo Supply Company of New York shipped on board the M/S "FERNSIDE" at New York, U.S.A., six cases of films and/or photographic supplies consigned to the order of respondent I. V. Binamira. For this shipment, Bill of Lading No. 29 was issued. The ship arrived at the port of Cebu on September 23, 1951 and discharged her cargo on September 23, and 24, 1951, including the shipment in question, placing it in the possession and custody of the arrastre operator of said port, the Visayan Cebu Terminal Company, Inc.

Petitioner, as agent of the carrier, hired the Cebu Stevedoring Company, Inc. to unload its cargo. During the discharge, good order cargo was separated from the bad order cargo on board the ship, and a separate list of bad order cargo was prepared by Pascual Villamor, checker of the stevedoring company. All the cargo unloaded was received at the pier by the Visayan Cebu Terminal Company Inc, arrastre operator of the port. This terminal company had also its own checker, Romeo Quijano, who also recorded and noted down the good cargo from the bad one. The shipment in question, was not included in the report of bad order cargo of both checkers, indicating that it was discharged from the, ship in good order and condition.

On September 26, 1951, three days after the goods were unloaded from the ship, respondent took delivery of his six cases of photographic supplies from the arrastre operator. He discovered that the cases showed signs of pilferage and, consequently, he hired marine surveyors, R. J. del Pan & Company, Inc., to examine them. The surveyors examined the cases and made a physical count of their contents in the presence of representatives of petitioner, respondent and the stevedoring company. The surveyors examined the cases and made a physical count of their contents in the presence of representatives of petitioner, respondent and the stevedoring company. The finding of the surveyors showed that some films and photographic supplies were missing valued at P324.63.

It appears from the evidence that the six cases of films and photographic supplies were discharged from the ship at the port of Cebu by the stevedoring company hired by petitioner as agent of the carrier. All the unloaded cargo, including the shipment in question, was received by the Visayan Cebu Terminal Company Inc., the arrastre operator appointed by the Bureau of Customs. It also appears that during the discharge, the cargo was checked both by the stevedoring company hired by petitioner as well as by the arrastre operator of the port, and the shipment in question, when discharged from the ship, was found to be in good order

and condition. But after it was delivered to respondent three days later, the same was examined by a marine surveyor who found that some films and supplies were missing valued at P324.63.

The question now to be considered is: Is the carrier responsible for the loss considering that the same occurred after the shipment was discharged from the ship and placed in the possession and custody of the customs authorities?

The Court of Appeals found for the affirmative, making on this point the following comment:

In this jurisdiction, a common carrier has the legal duty to deliver goods to a consignee in the same condition in which it received them. Except where the loss, destruction or deterioration of the merchandise was due to any of the cases enumerated in Article 1734 of the new Civil Code, a carrier is presumed to have been at fault and to have acted negligently, unless it could prove that it observed extraordinary diligence in the care and handling of the goods (Article 1735, supra). Such presumption and the liability of the carrier attach until the goods are delivered actually or constructively, to the consignee, or to the person who has a right to receive them (Article 1736, supra), and we believe delivery to the customs authorities is not the delivery contemplated by Article 1736, supra, in connection with second paragraph of Article 1498, supra, because, in such a case, the goods are then still in the hands of the Government and their owner could not exercise dominion whatever over them until the duties are paid. In the case at bar, the presumption against the carrier, represented appellant as its agent, has not been successfully rebutted.

It is now contended that the Court of Appeals erred in its finding not only because it made wrong interpretation of the law on the matter, but also because it ignored the provisions of the bill of lading covering the shipment wherein it was stipulated that the responsibility of the carrier is limited only to losses that may occur while the cargo is still under its custody and control.

We believe this contention is well taken. It is true that, as a rule, a common carrier is responsible for the loss, destruction or deterioration of the goods it assumes to carry from one place to another unless the same is due to any to any of the causes mentioned in Article 1734 on the new Civil Code, and that, if the goods are lost, destroyed or deteriorated, for causes other that those mentioned, the common carrier is presumed to have been at fault or to have acted negligently, unless it proves that it has observed extraordinary diligence in their care (Article 1735, Idem.), and that this extraordinary liability lasts from the time the goods are placed in the possession of the carrier until they are delivered to the consignee, or "to the person who has the right to receive them" (Article 1736, Idem.), but these provisions only apply when the loss, destruction or deterioration takes place while the goods are in the possession of the carrier, and not after it has lost control of them. The reason is obvious. While the goods are in its possession, it is but fair that it exercise extraordinary diligence in protecting them from damage, and if loss occurs, the law presumes that it was due to its fault or negligence. This is necessary to protect the interest the interest of the owner who is at its mercy. The situation changes after the goods are delivered to the consignee.

While we agree with the Court of Appeals that while delivery of the cargo to the consignee, or to the person who has a right to receive them", contemplated in Article 1736, because in such case the goods are still in the hands of the Government and the owner cannot exercise dominion over them, we believe however that the parties may agree to limit the liability of the carrier considering that the goods have still to through the inspection of the customs

authorities before they are actually turned over to the consignee. This is a situation where we may say that the carrier losses control of the goods because of a custom regulation and it is unfair that it be made responsible for what may happen during the interregnum. And this is precisely what was done by the parties herein. In the bill of lading that was issued covering the shipment in question, both the carrier and the consignee have stipulated to limit the responsibility of the carrier for the loss or damage that may because to the goods before they are actually delivered by insert in therein the following provisions:

1. . . . The Carrier shall not be liable in any capacity whatsoever for any delay, nondelivery or misdelivery, or loss of or damage to the goods occurring while the goods are not in the actual custody of the Carrier. . . . (Emphasis ours.)

(Paragraph 1, Exhibit "1")

2. . . . The responsibility of the Carrier in any capacity shall altogether cease and the goods shall be considered to be delivered and at their own risk and expense in every respect when taken into the custody of customs or other authorities. The Carrier shall not be required to give any notification of disposition of the goods. . . . (Emphasis ours.)

(Paragraph 12, Exhibit "1")

3. Any provisions herein to the contrary notwithstanding, goods may be . . . by Carrier at ship's tackle . . . and delivery beyond ship's tackle shall been tirely at the option of the Carrier and solely at the expense of the shipper or consignee.

(Paragraph 22, Exhibit "1")

It therefore appears clear that the carrier does not assume liability for any loss or damage to the goods once they have been "taken into the custody of customs or other authorities", or when they have been delivered at ship's tackle. These stipulations are clear. They have been adopted precisely to mitigate the responsibility of the carrier considering the present law on the matter, and we find nothing therein that is contrary to morals or public policy that may justify their nullification. We are therefore persuaded to conclude that the carrier is not responsible for the loss in question, it appearing that the same happened after the shipment had been delivered to the customs authorities.

Wherefore, the decision appealed from is reversed, without pronouncement as to costs.

G.R. No. 80936 October 17, 1990

EASTERN SHIPPING LINES, INC., petitioner, vs. COURT OF APPEALS, HONGKONG & SHANGHAI BANKING CORPORATION, AND CONSOLIDATED MINES, INC., respondents.

Quisumbing, Torres & Evangelista for petitioner.

Belo, Abiera & Associates for respondent HSBC.

GUTIERREZ, JR., J.:

Assailed herein is the decision of respondent Court of Appeals in C.A.-G.R. CV-08707 Hongkong & Shanghai Banking Corporation (HSBC) v. Eastern Shipping Lines, Inc. (ESLI) dated June 30, 1987 as well as its Order dated November 24, 1987 denying herein petitioner's Motion for Reconsideration and Supplemental Motion for Reconsideration, which in effect affirmed the decision of the trial court holding the petitioner liable for the value of the goods it allegedly misdelivered as well as for damages and attorney's fees.

The basic facts are as follows:

On February 24, 1980, the Nanyo Corporation of Kobe, Japan shipped a cargo consisting of five (5) packages of supplies and materials for "1200 W x 2500 LMM Apron Feeder and 200 W x 5850 LMM Apron Feeder," (p. 22, Rollo), covered by a bill of lading. The cargo was loaded on board the S/S Eastern Adventure destined for Manila. The vessel is operated by herein petitioner-carrier.

The bill of lading was consigned to "Shipper's Order", with "Address Arrival Notice to Consolidated Mines Inc. 6799 Ayala Avenue, Makati, Metro Manila, Philippines" (p. 22, Rollo). Consolidated Mines Inc. (CMI) is one of the private respondents herein.

The cargo arrived in Manila on March 4, 1980.

A few days later, on the basis of an Undertaking for Delivery of Cargo but without the surrender of the original bill of lading presented by CMI, petitioner-carrier released the shipment in question to CMI.

In said guaranty, CMI undertook to indemnify petitioner carrier "harmless from all demands, claiming liabilities, actions and expenses" (p. 5, Rollo).

About five (5) and a half months later, or specifically on August 19, 1980, the petitioner received from Hongkong and Shanghai Bank (HSBC) co-respondent of CMI in the case at bar, a letter (Annex B of complaint, p. 8, Original Records) stating thus:

We refer to the above mentioned cargo and would advise that we hold title to the goods and have in our possession the full set of original bills of lading a copy of which is enclosed for your perusal.

We are unable to locate the cargo and it would appear that it has been released by you to Consolidated Mines Inc.

We shall be grateful therefore if you will look into the matter and advise us. (Emphasis supplied.)

Considering that there was no reply from the petitioner, HSBC wrote another demand letter through counsel dated October 29, 1980 (Annex C of Complaint, p. 7, Original Records) in contemplation of a legal action against ESLI should it not make good HSBC's claim.

On December 23, 1980 CMI wrote a letter (Annex C of Third Party Complaint, p. 33, Original Records) to HSBC admitting that they received the shipment in question due to a guarantee executed by them, and requested HSBC that legal action be held off for at least thirty (30) days, promising to settle its account with HSBC from the funds it was expecting from Benguet Corporation.

On January 14, 1981 the petitioner-carrier wrote a reply to HSBC (Annex D of Complaint, p. 10, Original Records) as follows:

In this connection, we deeply regret releasing the cargo without the consent of your client. However, we are constrained to release the same in view of the consigee's strong representation and guarantee that they will settle their obligation with the bank. You must be aware of the fact that said consignee directly communicated with your client bank requesting for an extension of thirty (30) days within which to settle their account, to which we hope you will accommodate. Should consignee fail to comply with their commitments, please advise us immediately. (Emphasis supplied.)

CMI having failed to fulfill its promise, HSBC filed a complaint before the then Court of First Instance of Rizal against herein petitioner praying for actual and compensatory damages in the amount of $168,521.16 representing the value of the goods covered by the Bill of Lading, exemplary damage in the amount deemed just by the court and P50,000 attorney's fees plus expenses of litigation and judicial costs.

After two motions for extensions, the petitioner-carrier filed its answer with counterclaim alleging inter alia that:

xxx xxx xxx

That it ADMITS paragraph 7 insofar as it alleges that defendant is duly bound not only to transport the goods entrusted to it safely but to deliver them to the person indicated in the Bill of Lading, which obligation was religiously and faithfully complied with by defendant, but DENIES the allegation that goods will be released only as soon as the original Bill of Lading is presented; The truth being that it is not mandatory for defendant to require the consignee to present the original Bill of Lading for as long as the consignee has proof that it is the owner and besides in this particular case, the consignee, Consolidated Mines, Inc. not only proved that it is the owner of the cargo but it has executed a Letter of Guaranty signed by its President, JOSE MARINO OLONDRIZ, which is hereto attached and marked as Annex "I" and made an integral part of this answer, which not only proved

ownership over the cargo but further warrants that defendant herein is free from whatever liability;

That it ADMIT paragraph 8 insofar as it alleges that the Bill of Lading covering the shipment of goods in question is made to "TO SHIPPER'S ORDER" the rest of the allegation is DENIED for lack of knowledge or information sufficient to form a belief as to the truth or falsity of the allegation therein contained and for further reasons stated in the Special and Affirmative Defenses;

That it DENIES paragraph 9, the truth of the matter being there was no misdelivery, as the goods was received by the consignee and for further reasons stated in the Special and Affirmative Defenses;

xxx xxx xxx

SPECIAL AND AFFIRMATIVE DEFENSES

BY WAY of Special and Affirmative Defenses, defendant respect fully states:

That plaintiff has no cause of action against defendant;

That herein defendant is not aware that plaintiff is the consignee bank as the bill of lading only bears to "SHIPPER'S ORDER" and when the shipment arrived Manila on March 4, 1980 or even before its arrival, plaintiff did not notify defendant that they have a lien over the shipment;

That answering defendant only became aware of that fact that plaintiff is the consignee bank sometime on August 19, 1980 thru their letter dated August 11, 1980, to which such notice was received by the defendant several months after the shipment in question was released to the consignee Consolidated Mines, Inc.;

That answering defendant released the shipment in question to Consolidated Mines, Inc. pursuant to the provision of the last paragraph of Article 353 of the Code of Commerce which provide as follows:

In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier because of its loss or any other cause, he must give the latter a receipt for the goods delivered, this receipt producing the same effects as the return of the bill of lading. (Emphasis supplied.)

That the consignee (Consolidated Mines, Inc.) in compliance with the above-cited provision, executed a Letter of Undertaking for Delivery of cargo without surrendering the Bills of Lading signed by its President, MR. JOSE MARINO OLONDRIZ and the original Bill of lading will be surrendered by them later on ;

That the consignee (Consolidated Mines, Inc.) acknowledges the receipt of the goods and likewise its obligation with the plainntiff by virtue of their letter dated December 23, 1980 signed by its President;

That plaintiff prior to the filing of this instant case is already fully aware of the fact that herein answering defendant is not hable to them but still insisted in suing defendant carrier without even impleading Consolidated Mines, Inc. who accepted their obligation;

That speaking of negligence and bad faith, answering defendant maintains that plaintiff is the one that is negligent and in bad faith for the following reasons:

That at the earliest time possible when plaintiff became in possession of the original bill of lading, they did not at once notify the defendant carrier that they are the consignee bank and that they have lien over the goods for failure of Consolidated Mines, Inc. to pay the value of said goods. They only notify (sic) the defendant carrier after five (5) months from the arrival of the goods in Manila;

Plaintiff is in bad faith in suing the carrier alone knowing fully well that it is Consolidated Mines, Inc. who has the obligation with them and same was acknowledged by its President per letter dated December 23, 1980 addressed to plaintiff.

xxx xxx xxx

WHEREFORE, it is most respectfully prayed of this Honorable Court that after proper proceedings judgment be rendered herein

a) Dismissing the complaint;

b) Ordering the plaintiff to pay defendant moral damages in the amount of P200,000.00;

c) Sentencing plaintiff to pay defendant the sum of P50,000.00 as compensatory damages, litigation expenses and attorney's fees and granting unto the defendant such other reliefs which are just and equitable in the premises. (pp. 20-24, Original Records.)

On August 15, 1981, the petitioner-carrier filed a third party complaint against CMI seeking reimbursement from the latter of whatever pecuniary obligations the petitioner may be liable to HSBC, as well as moral damages.

During trial, CMI filed a Motion to Stay Action in view of the pendency of involuntary insolvency proceedings commenced against it in the meantime by its creditors which included HSBC. This motion was denied by the trial court.

On the basis of the evidence presented by HSBC and the petitioner, as CMI failed to present its evidence, the court on January 15, 1985 rendered judgment as follows:

WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Eastern Shipping Lines, Inc., ordering the latter to pay the sum of $168,521.16 or its equivalent in Philippine Currency representing the value of the goods covered by the Bill of Lading plus interest thereon from the filing of the

complaint, until fully paid; P20,000.00 as and for attorney's fees and to pay the costs.

With respect to the Third Party Complaint, judgment is hereby rendered in favor of the Third Party Plaintiff, Eastern Shipping Lines, Inc., and against the Third Party Defendant, Consolidated Mines, Inc., ordering the latter to pay all the liabilities of the former in favor of the plaintiff consisting of the value of the goods covered by the Bill of Lading in the sum of $168,521.16 or its equivalent in Philippine Currency plus interest from the filing of the Third Party Complaint until fully paid; attorney's fees of P20,000.00 and to pay the costs. (p. 27, Rollo)

Its motion for reconsideration having been denied, the petitioner appealed to herein public respondent Court of Appeals. On January 30, 1987, the Court of Appeals rendered the decision now assailed, the dispositive portion of which reads as follows:

WHEREFORE, premises considered, the appealed decision is hereby AFFIRMED in toto. Costs against appellant. SO ORDERED. (p. 40, Rollo)

Hence, this petition for review on the following grounds:

I. The Court of appeals erred in refusing to apply the principle that "Where one of two innocent persons must suffer, that person who gave occasion for the damages to be caused must bear the consequences"-on the finding that petitioner carrier "committed gross error and negligence when it released the cargo to CMI" and without considering the fault, gross error and negligence of respondent Hongkong Shanghai Banking Corporation." (p. 7, Rollo)

II. Although irrelevant to the application of the principle or doctrine here involved, the Court of Appeals was unduly prejudiced by petitioner carrier's polite "apologetic admission". (p. 16, Rollo)

The resolution of the dispute in the case at bar pivots upon the determination of who the consignee is in the bin of lading in question.

At the outset, the Bill of Lading which was issued by the carrier but contained articles furnished by the Shipper, shows on its face that the Shipment is consigned "TO SHIPPER'S ORDER" with "ADDRESS ARRIVAL NOTICE TO CONSOLIDATED MINES INC. 6799 AYALA AVE. MAKATI, METRO MANILA PHILIPPINES" (Annex A of Complaint, p. 7, Original Records). Nowhere did the Bill of Lading refer to respondent HSBC as the consignee or the one to be notified.

The foregoing information, without more, in effect makes respondent CMI for all practical intents and purposes the party named and ordered to receive the goods. The petitioner-carrier, not being privy to any transaction between HSBC and CMI, cannot be expected to look beyond what is contained on the face of the bill of lading in question and guess which of the many banks in Metro Manila or some other unrevealed corporation could possibly be the consignee. To consider otherwise would not be sound business practice as petitioner would be forced to wait for the real owner of the goods to show up, perhaps in vain. In Macondray and Company Inc. v. Acting Commissioner of Customs (62 SCRA 427 [1975]), it was held that a bill of lading is ordinarily merely a convenient commercial instrument designed to protect the importer or consignee. And in Phoenix Assurance Co., Ltd. v. United States Lines(22 SCRA 674 [1968]), it was held that as a receipt, a bill of lading recites the place and

date of shipment, describes the goods as to quantity, weight, dimensions, Identification marks, condition, quality and value.

It should likewise be noted that the shipment consisted of machinery materials and supplies for a mining company named in the bill of lading. In the absence of contrary instructions or at least knowledge of other facts, the carrier is not ordinarily expected to deliver mining equipment to an unnamed or unknown party lurking for several months.

Other pieces of evidence found in the records indicate that the parties knew that respondent CMI was indeed the owner of the goods in question, to wit:

Firstly, even respondent HSBC expressly admitted in its complaint that "pursuant to the BILL OF LADING (Annex "A" hereof) the shipment was issued 'To Shipper's Order.'" (p. 2, Original Records) It never alleged therein that it was the consignee of the shipment in question.

Similarly, by respondent HSBC's own documentary evidence, respondent CMI is the buyer-owner of the shipment, to wit:

"SOLD BY ORDER AND FOR ACCOUNT AND RISK OF MESSRS. CONSOLIDATED MINES INC. 6799 AYALA AVE. MAKATI, METRO MANILA PHILIPPINES" (Exh. A-3, NANYO CORPORATION PACKING LIST; Exh. A-4 NANYO CORPORATION INVOICE; Exh. A-8, NANYO CORPORATION INVOICE. (pp. 68, 71-77, Original Records)

Secondly, the Buyer referred to in the Certificate (Exh. A-5) issued by the shipper NANYO CORPORATION should perforce refer to CMI to wit:

We hereby certify that Original Consular Invoice had been air-mailed directly to Buyer.

We also certify that advance copies of Commercial Invoice Packing List and Bill of Lading were airmailed directly to Buyer. (p. 73, Original Records)

Thirdly, respondent HSBC has established by its own documentary evidence, more particularly, the CONSULAR INVOICE (Exh. A-6 dated February 25, 1980, issued in Tokyo, Japan by the Foreign Service of the Republic of the Philippines, that the consignee of the shipment in question is respondent CONSOLIDATED MINES, INC. as shown therein thus:

Consignee CONSOLIDATED MINES, INC.

Address 6799 AYALA AVENUE MAKATI

METRO MANILA PHILIPPINES (p. 74, Original Records)

Hence, in view of the admissions of the respondent, exceptional circumstances allow a deviation from the general rule regarding the surrender of the bill of lading. The rule cannot always be absolute.

On the other hand, petitioner-carrier Eastern Shipping Lines, Inc., averred in its answer as one of its special and affirmative defenses that respondent CMI is the consignee of the

shipment in question and offered in its formal offer of evidence before the Trial Court the subject Bill of Lading as its "Exhibit 1". (p. 146, Original Records)

The Rules of Court provide that:

Admissibility of evidence. Evidence is admissible when it is relevant to the issue and is not excluded by these rules. (Sec. 3, Rule 128, Rules of Court)

Judicial admissions. Admissions made by the parties in the pleadings, or in the course of the trial or other proceedings do not require proof and cannot be contradicted unless previously shown to have been made through palpable mistakes. (Sec. 2, Rule 129, Rules of Court)

But assuming that CMI may not be considered consignee, the petitioner cannot be faulted for releasing the goods to CMI under the circumstances, due to its lack of knowledge as to who was the real consignee in view of CMI's strong representations and letter of undertaking wherein it stated that the bill of lading would be presented later. This is precisely the situation covered by the last paragraph of Art. 353 of the Corporation Code to wit:

If in case of loss or for any other reason whatsoever, the consignee cannot return upon receiving the merchandise the bin of lading subscribed by the carrier, he shall give said carrier receipt of the goods delivered this receipt producing the same effects as the return of the bill of lading.

In State Bonding and Ins. Co. Inc. v. Manila Port Service, (11 SCRA 400 [1964]), it was held that the arrival of shipment is deemed admitted by an allegation of delivery to the consignee.

Under the special circumstances of this case, equity favors the petitioner which proved that it was in good faith while both respondents cannot claim the same.

While the goods in question were released on March 4, 1980 the records show that HSBC received the original bill of lading, as per testimony of its witness Ederlina Crisostomo (TSN, p. 29, July 13, 1982), only on April 1980 or long after the goods had been released. This circumstance goes against the claims of HSBC.

Thus HSBC in its original demand letter stated, "We are unable to locate the cargo and it would appear that it has been released by you to Consolidated Mines, Inc." (Annex B of Complaint, p. 8, Original Records). This proves that it had foreknowledge of the prior release to CMI.

And to make things worse, HSBC, despite CMI's admission that it received the goods, sued only the petitioner-carrier while at the same time claiming for the value of the goods in the involuntary insolvency proceedings of CMIwhich the Bank itself, together with others, initiated. Only later developments led to this case.

Notwithstanding that respondent HSBC admits even in its memorandum filed with the trial court that Consolidated Mines, Inc. is the consignee (p. 168, Original Records), yet HSBC pinpoints liability to the petitioner carrier by relying on the provisions of Article 1736 of the Civil Code of the Philippines which provides that:

The extraordinary responsibility of the common carrier lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of Article 1738.

Respondent HSBC wittingly or unwittingly overlooked the fact that the same article uses the conjunction "or" in reference to whom the goods may be delivered, that is, to the consignee, or to the person who has a right to receive them.

That respondent HSBC is the more negligent party as against the petitioner-carrier becomes more evident when aside from having allowed respondent Consolidated Mines, Inc. to be designed in the bills of lading (Exhibits A, A-1 and A-2, pp. 65-67, Original Records), as the party to be notified, it allowed the latter to be designated as the consignee in the Consular Invoice (Exhibit A-6, p. 74, Original Records), the original of which was directly furnished to respondent Consolidated Mines, Inc. by and as certified to by the shipper Nanyo Corporation (Exhibit A-5, p. 73, Original Records). With such vast powers, akin to an agent of respondent HSBC, respondent Consolidated Mines, Inc. acted within its authority, and even if it acted on its own; consequently, respondent HSBC may not hold the petitioner came liable because Art. 1883 of the Civil Code provides that:

If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted neither have such persons against the principal.

In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal.

The provisions of this article shall be understood to be without prejudice to the actions between the principal and agent.

For almost six months from the arrival of the goods HSBC did not do anything to claim the cargo. It could not possibly be left around lying Idle when on the face of the bill of lading, there was a named owner to be notified.

On the other hand, CMI secured the release of the goods through misrepresentation before the petitioner-carrier without settling its account with HSBC and thereafter did not bother to present evidence before the trial court, leaving the petitioner holding an empty bag as it were. These circumstances also prove bad faith on the part of CMI.

Under the exceptional circumstances and applying especially strong considerations of equity, the petitioner did not commit any fault sufficient to render it liable to HSBC. On the contrary, it was HSBC and CMI who were obviously in bad faith in dealing with the petitioner-carrier.

WHEREFORE, the petition is hereby GRANTED and the decision of the respondent Court of Appeals dated June 30, 1987 is SET ASIDE as well as its orders dated November 24, 1987 denying the petitioners's motion for reconsideration. The complaint before the trial court is dismissed for lack of merit but without prejudice to Hongkong & Shanghai Banking Corporation pursuing its claims herein against Consolidated Mines, Inc. in the proper proceedings. SO ORDERED.

[G.R. No. 125524. August 25, 1999]

BENITO MACAM doing business under the name and style BEN-MAC ENTERPRISES, petitioner, vs.COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES SHIPPING, INC., respondents.

D E C I S I O N

BELLOSILLO, J.:

On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac Enterprises, shipped on board the vessel Nen Jiang, owned and operated by respondent China Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc. (hereinafter WALLEM), 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading No. HKG 99012 and exported through Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan, Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a value of US$14,273.46 covered by Bill of Lading No. HKG 99013 and exported through Letter of Credit No. HK 1032/30 also issued by PAKISTAN BANK. The Bills of Lading contained the following pertinent provision: "One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order."[1] The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great Prospect Company of Kowloon, Hongkong (hereinafter GPC) as notify party.

On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices were submitted to petitioner's depository bank, Consolidated Banking Corporation (hereinafter SOLIDBANK), which paid petitioner in advance the total value of the shipment of US$20,223.46.

Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK, and without the required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN BANK such that the latter, still in possession of the original bills of lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-paid petitioner the value of the shipment, it demanded payment from respondent WALLEM through five (5) letters but was refused. Petitioner was thus allegedly constrained to return the amount involved to SOLIDBANK, then demanded payment from respondent WALLEM in writing but to no avail.

On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or its equivalent of P546,033.42 from respondents before the Regional Trial Court of Manila, based on delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee.

Respondents contended that the shipment was delivered to GPC without presentation of the bills of lading and bank guarantee per request of petitioner himself because the shipment consisted of perishable goods. The telex dated 5 April 1989 conveying such request read -

AS PER SHPRS REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO RESPECTIVE CNEES WITHOUT PRESENTATION OF OB/L[2] and bank guarantee since for prepaid shipt ofrt charges already fully paid our end x x x x[3]

Respondents explained that it is a standard maritime practice, when immediate delivery is of the essence, for the shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at the port of destination without requiring presentation of the bill of lading

as that usually takes time. As proof thereof, respondents apprised the trial court that for the duration of their two-year business relationship with petitioner concerning similar shipments to GPC deliveries were effected without presentation of the bills of lading.[4]Respondents advanced next that the refusal of PAKISTAN BANK to pay the letters of credit to SOLIDBANK was due to the latter's failure to submit a Certificate of Quantity and Quality. Respondents counterclaimed for attorneys fees and costs of suit.

On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following amounts: (1) P546,033.42 plus legal interest from 6 April 1989 until full payment; (2) P10,000.00 as attorney's fees; and, (3) the costs. The counterclaims were dismissed for lack of merit.[5] The trial court opined that respondents breached the provision in the bill of lading requiring that "one of the Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order," when they released the shipment to GPC without presentation of the bills of lading and the bank guarantee that should have been issued by PAKISTAN BANK in lieu of the bills of lading. The trial court added that the shipment should not have been released to GPC at all since the instruction contained in the telex was to arrange delivery to the respective consignees and not to any party. The trial court observed that the only role of GPC in the transaction as notify party was precisely to be notified of the arrival of the cargoes in Hongkong so it could in turn duly advise the consignee.

Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as established by previous similar transactions between the parties, shipped cargoes were sometimes actually delivered not to the consignee but to notify party GPC without need of the bills of lading or bank guarantee.[6] Moreover, the bills of lading were viewed by respondent court to have been properly superseded by the telex instruction and to implement the instruction, the delivery of the shipment must be to GPC, the real importer/buyer of the goods as shown by the export invoices,[7] and not to PAKISTAN BANK since the latter could very well present the bills of lading in its possession; likewise, if it were the PAKISTAN BANK to which the cargoes were to be strictly delivered it would no longer be proper to require a bank guarantee. Respondent court noted that besides, GPC was listed as a consignee in the telex. It observed further that the demand letter of petitioner to respondents never complained of misdelivery of goods. Lastly, respondent court found that petitioners claim of having reimbursed the amount involved to SOLIDBANK was unsubstantiated. Thus, on 13 March 1996 respondent court set aside the decision of the trial court and dismissed the complaint together with the counterclaims.[8] On 5 July 1996 reconsideration was denied.[9]

Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the bill of lading or to a party designated or named by the consignee constitutes a misdelivery thereof. Moreover, petitioner argues that from the text of the telex, assuming there was such an instruction, the delivery of the shipment without the required bill of lading or bank guarantee should be made only to the designated consignee, referring to PAKISTAN BANK.

We are not persuaded. The submission of petitioner that the fact that the shipment was not delivered to the consignee as stated in the Bill of Lading or to a party designated or named by the consignee constitutes a misdelivery thereof is a deviation from his cause of action before the trial court. It is clear from the allegation in his complaint that it does not deal with misdelivery of the cargoes but of delivery to GPC without the required bills of lading and bank guarantee -

6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the buyer/notify party, Great Prospect Company and not to the consignee, the National Bank of Pakistan, Hongkong, without the required bills of lading and bank guarantee for the release of the shipment issued by the consignee of the goods x x x x[10]

Even going back to an event that transpired prior to the filing of the present case or when petitioner wrote respondent WALLEM demanding payment of the value of the cargoes, misdelivery of the cargoes did not come into the picture -

We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of Lading No. 99012 and 99013 with a total value of US$20,223.46 were released to Great Prospect, Hongkong without the necessary bank guarantee. We were further informed that the consignee of the goods, National Bank of Pakistan, Hongkong, did not release or endorse the original bills of lading. As a result thereof, neither the consignee, National Bank of Pakistan, Hongkong, nor the importer, Great Prospect Company, Hongkong, paid our client for the goods x x x x[11]

At any rate, we shall dwell on petitioners submission only as a prelude to our discussion on the imputed liability of respondents concerning the shipped goods. Article 1736 of the Civil Code provides -

Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them, without prejudice to the provisions of article 1738.[12]

We emphasize that the extraordinary responsibility of the common carriers lasts until actual or constructive delivery of the cargoes to the consignee or to the person who has a right to receive them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive them[13] was proper.

The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without the bills of lading or bank guarantee.

Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC without the bills of lading and bank guarantee. The telex instructed delivery of various shipments to the respective consignees without need of presenting the bill of lading and bank guarantee per the respective shippers request since for prepaid shipt ofrt charges already fully paid. Petitioner was named therein as shipper and GPC as consignee with respect to Bill of Lading Nos. HKG 99012 and HKG 99013. Petitioner disputes the existence of such instruction and claims that this evidence is self-serving.

From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer for around two (2) or three (3) years already. When mangoes and watermelons are in season, his shipment to GPC using the facilities of respondents is twice or thrice a week. The goods are released to GPC. It has been the practice of petitioner to request the shipping lines to immediately release perishable cargoes such as watermelons and fresh mangoes through telephone calls by himself or his people. In transactions covered by a letter of credit, bank guarantee is normally required by the shipping lines prior to releasing the goods. But for buyers using telegraphic transfers, petitioner dispenses with the bank guarantee because the goods are already fully paid. In his several years of business relationship with GPC and respondents, there was not a single instance when the bill of lading was first presented before the release of the cargoes. He admitted the existence of the telex of 3 July 1989 containing his request to deliver the shipment to the

consignee without presentation of the bill of lading[14] but not the telex of 5 April 1989 because he could not remember having made such request.

Consider pertinent portions of petitioners testimony -

Q: Are you aware of any document which would indicate or show that your request to the defendant Wallem for the immediate release of your fresh fruits, perishable goods, to Great Prospect without the presentation of the original Bill of Lading?

A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested the immediate release of the cargo because there was immediate payment.

Q And you are referring, therefore, to this copy Telex release that you mentioned where your Companys name appears Ben-Mac?

Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of Lading referring to SKG (sic) 93023 and 93026 with Great Prospect Company.

Atty. Ventura:

Q: Is that the telegraphic transfer?

A: Yes, actually, all the shippers partially request for the immediate release of the goods when they are perishable. I thought Wallem Shipping Lines is not neophyte in the business. As far as LC is concerned, Bank guarantee is needed for the immediate release of the goods x x x x[15]

Q: Mr. Witness, you testified that it is the practice of the shipper of the perishable goods to ask the shipping lines to release immediately the shipment. Is that correct?

A: Yes, sir.

Q: Now, it is also the practice of the shipper to allow the shipping lines to release the perishable goods to the importer of goods without a Bill of Lading or Bank guarantee?

A: No, it cannot be without the Bank Guarantee.

Atty. Hernandez:

Q: Can