Ang vs. American Steamship Agencies, Inc.

Misdelivery of goods covered by a negotiable bill of lading is not a “loss” within the meaning of Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act; consequently, the one-year limitation period therein does not bar an action for misdelivery, which instead prescribes under the applicable articles of the Civil Code (ten years for breach of a written contract or four years for quasi-delict).

Yau Yue Commercial Bank Ltd. of Hongkong agreed to sell 140 packages of galvanized steel durzinc sheets to Herminio G. Teves for US$32,458.26. Payment was to be made by bank draft in exchange for the bill of lading deposited with a local bank; upon arrival in Manila, Teves would pay the draft, receive the bill of lading, and present it to the carrier’s agent to secure a permit for release from the Bureau of Customs. The goods were shipped from Japan aboard a vessel whose Philippine agent was American Steamship Agencies, Inc., under a bill of lading consigned “to order of the shipper” with Teves as the notify party. Teves never paid the draft, yet he obtained a bank guaranty and secured the permit to deliver from the carrier’s agent without surrendering the original negotiable bill of lading. The bill of lading was eventually indorsed to Domingo Ang, who demanded the goods from the carrier’s agent and was informed they had already been released to Teves.

• The Sale and Shipping Arrangement: Yau Yue Commercial Bank Ltd. of Hongkong sold 140 packages of galvanized steel durzinc sheets to Herminio G. Teves for US$32,458.26. The terms required Teves to pay a demand draft to the Hongkong & Shanghai Bank in Manila; only upon payment would the bill of lading be delivered to him. He would then present the bill of lading to the carrier’s agent, American Steamship Agencies, Inc., to obtain a “Permit To Deliver Imported Articles” for release by the Bureau of Customs.
• Shipment and Bill of Lading: On April 30, 1961, the goods were shipped from Yawata, Japan, aboard the S.S. TENSAI MARU, owned by Nissho Shipping Co., Ltd., whose Philippine agent was the defendant. Bill of Lading No. WM-2 was consigned “to order of the shipper” with Herminio G. Teves as the notify party. The bill of lading was indorsed by the shipper to Yau Yue.
• Arrival and Non-Payment: The cargo arrived in Manila around May 9, 1961. Hongkong & Shanghai Bank notified Teves and requested payment of the draft. Teves did not pay; the bank protested and returned the bill of lading and draft to Yau Yue, which subsequently indorsed the bill of lading to Domingo Ang.
• Release Without Bill of Lading: Despite his failure to pay, Teves obtained a bank guaranty in favor of the carrier’s agent promising to surrender the original negotiable bill of lading duly indorsed by Yau Yue. On the strength of this guaranty, defendant issued Teves a “Permit To Deliver Imported Articles,” enabling him to obtain the goods from the Bureau of Customs without ever surrendering the bill of lading.
• Demand and Refusal: Domingo Ang, as holder of the indorsed bill of lading, demanded delivery from defendant but was informed that the goods had already been released to Teves.
• Complaint and Motion to Dismiss: On October 30, 1963, Ang sued for wrongful delivery and/or conversion. Defendant moved to dismiss on the ground that the one-year prescriptive period under Section 3(6), paragraph 4, of the Carriage of Goods by Sea Act (C.A. No. 65) had lapsed, arguing delivery should have occurred on May 9, 1961, and suit filed more than one year later was barred. The complaint alleged that defendant authorized delivery to Teves without surrender of the bill of lading and without plaintiff’s knowledge or consent, in violation of the bill of lading’s terms.

• Prescription: Plaintiff-appellant maintained that the one-year prescriptive period under the Carriage of Goods by Sea Act applies exclusively to claims for “loss or damage” of cargo. The complaint alleged misdelivery — delivery to a person not entitled to the goods — which does not constitute “loss”; hence the shorter prescriptive period is inapplicable. The applicable prescriptive periods are those in the Civil Code for breach of written contract (ten years) or quasi-delict (four years), and the suit was timely filed within either.

• Prescription: Defendant-appellee argued that the cargo should have been delivered to the person entitled to it on May 9, 1961, or within a reasonable time thereafter. Since the complaint was filed on October 30, 1963 — more than one year after the date the goods should have been delivered — the action was barred by Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, which discharges the carrier from all liability “in respect of loss or damage” unless suit is brought within one year.

• Prescription under COGSA: Whether an action for misdelivery of goods covered by a negotiable bill of lading is governed by the one-year prescriptive period in Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, which applies to “loss or damage.”

• Prescription under COGSA: The one-year prescriptive period did not apply. Under the Civil Code, which supplies deficiencies in special laws, “loss” occurs when a thing perishes, goes out of commerce, or disappears in such a way that its existence is unknown or it cannot be recovered (Art. 1189). The complaint alleged that the goods were actually delivered — to Herminio G. Teves. Thus, the situation was either rightful delivery or misdelivery, but not non-delivery. Since there was no “loss,” the COGSA limitation period was not triggered. The distinction between non-delivery and misdelivery is settled: once goods are delivered, even to the wrong person, there is no non-delivery (citing Tan Pho vs. Hassamal Dalamal, 67 Phil. 555). The short one-year period is designed for maritime hazards and is inapposite to misdelivery claims, which instead are governed by the Civil Code’s prescriptive periods — ten years for breach of written contract (Art. 1144[1]) or four years for quasi-delict (Art. 1146). The suit, filed roughly two and a half years after the cargo arrived, was therefore timely. The dismissal order was reversed and the case remanded.

• Distinction between “loss” and “misdelivery” in carriage of goods: Under the Civil Code (Art. 1189), “loss” means the thing perishes, goes out of commerce, or disappears such that its existence is unknown or it cannot be recovered. Misdelivery — delivery to a person not entitled to the goods — is not a “loss” because delivery in fact occurred. Consequently, a suit for misdelivery is not subject to the one-year prescriptive period in Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, which applies only to “loss or damage.”
• Applicability of Civil Code prescriptive periods: When a claim is based on misdelivery (or conversion) of goods, the applicable prescriptive period is either ten years for breach of a written contract (Art. 1144[1], Civil Code) or four years for quasi-delict (Art. 1146, Civil Code), depending on the nature of the action.
• Hypothetical admission on motion to dismiss: A defendant moving to dismiss a complaint hypothetically admits the truth of the material allegations of fact in the complaint.

• “As defined in the Civil Code and as applied to Section 3 (6) paragraph 4 of the Carriage of Goods by Sea Act, ‘loss’ contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared that their existence is unknown or they cannot be recovered. It does not include a situation where there was indeed delivery — but delivery to the wrong person, or a misdelivery, as alleged in the complaint in this case.”
• “If the goods have been delivered, it cannot at the same time be said that they have not been delivered.” — quoting with approval Tan Pho vs. Hassamal Dalamal, 67 Phil. 555, 557-558.
• “Said one-year period of limitation is designed to meet the exigencies of maritime hazards. In a case where the goods shipped were neither lost nor damaged in transit but were, on the contrary, delivered in port to someone who claimed to be entitled thereto, the situation is different, and the special need for the short period of limitation in cases of loss or damage caused by maritime perils does not obtain.”

• Tan Pho vs. Hassamal Dalamal, 67 Phil. 555 — Followed; authoritative on the distinction between misdelivery and non-delivery. Where goods covered by a negotiable bill of lading are delivered to a person without presentation of the indorsed bill of lading, the delivery is a misdelivery, not a non-delivery.
• Philippine National Bank v. Hipolito, et al., L-16463, Jan. 30, 1965; Republic v. Ramos, L-15484, Jan. 31, 1963; Pascual v. Secretary of Public Works & Communications, L-10405, Dec. 29, 1960; Pangan v. Evening News Publishing Co., Inc., L-13308, Dec. 29, 1960 — Cited for the procedural rule that a defendant who files a motion to dismiss hypothetically admits the truth of the complaint’s factual allegations.

• Section 3(6), paragraph 4, Carriage of Goods by Sea Act (Commonwealth Act No. 65) — The carrier and ship are discharged from all liability for “loss or damage” unless suit is brought within one year after delivery or the date when delivery should have been made. Ruled inapplicable to misdelivery because misdelivery is not loss.
• Article 1189, Civil Code — Defines “loss” in conditional obligations (thing perishes, goes out of commerce, or disappears) and supplied the definition of “loss” absent a definition in the Carriage of Goods by Sea Act.
• Article 18, Civil Code — Mandates that deficiencies in special laws be supplied by the Civil Code.
• Articles 1144(1) and 1146, Civil Code — Establish the ten-year prescriptive period for actions upon a written contract and the four-year period for actions upon a quasi-delict; either period had not expired when suit was filed.

Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez, and Castro, JJ.