De Lizardi vs. Yaptico

Where a contract expressly provides that goods delivered on board a party's steamer shall be "for the account" of that party unless the shipper otherwise expressly provides in writing, the goods become the property of the receiving party upon delivery, and the receiving party is entitled to the insurance proceeds upon the goods' loss.

Lim Jocsing was a Chinese merchant in Malitbog, Leyte, engaged principally in purchasing abaca and copra. F.M. Yaptico, also known as the firm Chiat Seng, was a commission merchant and steamer operator in Cebu. Around 1909, the two executed a contract (Exhibit B) in Chinese characters under which Yaptico opened an account current for Lim Jocsing and extended him a P15,000 credit line for purchasing abaca and copra, guaranteed by Lim Jocsing's business. The contract required Lim Jocsing to ship all abaca and copra only on Yaptico's steamers, to deliver at least 10,000 piculs of abaca annually, and to pay Yaptico a commission of 20 centavos per picul, while Lim Jocsing would bear freight, storage, and insurance expenses in Cebu.

Around 1909, Lim Jocsing, a Chinese merchant of Malitbog, Leyte, entered into a contract with the firm of F.M. Yaptico, also called Chiat Seng, of Cebu. The contract, written in Chinese characters, established a commercial relationship under which Yaptico opened an account current for Lim Jocsing and extended him a P15,000 credit to purchase abaca and copra, which was Lim Jocsing's principal business in Leyte. Lim Jocsing guaranteed the credit with his business. Under the contract, all abaca and copra Lim Jocsing secured was to be delivered to Yaptico, with the value credited to Lim Jocsing's account. Lim Jocsing obligated himself to ship these articles only on Yaptico's steamers at stipulated freight rates, to deliver at least 10,000 piculs of abaca annually (paying the difference if short), and to pay Yaptico a commission of 20 centavos per picul sent. Warehouse charges, fire insurance, and other storage expenses in Cebu were for Lim Jocsing's account. The contract's fifth paragraph provided: "The abaca and copra that I may deliver to be received on board by his agent shall be for the account of Yaptico, except in case I should otherwise expressly provide in writing."

On October 9, 1912, Lim Jocsing telegraphed Yaptico several times requesting that a steamer be sent to Malitbog with money and goods he had ordered. Yaptico dispatched the steamer Bais carrying 850 sacks of rice and other goods valued at P7,127, plus P4,000 in cash, all consigned to Lim Jocsing. Having received these, Lim Jocsing on October 13, 1912 loaded 430 piculs of abaca on the Bais, consigned to Yaptico in Cebu. The abaca, valued at P9,460 (at P22 per picul), was charged to Yaptico and credited to Lim Jocsing's account current. The abaca and copra on the Bais were insured for P15,000 in the name of Chiat Seng (Yaptico) with two insurance companies, whose agent in Cebu was Yaptico himself.

On or about October 15, 1912, the steamer Bais wrecked during its voyage to Cebu. Lim Jocsing perished at sea, and all the abaca on board was lost. Yaptico collected P10,320 as insurance on the 430 piculs of abaca (at P24 per picul) and retained the sum, claiming the abaca was his property. Carlos de Lizardi, as administrator of Lim Jocsing's estate, filed suit in the Court of First Instance of Cebu to recover P15,000, alleging the abaca belonged to Lim Jocsing and that the insurance proceeds were wrongfully appropriated by Yaptico. The trial court found that the abaca belonged to Lim Jocsing and rendered judgment against Yaptico for P10,320 with 6% interest and costs. Yaptico appealed by bill of exceptions.

• Ownership of the Abaca: Plaintiff claimed that all abaca and copra delivered and loaded on Yaptico's steamer belonged to Lim Jocsing, who forwarded them for Yaptico to sell on commission, citing the commission nature of Yaptico's business, the 20-centavo per picul commission Lim Jocsing paid, the obligation to bear storage and insurance expenses, and Yaptico's practice of telegraphing Lim Jocsing market prices and sale details.
• Absurdity of Defendant's Theory: Plaintiff argued it was ridiculous and inconsistent with other contract clauses to suppose the abaca was Yaptico's property while Lim Jocsing remained obligated to pay freight, insurance, storage, and other expenses, as a non-owner would not bear such costs.

• Contractual Language: Defendant maintained that the fifth paragraph of the contract clearly and explicitly provided that all abaca shipped and delivered on board his steamers became his property unless Lim Jocsing expressly provided otherwise in writing, and Lim Jocsing had not done so for the October 13, 1912 shipment.
• Advance of Funds: Defendant asserted that he furnished Lim Jocsing with capital and money without interest, and obligated himself to send money and goods of approximately the same value as the merchandise received, making it just that the goods became his property upon delivery as reimbursement for the sums advanced.

• Ownership of the Abaca: Whether the abaca loaded by Lim Jocsing on the steamer Bais on October 13, 1912 became the property of Yaptico upon delivery on board, pursuant to the fifth paragraph of the parties' contract.
• Entitlement to Insurance Proceeds: Whether Yaptico, as owner of the abaca, was entitled to retain the P10,320 insurance proceeds collected upon the loss of the cargo.

• Ownership of the Abaca: Yes. The abaca became Yaptico's property upon delivery on board the steamer, the fifth paragraph of the contract expressly providing that goods received on board by his agent "shall be for the account of Yaptico" unless Lim Jocsing otherwise expressly provided in writing, which he did not.
• Entitlement to Insurance Proceeds: Yes. As owner of the abaca, Yaptico had the right to insure it in his own name and to collect the insurance proceeds upon its loss, the premiums having been paid by him.

• Ownership of the Abaca: The fifth paragraph of the contract (Exhibit B) stated in clear and positive terms that abaca and copra delivered and received on board Yaptico's steamers would be "for the account" of Yaptico — meaning on account and at his risk — unless Lim Jocsing expressly provided otherwise in writing. Lim Jocsing did not provide otherwise in writing for the October 13, 1912 shipment; he merely delivered the abaca to the steamer's supercargo. Under Article 1281 of the Civil Code, when the terms of a written contract are clear and leave no room for doubt, the plain meaning must be observed. The parties' course of dealing confirmed this interpretation: Yaptico advanced money and goods of approximately equal value to the merchandise received, effectively prepaying for the shipments. The insurance policies themselves reflected this arrangement — some were issued in Lim Jocsing's name (for goods acquired with his own money), while others, including those covering the lost shipment, were issued in favor of Chiat Seng (Yaptico), indicating the goods were acquired with Yaptico's funds. Upon receiving the goods and crediting Lim Jocsing's account with their value, Yaptico became the real owner. The fact that Lim Jocsing bore freight, insurance, storage, and other expenses did not conflict with Yaptico's ownership, because Lim Jocsing was conducting business with Yaptico's capital without paying interest or premium; it was just that the creditor benefit from freight charges on his boats, commissions on sales, and reimbursement for storage and insurance expenses. Yaptico's communications to Lim Jocsing regarding market prices and sale details reflected Lim Jocsing's interest in tracking his account current, not an indication of ownership.
• Entitlement to Insurance Proceeds: As owner of the abaca, Yaptico had an insurable interest and properly insured it in his own name. Had the abaca not been insured, the loss would have fallen on Yaptico, since the value was already credited to Lim Jocsing's account upon receipt on board. The insurance was therefore properly collected by Yaptico as owner, the premiums having been paid by him, and the proceeds accruing to his benefit as payment for the value of the abaca he had already advanced.

• Plain Meaning Rule (Article 1281, Civil Code) — When the terms of an obligation stated in a written contract are clear and leave no room for doubt, the plain meaning of the wording must be observed, and it is not lawful to include therein things and cases different from those the parties intended. The Court applied this doctrine to hold that the fifth paragraph of the contract unambiguously transferred ownership of the abaca to Yaptico upon delivery on board his steamer, and plaintiff could not be permitted to maintain a theory contrary to the contract's express language.
• Binding Force of Contracts — Persons who enter into a contract not contrary to law, morals, or public policy are bound by the terms of their agreement. The Court relied on this principle to enforce the parties' express stipulation that goods delivered on board Yaptico's steamer were for his account and at his risk.
• Insurable Interest of Owner — The owner of goods has the right to insure them against risk and to collect the proceeds upon loss. The Court held that Yaptico, as owner of the abaca, properly insured it and was entitled to the proceeds, since the loss would have fallen on him as owner had the goods not been insured.

• "When the terms of an obligation stated in a written contract are clear and leave no room for doubt, the plain meaning of the wording thereof should be observed, it not being lawful to include therein things and cases different from those which the interested parties intended to contract for." — The Court invoked Article 1281 of the Civil Code to enforce the plain meaning of the contract's fifth paragraph, establishing ownership of the abaca in Yaptico and precluding plaintiff's contrary interpretation.
• "The abaca and copra that I may deliver to be received on board by his agent shall be for the account of Yaptico, except in case I should otherwise expressly provide in writing." — This verbatim quotation of the contract's fifth paragraph is the decisive contractual provision the Court interpreted as transferring ownership of the shipped goods to Yaptico upon delivery on board his steamer, unless the shipper expressly provided otherwise in writing.

• Azarraga vs. Rodriguez, 9 Phil. Rep. 637 — Cited as authority for the application of Article 1281 of the Civil Code on the plain meaning of contractual terms.
• Santos vs. Marquez, 13 Phil. Rep. 207 — Cited for the principle that parties are bound by the terms of their agreement when the contract is not contrary to law, morals, or public policy.
• Alcantara vs. Alinea, 8 Phil. Rep. 11 — Cited alongside Santos vs. Marquez for the binding force of contracts.
• Icaza vs. Perez, 5 Phil. Rep. 166 — Cited alongside the above cases for the same principle of contractual binding force.

• Article 1281, Civil Code — Provides that when the terms of an obligation in a written contract are clear and leave no room for doubt, the plain meaning must be observed. Applied to enforce the fifth paragraph of the parties' contract, which plainly stated that goods delivered on board Yaptico's steamer were for his account, precluding any interpretation that would import a different intention from what the parties expressed.

Arellano, C.J., Johnson, Carson, Moreland, Trent, and Araullo, JJ., concurred.