Samar Mining Company, Inc. vs. Nordeutscher Lloyd

A common carrier may validly stipulate in a bill of lading that its extraordinary liability ceases upon discharge of the goods at an intermediate port, where it thereafter acts solely as the consignee's forwarding agent for transshipment, provided such stipulations are not contrary to law, morals, good customs, public order, or public policy. Upon delivery of the goods to a bonded warehouse at the port of discharge, the carrier's possession shifts from possession in its own name as carrier to possession in the name of the consignee as agent, constituting actual delivery within the meaning of Article 1736 of the Civil Code and thereby extinguishing the carrier's liability for subsequent loss.

Samar Mining Company, Inc. was the consignee of an importation of one crate of Optima welded wedge wire sieves shipped from Bremen, Germany aboard the M/S Schwabenstein, a vessel owned by Nordeutscher Lloyd, which was represented in the Philippines by its agent C.F. Sharp & Company, Inc. The shipment was covered by Bill of Lading No. 18, which embodied two distinct undertakings: the carriage of goods from Bremen to Manila, and the transshipment of those goods from Manila to Davao, with the carrier acting as forwarding agent of the shipper for the latter leg. The bill of lading contained stipulations limiting the carrier's liability once the goods left the ship's tackle and providing that, in arranging transshipment, the carrier would be considered solely the forwarding agent of the shipper without further responsibility.

Samar Mining Company, Inc. imported one crate of Optima welded wedge wire sieves from Bremen, Germany, shipped aboard the M/S Schwabenstein, a vessel owned by Nordeutscher Lloyd, which was represented in the Philippines by its agent C.F. Sharp & Company, Inc. The shipment was covered by Bill of Lading No. 18, issued to Samar Mining as consignee. The bill of lading specified that the port of discharge from the ship was Manila, while the port of discharge of goods — the final destination — was Davao, with freight prepaid. The bill expressly instructed that if goods were to be transshipped at the port of discharge, the destination should be shown under the column for "description of contents," where the typewritten words "PORT OF DISCHARGE OF GOODS: DAVAO" and "FREIGHT PREPAID" appeared.

Upon arrival of the vessel at the port of Manila, the shipment was unloaded and delivered in good order and condition to the bonded warehouse of AMCYL. The goods, however, were never delivered to or received by the consignee at the port of destination in Davao. Samar Mining sent letters of complaint to the defendants, which failed to elicit a response, and thereafter filed a formal claim for P1,691.93, the equivalent of $424.00 at the prevailing exchange rate. Neither defendant paid the claim, prompting the consignee to file suit. The defendants in turn brought in AMCYL as third-party defendant.

The trial court rendered judgment in favor of Samar Mining, ordering the defendants to pay P1,691.93 plus attorney's fees and costs, and stating that defendants could recoup from third-party defendant AMCYL, which had earlier been declared in default. Only the defendants appealed. The trial court found that there was actual delivery to the consignee through its duly authorized agent, the carrier, a factual finding that the Supreme Court examined in the context of the bill of lading's stipulations and the applicable provisions of the Civil Code.

• Carrier's Liability Under the Bill of Lading: Whether the defendant carrier and its agent are liable for the value of goods lost after being discharged from the ship at the port of Manila and placed in the custody of a bonded warehouse, pursuant to the stipulations of Bill of Lading No. 18.
• Validity of Exempting Stipulations: Whether the stipulations in the bill of lading exempting the carrier from liability for loss or damage to goods while not in its actual custody are valid and enforceable.
• Applicability of Articles 1736 and 1738: Whether Article 1736 or Article 1738 of the New Civil Code governs the carrier's extraordinary responsibility in this case.
• Liability as Agent of the Consignee: Whether the carrier, acting as forwarding agent of the consignee for transshipment, may be held liable for the loss of the goods absent proof of negligence, deceit, or fraud.

• Carrier's Liability Under the Bill of Lading: No. The carrier's responsibility ceased upon discharge of the goods at Manila and delivery to the bonded warehouse, in accordance with the valid stipulations of Bill of Lading No. 18, which designated Manila as the port of discharge from the ship and Davao as the port of discharge of goods requiring transshipment.
• Validity of Exempting Stipulations: Yes, the stipulations are valid. Sections 1 and 11 of Bill of Lading No. 18, exempting the carrier from liability for loss or damage while the goods are not in its actual custody and providing that the carrier acts solely as forwarding agent of the shipper in arranging transshipment, are not contrary to law, morals, good customs, public order, or public policy.
• Applicability of Articles 1736 and 1738: Article 1736 applies; Article 1738 does not. Article 1738 contemplates goods already stored in the carrier's warehouse at the place of destination, whereas the subject goods were still awaiting transshipment and were stored in a third party's warehouse.
• Liability as Agent of the Consignee: No. Absent proof of negligence, deceit, or fraud by the carrier or its representative, and absent any showing of notorious incompetence or insolvency on the part of AMCYL as substitute, the carrier as agent cannot be held liable for the failure to accomplish the object of the agency.

• Carrier's Liability Under the Bill of Lading: The bill of lading operates both as a receipt for goods and, more importantly, as a contract to transport and deliver them. Being a contract, it is the law between the parties, who are bound by its terms and conditions provided they are not contrary to law, morals, good customs, public order, or public policy. Bill of Lading No. 18 clearly distinguished between the port of discharge from the ship (Manila) and the port of discharge of goods (Davao), with the carrier undertaking to transport the goods only up to Manila and to transship them thereafter to Davao. The delivery of the goods to AMCYL was part of the carrier's duty to transship, and the carrier was acting in full accord with the contractual stipulations when it discharged the goods at Manila.

• Validity of Exempting Stipulations: The validity of stipulations in bills of lading exempting the carrier from liability for loss or damage to goods when the same are not in its actual custody was upheld in Phoenix Assurance Co., Ltd. vs. United States Lines, 22 SCRA 674 (1968), which involved substantially identical stipulations and nearly identical facts — goods destined for Davao but discharged from the ship in Manila. Finding those stipulations not contrary to law, morals, good customs, public order, or public policy, the Court sustained their validity. Applying the same reasoning, Section 11 and the third paragraph of Section 1 of Bill of Lading No. 18 are valid stipulations insofar as they exempt the carrier from liability for loss or damage to the goods while not in the latter's actual custody.

• Applicability of Articles 1736 and 1738: Article 1738 finds no applicability because it contemplates goods already stored in the carrier's warehouse at the place of destination. The subject goods were still awaiting transshipment to their port of destination and were stored in a third party's warehouse. Article 1736, however, is applicable: the carrier's extraordinary responsibility lasts from the time goods are received for transportation until delivered, actually or constructively, to the consignee or the person who has a right to receive them. At the hiatus between the two undertakings — the moment goods are discharged in Manila — the carrier's personality changes from carrier to agent of the consignee. Its possession shifts from possession in its own name as carrier to possession in the name of the consignee as the latter's agent. This constitutes actual delivery from the carrier to the same entity as agent of the consignee, thereby extinguishing the carrier's liability under Article 1736.

• Liability as Agent of the Consignee: Even as agent of the consignee, the carrier cannot be made answerable for the value of the missing goods. The transshipment, which was the object of the agency, was not fully performed, but the carrier had commenced performance, the completion of which was aborted by circumstances beyond its control. Under Articles 1884, 1889, 1892, and 1909 of the Civil Code, an agent who carries out the orders and instructions of the principal without negligence, deceit, or fraud cannot be held responsible for the failure to accomplish the object of the agency. The records revealed no proof of negligence, deceit, or fraud committed by the carrier or its representative, nor any showing of notorious incompetence or insolvency on the part of AMCYL, which acted as the carrier's substitute in storing the goods awaiting transshipment.

• Bill of Lading as Contract — A bill of lading operates both as a receipt for goods and as a contract to transport and deliver them. Being a contract, it is the law between the parties, who are bound by its terms and conditions, provided these are not contrary to law, morals, good customs, public order, or public policy (Articles 1306, 1159, 1308, Civil Code). The Court applied this doctrine by enforcing the stipulations in Bill of Lading No. 18 that distinguished the port of discharge from the ship (Manila) from the port of discharge of goods (Davao) and limited the carrier's liability accordingly.

• Extraordinary Responsibility of Common Carriers (Article 1736) — The extraordinary responsibility of a common carrier lasts from the time 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. The Court held that actual delivery occurs when the carrier, upon discharging goods at an intermediate port, transfers possession from itself as carrier to itself as agent of the consignee, thereby extinguishing its extraordinary liability.

• Carrier's Liability During Transshipment (Article 1738 Distinguished) — Article 1738 extends the carrier's extraordinary liability to goods stored in the carrier's warehouse at the place of destination until the consignee has been advised of their arrival and has had reasonable opportunity to remove them. The Court distinguished this provision as inapplicable where goods are still awaiting transshipment and are stored in a third party's warehouse rather than the carrier's own warehouse at the final destination.

• Agent's Liability for Non-Performance (Articles 1884, 1909) — An agent is bound to carry out the agency and is liable for damages through non-performance, but an agent who carries out the orders and instructions of the principal without negligence, deceit, or fraud cannot be held responsible for the failure to accomplish the object of the agency. The Court applied this by finding no evidence of negligence, fraud, or notorious incompetence in the carrier's selection of AMCYL as substitute for storing goods pending transshipment.

• "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." — This passage articulates the ratio decidendi: the dual-personality doctrine by which actual delivery under Article 1736 is deemed to occur when the carrier's role shifts from carrier to agent at the port of discharge, extinguishing its extraordinary liability.

• "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)." — This establishes the controlling precedent and confirms that exempting stipulations in bills of lading are valid so long as they are not contrary to law, morals, good customs, public order, or public policy.

• "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." — This defines the standard for agent liability applied to the carrier in its capacity as forwarding agent, anchoring the conclusion that the carrier incurred no liability for the loss of goods stored with AMCYL.

• Phoenix Assurance Co., Ltd. vs. United States Lines, 22 SCRA 674 (1968) — Controlling precedent. The Court found this case materially identical in both facts and bill of lading stipulations: goods destined for Davao were discharged from the ship in Manila, and the bill of lading exempted the carrier from liability once goods were not in its actual custody and provided that the carrier acted solely as agent of the shipper in arranging transshipment. The Court sustained the validity of those stipulations and applied the same reasoning to absolve the carrier in the present case.

• Gutierrez Hermanos vs. Oria Hermanos, 30 Phil. 491 — Cited for the proposition that an agent who carries out the orders and instructions of the principal without negligence, deceit, or fraud cannot be held responsible for the failure to accomplish the object of the agency.

• Article 1736, New Civil Code — Defines the extraordinary responsibility of the common carrier as lasting from the time goods are received for transportation until delivered, actually or constructively, to the consignee or the person who has a right to receive them. Applied to hold that the carrier's liability ceased upon actual delivery to the consignee's agent (the carrier itself in its altered capacity) at the port of discharge.

• Article 1738, New Civil Code — Extends the carrier's extraordinary liability to goods stored in the carrier's warehouse at the place of destination until the consignee has been advised and has had reasonable opportunity to remove them. Distinguished as inapplicable because the goods were still awaiting transshipment and were stored in a third party's warehouse, not the carrier's warehouse at the final destination.

• Article 1306, New Civil Code — Provides that contracting parties may establish such stipulations, clauses, terms, and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy. Applied to uphold the validity of the exempting stipulations in the bill of lading.

• Articles 1159 and 1308, New Civil Code — Provide that obligations arising from contracts have the force of law between the contracting parties and that contracts are binding on both parties. Applied to enforce the bill of lading as the law between the parties.

• Article 1766, New Civil Code — Provides that in all matters not regulated by the New Civil Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws. Cited to establish the hierarchy of laws governing common carriers.

• Articles 1884, 1889, 1892, and 1909, New Civil Code — Govern the obligations of an agent: to carry out the agency, liability for non-performance, liability for conflicts of interest, responsibility for acts of a substitute, and responsibility for negligence. Applied to hold that the carrier, as agent of the consignee for transshipment, incurred no liability absent proof of negligence, deceit, fraud, or notorious incompetence in selecting the warehouse as substitute.

Makasiar (Chairman), Guerrero, Abad Santos, and Escolin concurred. Aquino, J., concurred in the result. Concepcion Jr., J., took no part.