G.R. No. 80936 - Eastern Shipping Lines, Inc. vs. Court of Appeals

On February 24, 1980, Nanyo Corporation of Kobe, Japan, shipped a cargo consisting of five packages of supplies and materials intended for apron feeders.
The shipment was covered by a bill of lading which designated the shipment “to Shippers Order” with an Address Arrival Notice to Consolidated Mines Inc. (CMI), located at 6799 Ayala Avenue, Makati, Metro Manila.
The cargo was loaded aboard the S/S Eastern Adventure, operated by Eastern Shipping Lines, Inc. (ESLI), the petitioner-carrier, and was destined for Manila.

Upon the cargo’s arrival in Manila on March 4, 1980, Eastern Shipping Lines released the shipment to CMI based on an Undertaking for Delivery of Cargo.
CMI, without surrendering the original bill of lading, provided a written guarantee undertaking indemnification of ESLI against any future claims or liabilities.
In absence of the original bill of lading, Eastern Shipping Lines relied on this guarantee and the fact that the bill of lading’s face designation clearly indicated CMI as the consignee.

Approximately five and a half months later, on August 19, 1980, Hongkong and Shanghai Banking Corporation (HSBC), a respondent and co-related party to CMI, sent a letter asserting their claim over the goods by notifying that they possessed the original bill of lading.
HSBC followed up with additional demand correspondence on October 29, 1980, intimating the possibility of legal action if ESLI did not act to recover the cargo.
CMI later acknowledged in a letter on December 23, 1980 that it had received the cargo pursuant to its guarantee and requested a delay in legal action, promising settlement from funds expected from another transaction.

Following HSBC’s claims, the petitioner ESLI faced a complaint before the Court of First Instance (CFI) of Rizal filed by HSBC for the value of the goods ($168,521.16), along with exemplary damages, attorney’s fees, and litigation expenses.
In its answer with counterclaims, ESLI admitted its duty to transport and deliver the goods to the designated party but denied any misdelivery, asserting that the consignee (CMI) had validly proven its ownership through the guarantee and associated documents.
ESLI also raised special and affirmative defenses, including the timeliness and sufficiency of the documents, and the reliance on the provision of Article 353 of the Code of Commerce allowing for release upon issuance of a receipt when the bill of lading cannot be produced.

On August 15, 1981, ESLI filed a third party complaint against CMI, seeking reimbursement for liabilities ESLI might incur from HSBC, as well as moral damages.
The trial court, relying primarily on the documentary evidence provided by HSBC and ESLI, rendered a judgment on January 15, 1985:

ESLI was ordered to pay the value of the goods, interest, attorney’s fees, and costs.
With respect to the third party complaint, CMI was ordered to reimburse ESLI for the same amounts.

ESLI's subsequent motion for reconsideration was denied, prompting the filing of a petition for review with the Court of Appeals.

On January 30, 1987, the Court of Appeals affirmed the trial court’s decisions in toto, holding ESLI liable for the value of the goods and associated damages.
ESLI, in its petition for review, raised two primary grounds:

That the CA erred by not applying the principle that when one of two innocent parties must suffer, the party causing the damage should bear the consequences—thereby discounting the negligence of HSBC.
That the CA was unduly influenced by ESLI’s own earlier admission, which they argued was inconsequential relative to the total evidentiary matrix.

Central to the dispute was the interpretation of the bill of lading indicating that CMI, not HSBC, was the consignee—a fact that ESLI argued absolved it from liability.

Whether the release of the cargo to Consolidated Mines, Inc., without surrendering the original bill of lading, was valid and justified based on the guarantee provided by CMI.
Whether ESLI, as carrier, acted in good faith when releasing the goods based solely on the information and guarantee presented on the bill of lading.

Who is the unequivocal consignee as dictated by the bill of lading—the designated party, Consolidated Mines, Inc., or the bank, HSBC, which later asserted its rights?
Whether ESLI should have looked beyond the face of the bill of lading to ascertain a hidden or alternative consignee, given that HSBC later claimed lien over the goods.

Whether the petitioner-carrier’s actions should be excused on the premise that HSBC’s delay in asserting its rights and misrepresentation regarding the cargo’s ownership contributed to the alleged misdelivery.
Whether the principles of equitable relief and the doctrine of “where one of two innocent persons must suffer, the one who gave occasion for the loss must bear the consequences” apply exclusively to ESLI.

How the provision in Article 353 of the Code of Commerce (regarding receipt in lieu of the original bill of lading) supports or undermines ESLI’s reliance on the consignee’s guarantee.
The relevance of Article 1736 of the Civil Code, particularly the clause concerning delivery “to the consignee or to the person who has a right to receive” the goods, in determining ESLI’s liability.