G.R. No. L-14711 - Smith, Bell and Co., Ltd. vs. Manila Port Service and Manila Railroad Co., Inc.

Smith, Bell & Co., Ltd. filed an action in the Court of First Instance of Manila against Manila Port Service and/or Manila Railroad Company, Inc., jointly and or alternatively, docketed as civil No. 36034.
Manila Port Service was the defendant and later became the appellant.

The complaint alleged that Smith, Bell & Co., Ltd. (London) purchased and shipped for importation into the Philippines a “Crossley” diesel engine valued at US $7,380 (C & F), and that the engine included component parts consisting of nine packages, including one flywheel.
The flywheel was shipped on board the “SS Patroclus” under bill of lading No. 99, marked “SB-169-Manila,” consigned to order.
The vessel arrived in Manila on or about twenty-five (25) July 1957 and the cargo was discharged into the custody of the defendants.
The plaintiff alleged that shipping documents were indorsed and sent to it, that it paid for the value represented by the documents, and that it cleared the documents with the agents of the vessel and the Bureau of Customs.
The plaintiff alleged that during unloading, because of the “negligent act” of the defendants’ employees and/or the use of inadequate or defective machinery in delivery, the flywheel was broken beyond repair, resulting in total loss and causing damage to the plaintiff in the total amount of P2,063.18.

The plaintiff alleged that it made demand upon the defendants for payment of the P2,063.18 plus lawful interests from the date of the first demand until paid.
The plaintiff claimed P500 for litigation expenses and attorney’s fees and costs.
The defendants refused to pay, prompting the filing of the action on April 23, 1958.

The defendants denied negligence and denied the use of inadequate or defective equipment, alleging that the mishap resulted from ordinary handling.
As a special defense, the defendants invoked a management contract entered into by the Bureau of Customs and the defendant subsidiary on February 29, 1956.
The defendants claimed that under section 15 of the management contract, their liability for cargoes lost or damaged was limited only to the invoice value of the cargo, and in no case exceeded P500 for each package.
The defendants further claimed that all parties taking delivery from them were bound by the provisions of the management contract by law and by acceptance, alleged to be shown by presenting and signing pertinent documents covering the release of cargoes.

The trial court found that the flywheel fell due to a fall from the forklift operated by one of the defendants’ employees, and that the forklift was not strong enough to lift it.
The trial court found that the flywheel was broken beyond repair.
The trial court found the plaintiff’s damage value at P2,027.88.
The trial court held Manila Port Service liable for the damage, ordering payment of P2,027.88 with legal interest from the date of the filing of the complaint until fully paid, plus costs.
The trial court dismissed the case as against Manila Railroad Company for lack of evidence.
The trial court held that section 15 limiting liability was not binding upon the plaintiff because the plaintiff was not a signatory or party to the management contract.
The trial court declined to award:

Facts as summarized by the trial court and evidence on the handling of the cargo

On July 3, 1957, Smith, Bell & Co. Ltd. received nine packages as component parts for one “Crossley” Diesel Engine, including the flywheel, for US $7,380.
The machinery was shipped on board the SS PATROCLUS under bill of lading Exh. B; the vessel arrived in due time and the machinery was discharged into Manila Port Service’s custody.
Plaintiff’s witness Benito Nuguid testified that, during discharge, one flywheel fell while being lifted by the Manila Port Service forklift.
Plaintiff’s witness Antonio Esteban testified the flywheel was not crated because it was not possible to crate it, and it weighed about 600 lbs. and had a diameter of eight to ten feet.
Plaintiff’s witness Eustaqujo Partolo testified that the damaged flywheel became useless and could no longer be repaired.
The plaintiff filed a claim for damages amounting to P2,027.88, plus P35.30 for the survey of the damage, for a total of P2,063.18.
Manila Port Service rejected the claim, as reflected in letters dated:

indicating agreement to pay only P500.00 based on the management contract (Exh. 1).

After full payment did not occur, plaintiff instituted the action on April 23, 1958 against both defendants.

The appeal by Manila Port Service raised questions of law only.
The record on appeal was forwarded to the Court of Appeals and, upon motion of the appellant, forwarded to this Court.

The trial court treated the amount of damages as established and unchallenged by evidence.
The trial court treated Manila Port Service as at fault because the for...(Subscriber-Only)

Binding effect of the management contract limitation on a non-signatory consignee/importer

Whether section 15 of the management contract (Exhibit 1), limiting liability to P500 for each package, was binding upon the appellee who was not a party or signatory to the management contract.

Correct amount of liability under the management contract and effect of the declared or manifested value

Whether the value of the broken flywheel was recoverable beyond P500, considering that the value was not specified or manifested in the relevant bill of lading (as found in the referenced reasoning).

Whether the trial court’s dismissal of the complaint as against Manila Railroad Company was reviewable on appeal by Manila Port Ser...(Subscriber-Only)

Ruling:

(Subscriber-Only)

Ratio:

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