Case Summary (G.R. No. L-22491)
Key Dates and Logistics
Shipment: April 30, 1961 — 140 packages of galvanized steel durzinc sheets shipped from Yawata, Japan, aboard S.S. TENSAI MARU under Bill of Lading No. WM-2 consigned “to order of the shipper” with Teves as notify party.
Arrival in Manila: On or about May 9, 1961.
Demand draft not paid and protest: After arrival; bill of lading subsequently indorsed to Domingo Ang.
Complaint filed: October 30, 1963 in the Court of First Instance of Manila.
Lower court dismissal for prescription: Order dated December 21, 1963; motion for reconsideration denied January 13, 1964.
Decision under review: Appeal to the Supreme Court (decision issued January 27, 1967).
Applicable constitutional backdrop: Decision rendered in 1967 under the legal framework prevailing prior to the 1987 Constitution (the 1935 Constitution era).
Applicable Statutes and Legal Provisions
Carriage of Goods by Sea Act (Commonwealth Act No. 65) — Section 3(6), paragraph 4: “In any event, the carrier and the ship shall be discharged from all liability in respect to loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered.”
Civil Code: Article 18 (supplementing commercial and special laws with Civil Code provisions); Article 1189 (definition of “loss” in contexts suspending efficacy of an obligation to give).
Civil Code prescription provisions cited: Articles 1144(1) (ten-year prescription for breach of written contract) and 1146 (four-year prescription for quasi-delict).
Factual Background (transactional mechanics)
Yau Yue sold the goods to Herminio G. Teves for US$32,458.26 under terms requiring payment by bank draft in exchange for delivery of the bill of lading; the bill of lading was to be deposited with the Hongkong & Shanghai Bank of Manila. Yau Yue, through Tokyo Boeki, shipped the goods aboard the S.S. TENSAI MARU. The bill of lading was consigned to order of the shipper, with Teves as the notify party. Yau Yue indorsed and delivered the bill of lading and drew a demand draft against Teves. Teves did not pay; the bank protested. Nonetheless, Teves obtained from the carrier’s agent (American Steamship Agencies, Inc.) a bank guaranty promising surrender of the original negotiable bill of lading, and on that basis obtained a “Permit To Deliver Imported Articles” and recovered the goods from the Bureau of Customs. Ang, as indorsee, later presented the endorsed bill of lading and demanded the goods but was informed they had been delivered to Teves.
Procedural Posture
Ang sued American Steamship Agencies, Inc. for wrongful delivery/conversion. The defendant moved to dismiss, asserting prescription under Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act — the one‑year limitation for suits “in respect to loss or damage.” The trial court dismissed the complaint for prescription; the dismissal was appealed to the Supreme Court on the sole legal question whether the cause of action had prescribed under the cited provision.
Legal Issue Presented
Whether Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act — the one‑year limitation for suits in respect of “loss or damage” — bars plaintiff Ang’s action for wrongful delivery or conversion when the goods were delivered intact to another person (Teves) alleged to be wrongfully receiving them.
Governing Principle on Pleadings and Motions to Dismiss
A defendant’s motion to dismiss is treated as hypothetically admitting the factual allegations of the complaint. Therefore, for purposes of the motion to dismiss, the Court accepts the complaint’s allegations that the defendant issued the permit, that Teves obtained release without surrender of the bill of lading and without the plaintiff’s knowledge or consent, and that the defendant delivered the goods to Teves in violation of the bill of lading.
Definition and Legal Scope of “Loss” under the Carriage Act
The Carriage of Goods by Sea Act does not itself define “loss.” The Court invoked Civil Code Article 18 to supply the deficiency and turned to Article 1189, which indicates that, for obligations to give, a thing is “lost” when it perishes, goes out of commerce, or disappears such that it is unknown or cannot be recovered. Applying that definition, “loss” contemplates nondelivery because the goods have perished, disappeared, or otherwise cannot be recovered — not situations where goods have been delivered to the wrong person.
Distinction Between “Loss” and “Misdelivery”
The Court emphasized the established distinction: misdelivery (delivery to the wrong person in violation of the bill of lading) is not the same as nondelivery or loss. If goods have been physically delivered, even if to a person not entitled to them, they are not “lost” within the meaning of the one‑year limitation provision. The Court relied on prior authority (Tan Pho v. Hassamal Dalamal) demonstrating that delivery to an unintended recipient constitutes misdelivery and breach of the bill of lading, not nondelivery.
Application of the Law to the Present Facts
Under the complaint’s allegations (deemed admitted for purposes of the dismissal motion), the goods were delivered to Teves — i.e., they were not lost or damaged. Accordingly, the one‑year limitation in Section 3(6), paragraph 4 (which applies to loss or damage) does not govern actions for misdelivery or conversion where goods were intact and delivered to a person alleged to be wrongfully in possession.
Applicable Prescription Period for Misdelivery or Conversion Claims
Because the action is predicated on misdelivery/conversion rather than loss or damage, the Court applie
Case Syllabus (G.R. No. L-22491)
Citation and Panel
- Reported at 125 Phil. 543, G.R. No. L-22491, decided January 27, 1967.
- Decision by Justice Bengzon, J.P.
- Justices Concepcion, C.J., Reyes, J.B.L., Dizon, Regala, Makalintal, Zaldivar, Sanchez and Ruiz Castro concurred.
Procedural Posture
- Action filed by plaintiff-appellant Domingo Ang against defendant-appellee American Steamship Agencies, Inc. (carrier's agent) alleging wrongful delivery and/or conversion of goods covered by a bill of lading.
- Complaint filed in the Court of First Instance of Manila on October 30, 1963.
- Defendant moved to dismiss on December 2, 1963 on the ground of prescription under Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act (Commonwealth Act No. 65).
- Lower court granted dismissal for prescription by order dated December 21, 1963 (plaintiff received a copy on December 26, 1963); motion for reconsideration denied January 13, 1964.
- Plaintiff appealed directly to the Supreme Court on the question of law whether the cause of action had prescribed under the cited provision.
- Supreme Court reversed the dismissal and remanded the case for further proceedings; no costs.
Parties and Roles
- Plaintiff-Appellant: Domingo Ang — ultimate holder in due course of the bill of lading for 140 packages of galvanized steel durzinc sheets.
- Defendant-Appellee: American Steamship Agencies, Inc. — agent in the Philippines of the Nissho Shipping Co., Ltd., and acting as carrier’s agent responsible for issuing the "Permit To Deliver Imported Articles" and coordinating delivery procedures.
- Seller/Original Shipper: Yau Yue Commercial Bank Ltd. of Hongkong (Yau Yue), which contracted through Tokyo Boeki, Ltd. to ship the goods from Yawata, Japan.
- Buyer/Notify Party: Herminio G. Teves — designated notify party under the bill of lading and buyer who failed to pay the demand draft but later obtained a bank guaranty enabling release of the goods.
Contractual Terms and Shipping Documents
- Sale Agreement: Yau Yue agreed to sell 140 packages of galvanized steel durzinc sheets to Herminio G. Teves for $32,458.26 (US); date of agreement not shown in the record.
- Agreed procedures included:
- Purchase price to be covered by a bank demand draft paid by Teves in exchange for the bill of lading to be deposited with the Hongkong & Shanghai Bank of Manila.
- Upon arrival in Manila, Teves would be notified and would pay the demand draft, after which the bill of lading would be delivered to him.
- Teves would present the bill of lading to the carrier’s agent, American Steamship Agencies, Inc., which would issue the "Permit To Deliver Imported Articles" to be presented to the Bureau of Customs to obtain release of the goods.
- Bill of Lading: Bill of Lading No. WM-2 dated April 30, 1961, issued for shipment aboard S.S. TENSAI MARU, consigned "to order of the shipper", with Herminio G. Teves as the notify party; bill of lading was indorsed to the order of and delivered to Yau Yue by the shipper.
Chronology of Material Facts
- April 30, 1961: Goods shipped at Yawata, Japan aboard S.S. TENSAI MARU under Bill of Lading No. WM-2.
- Upon issuance and delivery of the bill of lading to Yau Yue, Yau Yue drew a demand draft together with the bill of lading against Herminio G. Teves through the Hongkong & Shanghai Bank.
- On or about May 9, 1961: Articles arrived in Manila; the Hongkong & Shanghai Bank notified Teves and requested payment of the demand draft.
- Teves did not pay the demand draft; the bank protested and returned the bill of lading and demand draft to Yau Yue, and Yau Yue indorsed the bill of lading to Domingo Ang.
- Despite non-payment, Teves obtained a bank guaranty in favor of American Steamship Agencies, Inc. that he would surrender the original negotiable bill of lading duly indorsed by Yau Yue.
- On the strength of that guaranty, Teves secured a "Permit To Deliver Imported Articles" from American Steamship Agencies, Inc., presented the permit to the Bureau of Customs, and the Bureau released the articles to Teves.
- Thereafter, Domingo Ang presented the indorsed bill of lading to American Steamship Agencies, Inc. and claimed the articles, but was informed that the carrier’s agent had delivered the articles to Teves.
- October 30, 1963: Domingo Ang filed suit claiming wrongful delivery and/or conversion of the goods.