CASE DIGEST - Designer Baskets v. Air Sea Transport; GR 184513 J. Jardeleza; 09 March 2016

RELEASE OF THE GOODS TO THE CONSIGNEE

Designer Baskets v. Air Sea Transport; GR 184513

J. Jardeleza; 09 March 2016

DOCTRINE: A common carrier may release the goods to the consignee even without the surrender of the bill of lading

FACTS:

DBI is a domestic corporation engaged in the production of housewares and handicraft items for export. Ambiente, a foreign-based company, ordered from DBI5 223 cartons of assorted wooden items (the shipment). The shipment was worth Twelve Thousand Five Hundred Ninety and Eighty-Seven Dollars (US$12,590.87) and payable through telegraphic transfer.

Ambiente designated ACCLI as the forwarding agent that will ship out its order from the Philippines to the United States (US). ACCLI is a domestic corporation acting as agent of ASTI, a US based corporation engaged in carrier transport business, in the Philippines.

DBI delivered the shipment to ACCLI for sea transport from Manila and delivery to Ambiente at 8306 Wilshire Blvd., Suite 1239, Beverly Hills, California. To acknowledge receipt and to serve as the contract of sea carriage, ACCLI issued to DBI triplicate copies of ASTI Bill of Lading No. AC/MLLA601317.9 DBI retained possession of the originals of the bills of lading pending the payment of the goods by Ambiente.

Ambiente and ASTI entered into an Indemnity Agreement. Under the Agreement, Ambiente obligated ASTI to deliver the shipment to it or to its order "without the surrender of the relevant bill(s) of lading due to the non-arrival or loss thereof. Ambiente undertook to indemnify and hold ASTI and its agent free from any liability as a result of the release of the shipment.13 Thereafter, ASTI released the shipment to Ambiente without the knowledge of DBI, and without it receiving payment for the total cost of the shipment.

DBI then made several demands to Ambiente for the payment of the shipment, but to no avail. DBI filed the Original Complaint against ASTI, ACCLI and ACCLFs incorporators-stockholders15 for the payment of the value of the shipment. DBI claimed that under Bill of Lading Number AC/MLLA601317, ASTI and/or ACCLI is "to release and deliver the cargo/shipment to the consignee, only after the original copy or copies of [the] Bill of Lading is or are surrendered to them; otherwise, they become liable to the shipper for the value of the shipment.

DBI also averred that ACCLI should be jointly and severally liable with its co-defendants because ACCLI failed to register ASTI as a foreign corporation doing business in the Philippines. In addition, ACCLI failed to secure a license to act as agent of ASTI. ASTI, ACCLI, and ACCLI's incorporators-stockholders filed a Motion to Dismiss.

DBI filed an Opposition to the Motion to Dismiss asserting that ASTI and ACCLI failed to exercise the required extraordinary diligence when they allowed the cargoes to be withdrawn by the consignee without the surrender of the original bill of lading.

ASTI, ACCLI, and ACCLI's incorporators-stockholders countered that it is DBI who failed to exercise extraordinary diligence in protecting its own interest. They averred that whether or not the buyer-consignee pays the seller is already outside of their concern. RTC'S Decision: It found ASTI, ACCLI, and Ambiente solidarity liable to DBI for the value of the shipment.

The trial court declared that the liability of Ambiente is "very clear." As the buyer, it has an obligation to pay for the value of the shipment. The trial court noted that "[the case] is a simple sale transaction which had been perfected especially since delivery had already been effected and with only the payment for the shipment remaining left to be done. The trial court held that as a common carrier, ASTI is bound to observe extraordinary diligence in the vigilance over the goods. However, ASTI was remiss in its duty when it allowed the unwarranted release of the shipment to Ambiente.The trial court found that the damages suffered by DBI was due to ASTI's release of the merchandise despite the non-presentation of the bill of lading. That ASTI entered into an Agreement with Ambiente to release the shipment without the surrender of the bill of lading is of no moment. The Agreement cannot save ASTI from liability because in entering into such, it violated the law, the terms of the bill of lading and the right of DBI over the goods. The trial court also added that the Agreement only involved Ambiente and ASTI. Since DBI is not privy to the Agreement, it is not bound by its terms.

Consequently, the trial court held ACCLI solidarily liable with ASTI. ACCLFs incorporators-stockholders, the trial court absolved them from liability. The trial court ruled that the participation of ACCLFs incorporators-stockholders in the release of the cargo is not as direct as that of ACCLI.

DBI, ASTI and ACCLI appealed to the CA. DBI took issue with the order of the trial court awarding the value of the shipment in Philippine Pesos instead of US Dollars. The trial court erred in pegging its value at the exchange rate prevailing at the time of the shipment, rather than at the exchange rate prevailing at the time of payment.

CA'S DECISION: Affirmed RTC'S decision with modification.

CA affirmed the trial court's finding that Ambiente is liable to DBI, but absolved ASTI and ACCLI from liability. The CA found that the pivotal issue is whether the law requires that the bill of lading be surrendered by the buyer/consignee before the carrier can release the goods to the former. It then answered the question in the negative.

The CA stressed that DBI failed to present evidence to prove its assertion that the surrender of the bill of lading upon delivery of the goods is a common mercantile practice. Further, even assuming that such practice exists, it cannot prevail over law and jurisprudence. Hence, this petition for review.

ISSUE:

Whether the common carrier may release the goods to the consignee even without the surrender of the bill of lading.

RULING:

Yes. A common carrier may release the goods to the consignee even without the surrender of the bill of lading.

This case presents an instance where an unpaid seller sues not only the buyer, but the carrier and the carrier's agent as well, for the payment of the value of the goods sold. The basis for ASTI and ACCLI's liability, as pleaded by DBI, is the bill of lading covering the shipment.

A bill of lading is defined as "a written acknowledgment of the receipt of goods and an agreement to transport and to deliver them at a specified place to a person named or on his order." It may also be defined as an instrument in writing, signed by a carrier or his agent, describing the freight so as to identify it, stating the name of the consignor, the terms of the contract of carriage, and agreeing or directing that the freight be delivered to bearer, to order or to a specified person at a specified place.

Under Article 350 of the Code of Commerce, "the shipper as well as the carrier of the merchandise or goods may mutually demand that a bill of lading be made." A bill of lading, when issued by the carrier to the shipper, is the legal evidence of the contract of carriage between the former and the latter. It defines the rights and liabilities of the parties in reference to the contract of carriage. The stipulations in the bill of lading are valid and binding unless they are contrary to law, morals, customs, public order or public policy.

Here, ACCLI, as agent of ASTI, issued Bill of Lading No. AC/MLLA601317 to DBI. This bill of lading governs the rights, obligations and liabilities of DBI and ASTI. DBI claims that Bill of Lading No. AC/MLLA601317 contains a provision stating that ASTI and ACCLI are "to release and deliver the cargo/shipment to the consignee, only after the original copy or copies of the said Bill of Lading is or are surrendered to them; otherwise they become liable to [DBI] for the value of the shipment.” Quite tellingly, however, DBI does not point or refer to any specific clause or provision on the bill of lading supporting this claim. The language of the bill of lading shows no such requirement.

Further, a carrier is allowed by law to release the goods to the consignee even without the latter's surrender of the bill of lading. The third paragraph of Article 353 of the Code of Commerce is enlightening:

Article 353. The legal evidence of the contract between the shipper and the carrier shall be the bills of lading, by the contents of which the disputes which may arise regarding their execution and performance shall be decided, no exceptions being admissible other than those of falsity and material error in the drafting.

After the contract has been complied with, the bill of lading which the carrier has issued shall be returned to him, and by virtue of the exchange of this title with the thing transported, the respective obligations and actions shall be considered cancelled, unless in the same act the claim which the parties may wish to reserve be reduced to writing, with the exception of that provided for in Article 366.

In case the consignee, upon receiving the goods, cannot return the bill of lading subscribed by the carrier, because of its loss or any other cause, he must give the latter a receipt for the goods delivered, this receipt producing the same effects as the return of the bill of lading.

The general rule is that upon receipt of the goods, the consignee surrenders the bill of lading to the carrier and their respective obligations are considered canceled. The law, however, provides two exceptions where the goods may be released without the surrender of the bill of lading because the consignee can no longer return it. These exceptions are when the bill of lading gets lost or for other cause. In either case, the consignee must issue a receipt to the carrier upon the release of the goods. Such receipt shall produce the same effect as the surrender of the bill of lading.

We have already ruled that the non-surrender of the original bill of lading does not violate the carrier's duty of extraordinary diligence over the goods. In Republic v. Lorenzo Shipping Corporation, we found that the carrier exercised extraordinary diligence when it released the shipment to the consignee, not upon the surrender of the original bill of lading, but upon signing the delivery receipts and surrender of the certified true copies of the bills of lading. Thus, we held that the surrender of the original bill of lading is not a condition precedent for a common carrier to be discharged of its contractual obligation.

The applicable provision instead is Article 353 of the Code of Commerce, which we have previously discussed. To reiterate, the Article allows the release of the goods to the consignee even without his surrender of the original bill of lading. In such case, the duty of the carrier to exercise extraordinary diligence is not violated. Nothing, therefore, prevented the consignee and the carrier to enter into an indemnity agreement of the same nature as the one they entered here. No law or public policy is contravened upon its execution.

Petition is denied.