45 Phil. 488
[ G.R. No. 20410. December 10, 1923 ]
JAMES J. MCCARTHY, PLAINTIFF AND APPELLEE, VS. BARBER STEAMSHIP LINES, INC., DEFENDANT AND APPELLANT.
D E C I S I O N
Plaintiff
is a resident of the City of Manila, and the defendant is a corporation
organized under the laws of the State of New York, and duly licensed to
do business in the Philippine Islands, with its principal office in the
City of Manila, where it is represented by the Pacific Steamship
Company, another corporation organized under the laws of the State of
Washington, and duly authorized to transact business here. The
steamship ‘West Mahomet’ is a vessel belonging to, and
operated by, the Barber Steamship Lines, Inc., which is engaged in the
transportation of freight as a common carrier between New York City and
Manila. The complaint then alleges that on the first day of July, 1920,
the defendant entered into a contract with the American Undergarment
Corporation of New York City to transport from New York to Manila 22
cases of cotton piece goods and 3 cases of perforating paper, which it
received from the Undergarment Corporation in New York in good order
and for which it issued its bill of lading, promising to deliver the
same to the Undergarment Corporation at Manila; that of the 22 cases of
cotton piece goods delivered to the defendant, only 16 were delivered
to, and received by, the Undergarment Corporation in Manila, and that
the value of the undelivered six cases was P7,443.64; that among the 16
cases which were delivered, one of them contained 2,926½ yards of
nainsook, of which only 2,352½ yards were delivered, making a shortage
of 574 yards of the value of $223.86, or a total value on account of
shortage of all the goods of the sum of $7,667.50; that the value set
forth in paragraphs 3 and 4 of the complaint are the net invoice values
of the goods, plus freight and insurance; that the goods were insured
in the Union Insurance Company of Canton, and that upon claim of
shortage being made, the Insurance Company paid the Undergarment
Corporation the full value of the shortage; that for value the
Insurance Company sold and assigned its claim against the defendant to
the plaintiff, who became and is now subrogated to all the rights of
the Insurance Company; that the defendant was duly notified of the
assignment to the plaintiff, who made a demand for the $7,667.50; “that
the defendant has paid on this account the sum of $218.59, U. S.
currency, only.”
Wherefore, plaintiff prays for judgment against the defendant for the balance, with interest and costs.
After the overruling of the defendant’s motion and demurrer, to which
an exception was duly taken, the defendant made a general and specific
denial of all the material matters in the complaint, and, as a special
defense, alleges that about April 11, 1921, the defendant paid to the
American Undergarment Corporation the sum of $213.59, as a full, final
and complete settlement of any and all claims arising from, and
pertaining to, the alleged shortage, and, therefore, there is nothing
due plaintiff.
The case was tried upon such issues, and
judgment rendered in favor of the plaintiff for $7,448.91, with
interest and costs, to which the defendant duly excepted and filed a
motion for a new trial, which was overruled, and it then appealed,
contending that the lower court erred in refusing to sustain
defendant’s special defense, in finding that “the consignee presented
its claim in due time and form,” and that part only of the claim was
paid, in finding that the Insurance Company assigned all of its rights
to plaintiff, in overruling defendant’s motion for a nonsuit, in the
admission of certain evidence, and in rendering judgment for the
plaintiff and in not rendering judgment for the defendant, and in
denying its motion for a new trial.
JOHNS, J.:
It is conceded that on November 5, 1920, the American Undergarment
Corporation wrote the following letter to the “Admiral Line:”
“We received shipment of cotton textile via the S. S. West Mahomet six cases of which were short landed and one landed in bad order.
The value of merchandise lost en route is P15,335 as per enclosed invoice.
“We
hereby make claim against you for P437.18 the proportionate share for
which you are liable according to clause (1) of the attached bill of
lading.“Kindly acknowledge receipt of this claim and documents for same and awaiting your prompt settlement, we remain.”
In which it enclosed its claim, as follows:
“Claim No. 667.
“Ex S. S. West Mahomet
“Cases short landed:
— Flesh Nainsook, yds. at $0.44 — 2½ Nainsook, yds. at $0.39 — 2½ Nainsook, yds. at $0.39 — 2½ Nainsook, yds. at $0.42 3/4 — 2½ Nainsook, yds. at $0.42 3/4 — 2½ Nainsook, yds. at $0.39
— 2½ Nainsook — …….. “at $500 per ton—$218.59 or P437.18.”
That, not having received payment of its claim, it wrote the following letter on March 5, 1921, to the “Admiral Line:”
“Would you be kind enough to advise us what action has been taken regarding our claim Ex S. S. West Mahomet. This claim has been in your hands since Nov. 2, 1921, and we sincerely trust that it is ready for settlement.
“Awaiting reply with interest we remain.
*******
“Claim No. 667.
“Claim No. 667.
On April 6, the claim was examined and allowed for the full amount as presented.
April 11, the Undergarment Corporation signed the following receipt:
“Received
from Pacific Steamship Company two hundred eighteen and 59/100 dollars,
P437.18, in full settlement of loss and damage on shipment as described
below.” To which an itemized list of the shipping articles was
attached. Also, the following guaranty by the American Undergarment
Corporation against claims arising from non-delivery of original bill
of lading:“In consideration of the Pacific Steamship Company paying to American Undergarment Corporation $218.59 (more or less), in settlement of claim for Shortages and Shortlanded on the shipment referred to below,
without surrendering the original Bill of Lading, agree to bind
themselves and guarantee to reimburse the said Pacific Steamship Co.
whatever amount it may be required to, or may pay on other claims for
shortage or for outage or damage on same shipment, or for damages, cost
or expenses, incident to or growing out of such payments, or out of
refusal to pay such claims made by any parties in case of presentation
of claim at any time hereafter, accompanied by the missing document
referred to.“The original Bill of Lading is not
surrendered in support of above numbered claim for reason * * *.
Shipment of 25 Cs. Cotton Pcs. Goods made by American Undergarment
Corporation from New York, date July 1st, 1920, consigned to American
Undergarment Corporation at Manila covered by Barber Bill of Lading,
B/L 452 from New York to Manila, dated July 13th, 1920, Steamer West Mahomet. Voyage Two.“Dated at Manila this 11th day of April, 1921.”
April 12, 1921, the Undergarment Corporation wrote the following letter to the “Admiral Line:”
“Kindly give bearer check, for our claim No. 667 ex S. S. West Mahomet in amount P437.18 and oblige.”
On the same day, a check for P437.18 was issued by the “Admiral Line”
to, and in favor of, the Undergarment Corporation, which it endorsed
and deposited to its credit in the bank.
The following dates
are important: The original complaint was filed on the 1st of March,
1922, and the amended complaint was filed on March 28, 1922.
The record is not clear as to when the Insurance Company paid the full
amount of the loss to the Undergarment Corporation, but it was a few
days after the letter of November 5, 1920, was written, and it will be
noted that the Undergarment Corporation received a check for P437.18 on
April 12, 1921, about five months after the Insurance Company paid the
loss in full. There is no claim or pretense that at the time the
settlement was made and the check was given, the defendant was ever
notified of the fact that the loss was insured, or that the policy was
paid, or of any of the legal rights of the Insurance Company.
Clause 1 of the bill of lading recites:
“It
is mutually agreed that the value of the goods receipted for above does
not exceed $500 per freight ton, or in proportion for any part of a
ton, unless the value be expressly stated herein and ad valorem freight
paid thereon.”
The defendant contends that
the claim of the Undergarment Corporation and the settlement with it
was made under this clause, and that, in legal effect, it was a full
and complete settlement of any and all claims which the Undergarment
Corporation had against the defendant.
Clause 9 of the bill of lading recites:
“Also,
that in the event of claims for short delivery of, or damage to, cargo
being made, the carrier shall not be liable for more than the net
invoice price plus freight and insurance less all charges saved, and
any loss or damage for which the carrier may be liable shall be
adjusted pro rata on the said basis.“Neither the
carrier, the vessel, nor the agents shall be liable for any claim for
loss of or damage to goods in any event unless notice in writing of the
claim shall have been presented to the ship’s agent at the port of
discharge before the removal of the goods from the ship’s custody,
except at Manila as hereinafter provided for.”
Plaintiff contends that the present action is for short delivery of the
goods under the bill of lading, and that the payment which was made to
the Undergarment Corporation was a payment pro tanto upon the full amount of its loss, and that under the decision of this court in H. E. Heacock Co. vs.
Macondray & Co. (42 Phil., 205), he is now entitled to judgment for
the full amount, less the credit of P437.18. The record shows that the
Heacock decision was rendered October 3, 1921, and that it was first
published in the Official Gazette January 12, 1922, and the complaint
in this action was filed March 1, 1922, more than sixteen months after
the Undergarment Corporation presented its claim, which was settled in
full. It is very significant that no other or further claim of any kind
was ever made on the defendant until after the decision of this court
in the Heacock case.
As we analyze the record, the claim
which was presented, and the settlement which was made, was a full,
complete and final settlement of any and all claims which the
Undergarment Corporation had against the defendant, and that the
P437.18 was paid and accepted in full settlement of all claims.
The letter of November 5, 1920, recites:
“We
hereby make claim against you for P437.18 the proportionate share for
which you are liable according to clause (1) of the attached bill of
lading.”
The claim enclosed in the letter recites:
“Six cases short fended of Nainsook, of so many yards in each case, at so much a yard, amounting to $7,443.64,” and
“1233—2½ Nainsook — or a total of $7,667.50 “at $500 per ton—$218.59 or P437.18.”
This claim was presented on November 5, 1920, and the Undergarment
Corporation, not having heard from it, wrote a letter of inquiry as to
what action had been taken on its claim, in which it says:
“This claim has been in your hands since November 2, 1921, and we sincerely trust that it is ready for settlement.”
April 6, 1921, the claim was allowed, and on April 11, 1921, the
Undergarment Corporation signed a receipt for P437.18 “in full
settlement of loss and damage on shipment as described below,” to which
the following statement was attached:
“Herewith
claim papers supporting payment of $218.59 to American Undergarment
Corporation for Shortage and Shortlanded on 7 Cs. Cot. Pcs. Goods from
New York to Manila covered by Barber B/L 452 to Manila waybill 23 dated
July 13, 1920, via S. S. West Mahomet, Voyage No. Two,” to
which were attached all of the papers concerning the shipment and the
claim for loss, and on the same day the Undergarment Corporation gave
its guaranty, reciting the payment of $218.59 by the steamship company
“in settlement of claim for shortages and shortlanded on the shipment
referred to below.”
The decision in the
Heacock case is the law of this court. In legal effect, it holds that
at the time the Undergarment Corporation presented its claim under
clause 1 of the bill of lading for P437.18, it had a claim against the
defendant for the full amount of its loss under clause 9 of the bill of
lading, and that in truth and in fact the defendant was liable for all
of the shortage. But the question here involved is the legal force and
effect of a settlement in full of all claims for losses, and whether
one year after such a settlement has been made it can be annulled, set
aside or vacated without any allegation or proof of fraud. The proof is
conclusive that plaintiff’s claim was made and presented under clause 1
of the bill of lading, and that the settlement was full, final and
complete of all claims against the defendant by the Undergarment
Corporation. There is no claim or pretense that the settlement was
fraudulent. The most that could be claimed is that at the time it was
made, the Undergarment Corporation understood and believed that the
only liability of the defendant was under clause 1 of the bill of
lading, and that it did not know that it had a legal claim against it
for the full value of the goods under clause 9.
In other
words, if the Undergarment Corporation had known and been fully advised
of its legal rights, it would have made and presented its claim under
clause 9 of the bill of lading, and it would not have presented its
claim under clause 1, or made the settlement which it did. That is not
a valid defense. The original claim was presented November 5, 1920. The
settlement was made April 11, 1921, nearly five months after the claim
was presented. There is no claim or pretense that the Undergarment
Corporation was in any way misled or deceived by any statements or
representations of the defendant.
Ruling Case Law, vol. 5, says:
“The
compromise of any matter is valid and binding, not because it is the
settlement of a valid claim, but because it is the settlement of a
controversy.” (Page 877.)“In order to effect a compromise
there must be a definite proposition and an acceptance. As a question
of law it does not matter from whom the proposition of settlement
comes; if one is made and accepted, it constitutes a contract, and in
the absence of fraud it is binding on both parties.” (Page 879.)“Hence
it is a general rule in this country, that compromises are to be
favored, without regard to the nature of the controversy compromised,
and that they cannot be set aside because the event shows all the gain
to have been on one side, and all the sacrifice on the other, if the
parties have acted in good faith, and with a belief of the actual
existence of the rights which they have respectively waived or
abandoned; and if a settlement be made in regard to such subject, free
from fraud or mistake, whereby there is a surrender or satisfaction, in
whole or in part, of a claim upon one side in exchange for or in
consideration of a surrender or satisfaction of a claim in whole or in
part, or of something of value, upon the other, however baseless may be
the claim upon either side or harsh the terms as to either of the
parties, the other cannot successfully impeach the agreement in a court
of justice * * *. Where the compromise is instituted and carried
through in good faith, the fact that there was a mistake as to the law
or as to the facts, except in certain cases where the mistake was
mutual and correctable as such in equity, cannot afford a basis for
setting a compromise aside or defending against a suit brought thereon
* * *. Furthermore, and as following the rule stated, a compromise of
conflicting claims asserted in good faith will not be disturbed because
by a subsequent judicial decision in an analogous case it appears that
one party had no rights to forego.” (Pages 883, 884.) In which is cited
the case of Fisher vs. May (2 Bibb, 448; 5 Am. Dec, 626), in which the court says:“And
whether one or the other party understood the law of the case more
correctly than the other, cannot be material to the validity of the
bargain. For if it were, then it would follow that contracts by the
parties settling their own disputes, would at last be made to stand or
fall, according to the opinion of the appellate court how the law would
have determined it.”
Also, vol. 13, L. R. A., p. 601,[1] to the same effect, where a wealth of authorities are cited in the notes.
Under the head of “Release,” Ruling Case Law, vol. 23, p. 375, says:
“A
release is the giving up or abandoning of a claim or right to the
person against whom the claim exists or the right is to be enforced or
exercised. It is the discharge of a debt by the act of a party in
distinction from an extinguishment, which is a discharge by operation
of law. In distinguishing a release from a receipt it has been said
that a ‘receipt’ is evidence that an obligation has been discharged but
a ‘release’ is itself a discharge of it. No receipt can have the effect
of destroying per se any subsisting right; it is only evidence of a
fact. The payment of the money discharges or extinguishes the debt; a
receipt for the payment does not pay the debt; it is only evidence that
it has been paid. Not so of a written release; it is not only evidence
of the extinguishment, but is the extinguisher itself.”
In legal effect, the plaintiff now seeks to void and annul a full and
complete settlement which was made between the parties in good faith,
and which has been acquiesced in, and approved for sixteen months, by
all parties to the settlement, so that he may take advantage of the
decision of this court in the Heacock case, which was rendered sixteen
months after the settlement. No authority will ever be found which will
permit that to be done. The transaction between the defendant and the
Undergarment Corporation was a full, final and complete settlement with
the defendant for all of the losses arising out of the shortage in the
original shipment. There is no allegation or proof that at the time the
settlement was made the defendant had any notice or knowledge that the
loss was insured, or that the insurance company had paid the full
amount of the loss. For such reasons, it follows that the settlement
was binding upon both the insurance company and the plaintiff.
The judgment of the lower court is reversed and the complaint
dismissed, and the defendant will have judgment against the plaintiff
for its costs in both this and the lower court. So ordered.
Street, Malcolm, Villamor, and Ostrand, JJ., concur.
[1] Royal Society of Good Fellows vs. Campbell.
DISSENTING
JOHNSON, J., with whom concur, Avanceña, and Romualdez, JJ.:
This is an action to recover a sum of money. Certain facts are not denied. They are:
(1) That the American Undergarment Corporation shipped from New York on
the 15th day of July, 1920, 22 cases of cotton piece goods and 3 pieces
of perforating paper;
(2) That said merchandise was shipped
as per bill of lading (Exhibit A) on the steamship West Mahomet, which
boat belonged to the defendant, the Barber Steamship Lines, Inc.; that
said merchandise was received by said Steamship Company in good order
as per said bill of lading, to be shipped to Manila from New York;
(3) That on the 15th day of July the said American Undergarment
Corporation insured or entered into a contract of insurance with the
Union Insurance Company in the sum of $30,144 on said merchandise,
which insurance policy contained the condition, “it is hereby
understood and agreed that in case of loss such loss is
payable to the order of the American Undergarment Corporation” (Exhibit
G, page 68). It will be noted that the said three cases of perforating
paper were not included in the merchandise covered by said insurance
policy;
(4) That a part of said merchandise was received in the City of Manila sometime in the month of October, 1920;
(5) That of the 22 cases of cotton piece goods delivered to the Barber
Steamship Lines, Inc., in the City of New York, for shipment to the
City of Manila, only 16 cases were delivered to the American
Undergarment Corporation in the City of Manila, and one of which was
received in bad condition;
(6) That the value of the 6 cases
which were not delivered was P15,355; that the damage caused to the one
case received in bad condition amounted to P447.72;
(7) That
on the 5th day of November, 1920 the said American Undergarment
Corporation made a demand upon the agent of the Barber Steamship Lines
(the Admiral Line) located in the City of Manila (Exhibit F, p. 67) for
the payment of the said damages and “the proportionate share for which
the said Admiral Line was responsible;” that on the 12th day of April,
1921 (Exhibit M), the said Admiral Line paid to the American
Undergarment Corporation the sum of P437.18;
(8) That on the
19th day of January, 1921, the Union Insurance Company, which had
insured the safe delivery of said merchandise, paid, upon demand, to
the American Undergarment Corporation the sum of P17,673.65, the value
in Philippine currency at that time of the six cases of said
merchandise which had not been delivered (Exhibit H, p. 69);
(9) That the claim of the Union Insurance Company against the Barber
Steamship Lines for its loss of the goods in question, which amount it
had paid to the American Undergarment Corporation under its policy of
insurance, was transferred to the plaintiff herein by assignment on the
6th day of January, 1922, more than three months before the Admiral
Line paid its proportionate share of the loss;
(10) That by
virtue of said transfer to the plaintiff herein, he became subrogated
to all of the rights of the Insurance Company as well as of the
American Undergarment Corporation against the defendant;
(11) That this action was brought to recover the amount of the loss
suffered by said Insurance Company, based upon paragraph 9 of the bill
of lading issued by said Barber Steamship Lines to the American
Undergarment Corporation.
DISPUTED FACTS
The only fact in dispute is, whether or not the payment by the Admiral
Line to the American Undergarment Corporation of the sum of “P437.18,
as per Exhibit F, p. 67; Exhibit M, p. 74, and Exhibit N, p. 75, was in
full settlement of all the loss of merchandise caused by the
negligence, or otherwise, on the part of the Barber Steamship Lines in
its failure to deliver the said cases of cotton piece goods.
It is argued that, because the American Undergarment Corporation gave a
receipt which purported to be a receipt in full of the proportionate
share of the loss complained of, caused by the defendant, that it is
now estopped from making any further claim for any other losses. It is
also argued that because the American Undergarment Corporation
presented its claim against the Admiral Line, agent of the defendant,
under and by virtue of section 1 of the bill of lading it cannot now
present a claim under paragraph 9 of said bill of lading. With
reference to the alleged estoppel, of course the fact will not be lost
sight of that the American Undergarment Corporation is not a party to this action.
Neither are we convinced, even admitting that the American Undergarment
Corporation did present its claim against the Steamship Company, based
upon paragraph 1 of the bill of lading, that that mistake
will prevent the Union Insurance Company or its assignee from invoking
the term of the contract of shipment which the American Undergarment
Corporation might have invoked, providing the provision of the bill of
lading (paragraph 9) does actually afford the Union Insurance Company
or its assignee a remedy. The fact appears of record, and is nowhere denied, that
when the claim of the American Undergarment Corporation (Exhibit F) was
presented to the Admiral Line, it was presented by a clerk and was not
the correct claim of said corporation, and that a mistake was made.
The majority opinion admits “that at the time the Undergarment
Corporation presented its claim under clause 1 of the bill of lading
for P437.18, it had a claim against the defendant for the full
amount of its loss under clause 9 of the bill of lading, and that in
truth and in fact the defendant was liable for all of the shortage” (H. E. Heacock Co. vs.
Macondray & Co., 42 Phil., 205), which clearly confirms that a
mistake was made. The majority opinion continues: “But the question
here involved is the legal force and effect of a settlement in full of
all claims for losses, and whether one year after such a settlement has
been made it can be annulled, set aside or vacated without any
allegation or proof of fraud.” The majority opinion adds: “The proof is
conclusive that plaintiff’s claim was made and presented under clause 1 of the bill of lading.” But it must be remembered that the plaintiff
herein never presented a claim under clause 1 of the bill of lading.
The claim presented by the plaintiff was under clause 9 of the bill of
lading and not under clause 1. The majority opinion admits that the
American Undergarment Corporation “did not know that it had a legal
claim against it for the full value of the goods under clause 9.”
Even granting that the American Undergarment Corporation made a mistake
in its selection of a remedy, that fact would not estop the Union
Insurance Company from invoking the correct provision of the contract
unless and until the full amount of damages caused by the defendant had
been paid. The Union Insurance Company paid the loss in good faith
and was thereby subrogated to the right to recover from the Barber
Steamship Company whatever loss it had suffered by reason of the
negligence of the latter. The “Barber Steamship Lines, Inc.” makes no
pretense that it is not responsible for the loss complained of. The
majority opinion admits the liability of the Steamship Company. The
said Steamship Company must have known its responsibility under its
bill of lading. The Steamship Company is presumed to have known the
law. Is it equitable and just and fair to permit it to escape the
responsibility of the payment of more than P15,000 of damages which it
caused, by the payment of P437.18 only, and in the face of the fact, as
admitted by the majority opinion, that it was responsible in damages
under its contract for whatever loss or damages it occasioned?
The mistake of the American Undergarment Corporation cannot be invoked
for the purpose of defeating the rights, acquired in good faith, by the
Union Insurance Company or its assignee. There is no proof that
the Union Insurance Company knew or had any notice that the American
Undergarment Corporation had made any settlement with the defendant.
The mistake of the American Undergarment Corporation is not the first
mistake which has been made under similar bills of lading on the part
of merchants. (H. E. Heacock Co. vs. Macondray & Co., 42 Phil., 205.)
Mistakes of law are not always a bar to the right to recover one’s
right. A mistake on the part of the American Undergarment Corporation
would not prevent the Union Insurance Company from electing the proper
remedy under the law. No mistake is attributable to the Union Insurance
Company or its assignee.
Mr. Chief Justice Marshall, in the case of Hunt vs.
Rousmanier’s Admr’s. (8 Wheaton [U. S.], 174), said: “That he had found
no case in the books, in which it has been decided that a plain and
acknowledged mistake of law was beyond the reach of equity.” Mr.
Justice Story said: “That the rule, that an admitted or clearly established misapprehension of the law
does create a basis for the interference of the court of equity, is
certainly more in consonance with the best considered and best reasoned
cases upon the point, both in England and America.” We believe that no
case can be found, where the courts have refused to give relief where
the rights of the parties under a contract have been entirely
misunderstood.
And moreover, one of the principal objections
made by the defendant in the court below was the fact that the
plaintiff had no right to maintain the present action; that the present
action should have been instituted by the Union Insurance Company,
thereby tacitly admitting that the Union Insurance Company had a right
to recover from the defendant the amount of damages complained of.
After a careful examination of the record, we are fully persuaded that
the evidence, equity, justice, and fair dealing, demand the
confirmation of the judgment appealed from. The judgment appealed from
should be affirmed, with costs.
Date created: June 10, 2014
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