CALTEX (PHILIPPINES), INC., THE SHELL COMPANY OF THE PHILIPPINE ISLANDS LIMITED; AND STANDARD VACUUM OIL COMPANY, PLAINTIFFS-APPELLEES, VS. DELGADO BROTHERS, INC. AND ALFREDO V.…

This is an appeal by the defendants, Delgado Brothers, Inc. and
Alfredo V. Jacinto, the latter in his capacity as Commissioner of
Customs at the port of Manila, the dispositive part which read as
follows: “Premised upon the above considerations, the Court hereby
declares that the defendant Delgado Brothers, Inc., is not entitled to
collect ‘checking charges’ from the plaintiffs on the cargoes of bulk
petroleum products involved in this cases; and the defendant Alfredo V.
Jacinto, in his capacity as Commissioner of Customs, is hereby ordered
to refund to plaintiff Caltex (Philippines) Inc., the sum of
P13,824.92; to plaintiff The Shell Company of Philippine Islands
Limited the sum of P9,416.00, without interest. No special
pronouncement as to costs.”

In their notice of appeal, the defendants expressly manifested their
intention to appeal to the Supreme Court on question of law, with the
result that under section 3 of Rule 42 of the Rules of Court, no other
issues shall be allowed. Accordingly, we are to decide this case upon
the factual findings contained in the appealed decision, the full text
of which is quoted below:

“This is an action instituted by the plaintiffs to
recover certain deposits of money made by them with the defendant
Commissioner of Customs.

“The plaintiff Caltex (Philippines) Inc., (hereinafter called
Caltex) and the defendant Delgado Brothers, Inc. (hereinafter called
Delgado Brothers), are domestic corporations domiciled in the City of
Manila. The plaintiffs The Shell Company of Philippine Islands Limited
and the Standard-Vacuum Oil Company (hereinafter called Shall and
Stanvac, respectively), are foreign corporations duly licensed to
transact business in the Philippines, and have their principal place of
business in the City of Manila. The defendant Alfredo V. Jacinto is the
duly appointed and acting Commissioner of Customs.

“On October 21, 1950, after public bidding, the
defendants Delgado Brothers and the Bureau of Customs executed the
“Arrasta Contract,’ or ‘Management Contract,’ marked plaintiffs’
Exhibit ‘AA’ and defendants’ Exhibit ‘2’.

“From the month of
July to September, 1951, the plaintiffs imported into the Philippines
bulk petroleum products consisting of kerosene, gasoline, diesel oil
and fuel oil the cargo was brought in tankers, and prior to their
arrival the plaintiffs secured from the Commissioner of Customs permits
for shipside delivery, which were in turn processed by Delgado Brothers.

“The
plaintiffs were required, however, by the defendants to deposit with
the Commissioner of Customs: Caltex, the sum of P13,824.92; Shell,
P9,416; and Stanvac, P17,416, for and as ‘checking charges’ (sometimes
also known as ‘shipping charges’), and the plaintiffs, under protest,
made the deposits with the Commissioner of Customs.

“There is practically no dispute as to the essential facts.

“Delgado
Brothers contend that they are entitled to collect ‘checking charges’
for ‘checking services’ rendered by them to the plaintiffs. The latter,
on the other hand, contend that Delgado Brothers did not render any
‘checking services,’ and that, even assuming that they did, under the
provisions of paragraphs 2, 5 and 17 of the said ‘Management Contract’
and under the communication of the Collector of Customs to Delgado
Brothers of April 12, 1951, the plaintiffs are under no obligation to
pay Delgado Brothers any ‘checking charges.’

“As to how the
cargo of bulk petroleum products consigned to each of the plaintiffs
was discharged at the port of Manila, the evidence shows that it came
in tankers; that upon their arrival, representatives of the plaintiffs,
after securing the necessary permits, boarded the tankers, and took the
ullage specific gravity and temperature of the cargo to ascertain if
the cargo had arrived intact as reported from the last port of
departure of the tankers; that the cargo was pumped later into
lighters; that upon completion of the pumping operations, the lighters
were sealed and towed to plaintiffs’ oil installations at Pandacan,
Manila, and that upon arrival of the lighters in Pandacan, the cargo
was pumped into plaintiffs’ shoretanks where the plaintiffs took
soundings, specific gravity and temperature.

“Some checkers
of Delgado Brothers also took the ullage, specific gravity and
temperature of the cargo on board the tankers and the lighters only. No
checker of Delgado Brothers took soundings, specific gravity, or
temperature in the shore-tanks of the plaintiffs in Pandacan.

“It
is plaintiffs’ contention that the taking of the ullage, specific
gravity and temperature by Delgado Brothers’ checkers on board the
tankers and the lighters was not, and could not, be accurate,
regardless of who was the person who took the measurements, whether the
defendants or the plaintiffs themselves, or any other person, and the
plaintiffs base their contention on the following factors: (a) a tanker is not always on an even keel or level plane; (b) it rolls or pitches slowly; (c) it is usually inclined toward the stern to facilitate the transfer of the oil or the discharge of the oil into lighters; and (d) it lists from one side to the other, which affects the level of the oil in the tanker.

‘Rafael
del Pan, a witness for the defendants, stated, on cross-examination,
that in the taking of the ullage, specific gravity and temperature of
bulk petroleum products on board a tanker or a lighter, the difference
may be as much as five per cent (5%), or even greater, while the
percentage of errors in the measurements taken in a shoretank—(which is
built on solid and permanent foundations)—‘ could be very much less.’

“After
considering the factors testified to by the witness Emerson Sanderson
and Rafael del Pan, both marine surveyors, who were presented as expert
witnesses by the plaintiffs and the defendants, respectively, the Court
is of the opinion that it can not be denied that the measurement taken
in bulk petroleum products inside a shore-tank necessarily have to be,
and are, more accurate than the measurements taken on board a tanker or
a lighter. As stated by witness Emerson Sanderson, a shore-tank is
built on solid and permanent foundations whereas a tanker or a lighter
is floating on water and is subject to the movements of the sea and is
not always on an even keel or level plane. And this is borne out by the
difference of over five thousand long tons between the measurements
taken by Delgado Brothers’ checkers of certain cargo of the plaintiffs
Caltex and Stanvac on board tankers and lighters and the measurements
of the same cargo taken by the companies in their shore-tanks at
pandacan. The companies’ measurements are 5,630.430 long tons, more
than Delgado Brothers’ measurements taken on board the tankers and the
lighters. Delgado Brothers’ ‘records of shipside deliveries on bulk
petroleum products,’ marked defendants’ Exhibits ‘9’ and ‘10’, show a
total of 75,079.972 long tons of bulk petroleum products consigned to,
and discharged for, the plaintiffs’ Caltex and Stanvac, but the
measurements of the same cargo taken by these two companies in their
shore-tanks at their Pandacan installations, which measurements were
checked by officers of the Bureau of Customs, show that the companies
received a total of 80,710.486 long tons, that is 5,630.434 long tons
more than the records of shipside deliveries of the defendant Delgado
Brothers call for.

“The evidence also shows that in
determining the amount of the specific tax and duties due the
Government on the cargoes of bulk of petroleum products involved in
this case, the Bureau of Customs relied exclusively on the measurements
taken in plaintiffs’ shoretanks at their Pandacan installations, which
measurements were checked by officers of the Bureau of Customs.

“Taking
into consideration the foregoing, and the fact that the measurements
taken on board a tanker or a lighter cannot be accurate, or, at least,
as accurate as the measurements taken in a shore-tank, which is built
on solid and permanent foundations (plaintiffs’ Exhibit ‘DD’), the
Court is of the opinion that the defendant Delgado Brothers is not
entitled to collect ‘checking charges’ from the plaintiffs for the
following reasons: the Bureau of Customs made no use of the
measurements taken by Delgado Brothers’ checkers, but relied
exclusively on the measurements taken by plaintiffs in their shoretanks
at their Pandacan installations; the said measurements taken by Delgado
Brothers’ checkers on board the tankers and lighters were inaccurate
and were of no use to the Bureau of Customs for the determination of
the specific tax and duties due on each cargo; and to sustain a claim
for compensation for services rendered, the service must have been of
some utility or benefit to the person against whom the claim for
compensation is made.

“On the other hand, the defendants rely
on their contract with the Bureau of Customs, especially paragraphs 17
and 23 of the ‘Management Contract’ which read as follows:

“’17.
It is further understood and agreed that the CONTRACTOR shall be
entitled to and shall make the following charges to the public for the
receiving, handling, and custody and delivery of merchandise and the
services rendered in conjunction therewith, as hereinafter designated.

“’23.
There shall be collected on all import cargo falling under Customs
Administrative Order No. 113, and other subsequent Customs
Administrative Orders relative to shipside delivery, charges as
follows………….0.60.’”

“The evidence, however,
shows that Delgado Brothers did not receive, or handle, or take into
their custody, and later deliver to the plaintiffs the cargoes of bulk
of petroleum products in question, and no service was rendered by the
defendants in connection therewith. It is evident that, under the
foregoing provisions of paragraph 17 and 23 of the ‘Management
Contract’, Delgado Brothers are not entitled to collect ‘checking
charges’ from the plaintiffs.

“Furthermore, using the
language of the ‘Management Contract’, the defendant Delgado Brothers
did not have ‘the exclusive right or privilege’ of ‘recording or
checking’ plaintiffs’ cargoes of bulk of petroleum products involved in
this case, and they are not therefore entitled to collect ‘checking
charges’. Paragraphs 2 and 5 of the ‘Management Contract’ read as
follows:

“2. During the period while this
agreement remains in force and effect, the CONTRACTOR shall be, and the
BUREAU does hereby appoint the CONTRACTOR, sole management of the
Arrstre Service at the Port of Manila, subject always, however, to the
terms, conditions, restrictions, supervisions and provisions in this
agreement contained, with the exclusive right or privilege of
receiving, handling, caring for and delivery of all merchandise,
imported and exported, upon or passing over, the Philippine Government
owned wharves and piers in the Fort of Manila, and also, the recording
or checking of all merchandise which may be delivered to the Port of
Manila at shipside, except coal, lumber and firebricks in quantity,
case crude oil, and kerosene and gasoline in lots of over ten thousand
cases or its equivalent, and whole cargoes of one commodity when
consigned to one consignee only as hereinafter provided, and in general
to furnish lighting and water services and other incidental services,
in order to undertake such work, and with full power to fix the number
and salaries of, and to appoint and dismiss, all officers, employees
and laborers, temporary and permanent, which may be necessary, and to
do all acts and things which said CONTRACTOR may consider conducive to
the interest of the Arrastre Service.’

“’5. It is
understood and agreed that the CONTRACTOR shall make a complete and
detailed checking by marks and numbers of all cargo handled in the Port
of Manila, whether onto or over wharves or piers, or delivered at
shipside, except coal, lumber and firebricks in quantity, case crude
oil and kerosene and gasoline in lots of over ten thousand cases, or
its equivalent, and entire cargoes when of one commodity and consigned
to one consignee only.’

“The evidence
further shows that each cargo of petroleum products involved in this
case was all consigned to one person, either to the plaintiffs Caltex,
or Shell, or to Stanvac, and that the equivalent of the said cargo
reduced to cases, was more than ten thousand cases.

“Under
the foregoing exemptions established by paragraphs 2 and 5 of the
‘Management Contract’ the Court is of the opinion , and so holds, that
the plaintiffs are under no obligation to pay any checking charges to
Delgado Brothers, the cargo falling within the two exceptions set forth
in paragraphs 2 and 5 of the ‘Management Contract’.

“In the
opinion of the Court, there is no conflict between the provisions of
paragraphs 2 and 5, on the one hand, the provisions of paragraph 23 of
the ‘Management Contract’ on the other.

“Paragraph 23 of the
contract provides, in general, that ‘there shall be collected on all
import cargo falling under Customs Administrative Order No. 137 (old
series), as amended by Customs Administrative Order No. 113, and other
subsequent Customs Administrative Orders relative to shipside delivery,
chargers as follows…….0.60’, and paragraphs 2 and 5 of the contract
establish two exceptions, or limitations to the ‘exclusive right to
privilege’ of the arrastre contractor of ‘recording or checking’
shipside deliveries or cargo of bulk of petroleum products under
certain conditions, to wit: first, that if the cargo consists of coal,
lumber and firebricks in quantity, case crude oil and kerosene and
gasoline in lots or over ten thousand cases or its equivalent, or,
second, if the entire cargo consists of one commodity and is consigned
to one consignee only, the arrastre contractor ( the defendants Delgado
Brothers Inc.) will not have the ‘ exclusive right or privilege’ of
‘recording or checking’ the said cargo.

“But in any event,
even if the provisions of said paragraph 2, 5 and 23 of the ‘Management
Contract’ are in conflict, pursuant to the well-known rule of statutory
construction that in the event of a conflict between general and
special provisions in a contract, the special provisions shall prevail
over that of paragraph 23. (Sec. 60, Rules of Court; Hibberd vs. Estate
of McElvay, 25 Phil. 164, 167).

“The next question for
determination by the Court is the effect of the agreement of July 1,
1951, entered into between the Bureau of Customs and Delgado Brothers,
which set aside and annulled, and declared of no force and effect, the
provisions contained in paragraphs 2 and 5 of the ‘Management Contract’
of October 21, 1950.

“As heretofore already stated, the said
‘Management Contract’ of October 21, 1950, was entered into and
executed by Delgado Brothers and the Bureau of Customs after public
bidding, and is effective until December 31, 1955. The agreement of
June 1, 1951, was executed and entered into by Delgado Brothers and the
Bureau of Customs without public bidding. Is the said agreement valid?

“Without
going into the question of whether or not the said ‘Management
Contract’ could be altered or amended by the contracting parties before
the date of its expiration (December 31, 1955), if the interest of
third parties are adversely affected, a very important point on which
the Court makes no pronouncement, it is the opinion of the Court that
the said agreement of June 21, 1951, executed and executed and entered
into without previous public bidding, is null and void, and can not
adversely affect the rights of third parties, —(and the plaintiffs
three of such third parties)—and of the public in general. The Court
agrees with the contention of counsel for the plaintiffs that the due
execution of a contract after public bidding is a limitation upon the
right of the contracting parties to alter or amend it without another
public bidding, for otherwise what would a public bidding be good for
if after public bidding, the contracting parties may alter or amend the
contract, or even cancel it, at their will? Public biddings are held
for the protection of the public, and to give the public the best
possible advantages by means of open competition between the bidders.
He who bids or offers the best terms is awarded the contract subject of
the bid, and it is obvious that such protection and best possible
advantages to the public will disappear if the parties to a contract
executed after public bidding may alter or amend it without another
previous public bidding.

“In taking a view in favor of the
plaintiffs, the Court took into consideration not only the evidence
adduced but also the detrimental effect upon the consuming public if
the view were otherwise, for, if the plaintiffs were to be made to pay
any ‘checking charge’, they will most likely have to raise the price of
the bulk of petroleum products in order to maintain a marginal level
for profit. For any such increase in price, the consuming public will
ultimately have to bear the brunt.

“The foregoing
considerations dispose of the essential questions involved in this
case. For the reason, the Court abstains from discussing the other
questions raised by the parties.

“Presmised upon the above
considerations, the Court hereby declares that the defendant Delgado
Brothers, Inc., is not entitled to collect ‘checking charges’ from the
plaintiffs’ on the cargoes of bulk of petroleum products involved in
this case; and the defendant Alfredo V. Jacinto, in his capacity as
Commissioner of Customs, is hereby ordered to refund to Caltex
(Philippines) Inc, the sum of P13,824.92; to plaintiff The Shell
Company of Philippine Islands Limited the sum of P9,416.00; and to
plaintiff Standard-Vacuum Oil Company the sum of P17,416.00, without
interest. No special pronouncement as to cost.”

Merely reiterating the reason given by the trial court in deciding
adversely against the defendants, we need only point out that, although
under paragraph 23 of the “Arrastre Contract” in favor of Delgado
Brothers, Inc., there shall be collected on all import cargo falling
under Customs Administrative Order No. 137 (old series), as amended by
Customs Administrative Order No. 113, and other subsequent Customs
Administrative Orders relative to shipside delivery, charges in the
amount of P0.60, under paragraph 17 the contractor is entitled to make
charges to the public “for the receiving, handling, and custody and
delivery of merchandise and services rendered in conjunction
therewith,” said paragraph specifying the schedule of arrastre charges
on imported cargo, lighter deliveries, export cargo, transit cargo,
heavy cargo and shipside charges. In view of the finding of the court a
quo that Delgado Brothers, Inc. “did not receive, or handle, or take
into their custody, and later deliver to the plaintiffs the cargoes of
bulk of petroleum products in question, and no service was rendered by
the defendants in connection therewith,” no checking charges are due to
said contractor under paragraph 17 of the “Arrastre Contract”.
Paragraphs 25 and 17 must of course be taken in conjunction with each
other.

Under the theory of Delgado Brothers, Inc., however, the applicable
provisions are contained in paragraphs 2, 5 and 23 of the “Arrastre
Contract. But in paragraph 2 there is an exemption in favor of “coal,
lumber and firebricks in quantity, case crude oil and kerosene and
gasoline in lots or over ten thousand cases or its equivalent, and
whole cargoes of one commodity when consigned to one consignee only”;
and in paragraph 5 there is also an exemption in favor of coal, lumber
and firebricks in quantity, case crude oil and kerosene and gasoline in
lots or over ten thousand cases, or its equivalent, and entire cargoes
when of one commodity and consigned to one consignee only.” Since the
trial court found that “each cargo of petroleum products involved in
this case was all consigned to one person, either to the plaintiffs
Caltex, or to Shell, or to Stanvac, and that the equivalent of the said
cargo reduced to cases, was more than ten thousand cases,” the
plaintiffs are still excused from paying any checking charges to the
Delgado Brothers, Inc., Appellants, however, argue that paragraph 2
merely means that, with respect to shipside deliveries of cargo
mentioned therein, Delgado Brothers, Inc., is not vested with the
exclusive right or privilege, but the same is dependent upon the
Commissioner’s continuing supervision and specific directions, as the
checking of all cargoes delivered shipside continues to be an
indispensable function for all importations into the Port of Manila.
The weakness of this contention is that the supervision of the
Commissioner of Customs is distinguished from the right of the
contractor to collect checking charges, if the imported cargo is exempt
under the provision of paragraph 2. Moreover, the construction given by
the trial court is supported by the fact that, in the amendment of
paragraph 23 of the “Arrastre Contract” made on June 1, 1951, it had to
be expressly provided that with regards to crude oil, kerosene,
gasoline and other liquid petroleum products in bulk pumped shipside
directly to lighters or tanks, and entire cargoes vessels consisting of
one commodity only and consigned to one consignee, the shipside
delivery charge shall be per ton of 40 cu. ft. or 1000 kilos….P0.40,”
and that “all other provisions as in this Management Contract, and all
regulations or orders of the Bureau of Customs contrary or in conflict
with the provisions as in this paragraph contained, are hereby declared
of no force and effect.” The effect is to cancel the exemptions
provided for in paragraphs 2 and 5 of the “Arrastre Contract” of
October 21, 1950. Our conclusion is furthermore in line with the
admitted fact, under the former arrastre contracts, charges of kind
sought to be collected by Delgado Brothers, Inc., had ever been
imposed; and no valid reasons have been advanced for departing from the
general policy.

The charges to be collected by Delgado Brothers, Inc., are for
checking; and yet the measurements taken by it on board the tankers and
lighters redounded to the benefit neither of the plaintiffs’ nor of the
Government; because the checking made by the plaintiffs in their
shore-tanks at Pandacan and verified by the officers of the Bureau of
Customs was adopted by the Government for the purpose of assessing the
tax due from the plaintiffs, and rightly so, since the plaintiffs’
computation exceeded those of Delgado Brothers, Inc. by more than 5,000
long tons. The measurements made by Delgado Brothers, Inc. could not
have been solely for the purpose of enabling it to collect charges.

This leads us to the ruling in appealed decision that the amendment
of June 1, 1951 is null and void, for the reason that it was done
without public bidding. We may add to what was pointed out by the trial
court that, although the “Arrastre Contract” (paragraph 45) authorizes
the parties to alter or amend any of the terms thereof, said authority
must be considered as being subject to the requirement of previous
public bidding, a formality observed before contract of October 21,
1950 was awarded to Delgado Brothers, Inc. The “Arrastre Contract” is
not an ordinary agreement involving merely the parties therein, as the
same affects the public in general, particularly as to the rates of and
exemptions from the arrastre charges.

Wherefore, the appealed decision is affirmed and it is so ordered with costs against the appellant Delgado Brothers, Inc.

Paras, C.J., Padilla, Montemayor, Reyes, A., Jugo, Bautista Angelo, Labrador, Concepcion, and Reyes, J.B.L., JJ. concur