MARITIME COMPANY OF THE PHILIPPINES, PLAINTIFF-APPELLANT, VS. REPARATIONS COMMISSION OR REPARATIONS MISSION, DEFENDANT-APPELLEE.

Decisive of the crucial issue posed by this appeal from a
decision of the lower court is the applicability of the well?settled
principle that a statute should be considered as entering into and forming part
of a contract.  Plaintiff Maritime
Company of the Philippines, now appellant, would deny that it is controlling in
its suit to hold defendant Reparations Commission, now appellee, liable for the
freight charges as the consignee of reparations goods, notwithstanding that
under Section 11 of the Reparations Act,^[1]
ocean freight and other expenses incident to importation shall be paid by the
end-user and not by such agency.  That
defendant is exempt from such obligation is further stressed by the concluding
sentence thereof:  “Nothing herein
shall be construed as exempting the end-user from paying in full all the
necessary costs, charges and expenses incident to the application for and the
procurement, production, delivery and acquisition, of, the goods
concerned.” It could not have been entirely unexpected therefore for the
lower court to reach the conclusion that it had no choice on the matter in view
of the explicit character of such statutory language which must be read into
the contract of shipment.  So it held in
dismissing plaintiff’s complaint for the recovery of freight charges.  As such decision is not vitiated by any
infirmity, we affirm.

In plaintiff’s complaint of July 29, 1965, after setting forth
its corporate character as well as that of the defendant Reparations
Commission, which is vested by law with the power to enter into contracts and
to sue and be sued, it alleged that shipments of reparations goods were loaded
in three of its vessels consigned to defendant, with corresponding freight
charges amounting to P228,250.58.^[2]
Then came the allegation that said vessels arrived in Manila and discharged all
such shipment of reparations goods, which were duly delivered to and received
by defendant as consignee in good order and condition, but defendant failed and
refused to pay, notwithstanding repeated demands, the total amount of the
freight charges above-mentioned.^[3]
There was a claim for attorney’s fees in the amount of P20,000.00, plaintiff,
according to the complaint, being compelled to engage counsel.^[4]
The prayer was for a judgment against defendant in favor of plaintiff in the
afore­said sum of P228,250.58 as freight charges plus 6% interest thereon from
the date of the filing of the complaint until fully paid, and the sum of
P20,000.00 by way of attorney’s fees.

There was no denial in the answer of defendant filed on September
10, 1965 of the facts as alleged, but Section 11 of the Reparations Act was
invoked to show that it was not liable at all for the freight charges, a matter
which, according to defendant, was fully known to plaintiff as it had in
several instances collected freight charges from the end-users concerned.^[5]
In its special affirmative defenses, defendant contended that plaintiff’s claim
was barred by a prior judgment under the principle of res adjudicata
and that “as a carrier of reparations goods, [it] is not only presumed to
know the law but is chargeable with knowledge of that law, and when it thus
entered into a contract of carriage or affreightment of reparations goods, it
rendered itself bound by the pertinent provision of Section 11 of the
Reparations Law * * * on the question of who is liable for said freight
charges; that as a matter of fact, plaintiff in its prior dealings with the
defendant on this matter had so recognized and accepted the set-up as en­visioned
by Section 11 of the Reparations Law.”^[6]
Its prayer was for the dismissal of the complaint with costs against plaintiff.

As noted, defendant’s contention was sustained by the lower court
in its decision of March 29, 1968 dismissing the complaint.  After referring to the language of Section 11
of the Reparations Act, mentioned at the opening of this opinion, it reached
the above conclusion, there being “no doubt on the interpretation as to
who will pay for the freight charges.”^[7]
It was likewise set forth therein that plaintiff in fact had been collecting
freight charges from end-users and turning over a portion thereof, at least
50%, to defendant to pay its outstanding obligations, plaintiff having
purchased several vessels through the Reparations Commission payable on installments.^[8]
There was no question then, to its mind, that plaintiff, considering such
conduct, had no right to demand the payment of freight charges from defendant.^[9]

From the above decision, an appeal was taken to this Court on
April 26, 1968.  The brief for
plaintiff-appellant was filed on September 7 of the same year.  Defendant-appellee Reparations Commission, in
turn submitted its brief on October 7, 1968. 
There was no reply brief on the part of the appellant.  Notwithstanding the vigorous present­ation of
the alleged errors imputed to the lower court, there is no legal justification,
as was already indicated, for a reversal.

1. It is to be recognized that a large degree of autonomy is
accorded contracting parties.  Not that
it is unfettered.  They may, according to
the Civil Code,^[10]
“establish such stipulations, clauses, terms and conditions as they may
deem convenient, provided they are not contrary to law, morals, good customs,
public order, or public policy.” The law thus sets limits.  It is a fundamental requirement that the
contract entered into must be in accordance with, and not repugnant to, an
applicable statute.  Its terms are
embodied therein.  The contracting parties
need not repeat them.  They do not even
have to be referred to.  Every contract
thus contains not only what has been explicitly stipulated, but the statutory
provisions that have any bearing on the matter. 
So it has been invariably held from United States v. Constantino,^[11]
a 1919 decision, to Lakas Ng Manggagawang Makabayan (LMM) v. Abiera,^[12]
promulgated only a year ago.^[13]
According to Justice Malcolm, speaking for the Court in the former:  “It is an elementary rule of contracts
that the laws, in force at the time the contract was made, enter into and
govern it.”^[14]
This is how the matter is put in the latest decision:  “The principle is thus well-settled that
an existing law enters into and forms part of a valid contract without the need
for the parties expressly making reference to it.  Only thus could its validity insofar as some
of its provisions are concerned be assured.”^[15]

A fairly recent restatement of the principle, in the language of
Justice J. B. L. Reyes, speaking for the Court, appears in Liberation Steamship
Co., Inc. v. Court of Industrial Relations.^[16]
Thus:  “The rule is that the law
forms part of, and is read into, every contract, unless clearly excluded
therefrom in those cases where such exclusion is allowed * * *. “^[17]
What is the law that forms part of, and is to be read into, the contract
between plaintiff-appellant and defendant-appellee?  It is, to repeat, Section 11 of Republic Act
No. 1789 as amended.^[18]
More specifically:  “The insurance,
ocean freight and other expenses incident to importation shall be paid by the
end-user in accordance with usual business practices.” The last sentence
is equally plain:  “Nothing herein
shall be construed as exempting the end-user from paying in full all the
necessary costs, charges and expenses incident to the application for and the
procurement, production, delivery and acquisition, of, the goods
concerned.” The above provisions, then, form part of and must be read into
the shipping contracts between plaintiff-appellant and defendant-appellee,
unless they could be “clearly excluded therefrom”, assuming
“such exclusion is allowed”.

There is thus no persuasive force to the first error imputed to
the lower court for their being applied to the contractual relationship between
the parties.  There is no showing that
the shipping contracts between them are clearly excluded from the law, much less
that such exclusion could be allowed. 
The lower court had no choice then. 
It yielded obedience to the law. 
What it did certainly cannot be stigmatized as error.

It is in that sense that reliance by plaintiff-appellant on the
force and effect to be given the usual contracts between shipper and carriers,
while finding support in the applicable provisions both of the Civil Code and
the Code of Commerce, is far from persuasive. 
As was pointed out in the equally forceful brief of defendant-appellee,
to so view the matter is to ignore what has been explicitly set forth in
Section 11 of the Reparations Act which is controlling.

Nor did the
attempt by plaintiff-appellant to invoke equitable considerations strengthen an
inherently weak case.  It asserted that
defendant-appellee was in a better position to collect the freight
charges.  This is the answer of the
latter:  “Contrary to appellant’s
contention, it is itself and not the appellee which is in a better position to
collect the corresponding ocean freight. 
This is because under the Reparations Law and established reparations
set-up, the incidental charges to reparations importations, including freight
charges are to be paid by the end-user to the party concerned upon the arrival
but before delivery of the goods to the end-user, and ‘in accordance with usual
business practices.’ (Sect. 11 R.A. 1789, as amended) Under this concept,
before the carrier issues the ‘Permit to deliver’ the shipments, it could
rightfully demand payment as a settlement of the freight charges.  This is the stage more appropriate and
commands a better facility in so far as the collection of the freight charges
is concerned, and not after the goods shall have been released to the end-user
by the carrier and the corresponding contract of Conditional Purchase and Sale
executed by and between the Commission and the End-user concerned.”^[19]
It cannot be said then that plaintiff-appellant’s effort to thus collect would
be futile.  Moreover, there is always the
remedy of a court action.  Both in the
answer of defendant-appellee^[20]
as well as in its brief,^[21]
reference was made to such a suit actually being filed by plaintiff-appellant
against a reparations end-user, C.G. Nazario and Sons, Inc. as well as the
Reparations Commission as far back as 1961.^[22]
It was therein decided that defendant-appellee was not liable for the freight
charges, such obligation being incumbent on its co-defendant C.G. Nazario and
Sons, Inc., the end-user.

At bottom then, this is one of those cases where a statutory
provision free from any ambiguity, quite specific and definite, calls for
application.  Under such circumstances,
there is not even any need for construction. 
The task of the judiciary is clear.^[23]
It must consider the law as control­ling. 
This is what the lower court did. 
Certainly, no error could
justly be imputed to it.

2. Nor is the second assignment of error deserving of a better
fate.  Plaintiff-appellant would find
fault with the holding of the lower court that its having collected the freight
charges on certain occasions from the end-users of reparations goods and
applying portions thereof to the payment of its obligation to
defendant-appellee for the purchase of several vessels indicated it had no
right to demand payment thereof from the latter.  On this point, the appealed decision
reads:  “The practice followed by
the plaintiff in its dealings with the defendant establishes the fact that the
plaintiff has been collecting the freight charges from the end-users and
turning over a portion thereof (at least 50%) to the [defendant] in payment of
the outstanding obligation of the plaintiff to the defendant, the plaintiff
having purchased several vessels thru the Reparations Commission and paying the
latter by installments * * *.  There is,
therefore, no question that as far as the plaintiff in its relation with the
defendant is concerned, said plaintiff has been collecting from the end-users
the freight charges of reparations goods from the end-users and, therefore, it
has no right to demand the same from the defendant.”^[24]
On the face thereof, the imputation of error would be hard to justify.  The conclusion reached proceeds from an
accurate appraisal of plaintiff-appellant’s conduct.  Nor is it without support in the evidence.

So it was made manifest in defendant-appellee’s brief in these
words:  “To exemplify and bolster
the foregoing view, attention is respectfully invited to the herein quoted
contents of Exhs. 6, 7 and 8 of defendant-appellee:  From Exh. ‘6’ which is a letter of the
plaintiff-appellant to the defendant-appellee, dated August 7, 1963 containing
the manifestation of plaintiff to turn over to the defendant 50% of freightage
collected, we quote in part:  ‘Allowing
some time for the collection of freights from the various end-users, we
expect to remit to the Reparations Commission an approximate total of
P60,000.00 within 60 days.’ (italics supplied) From Exh. ‘7’ which is a letter
dated October 3, 1963, of plaintiff-appellant to defendant-appellee we quote
the following:  ‘As of August 28, 1963,
the only remaining past due account on this vessel was a delinquency interest
of P4,600.46.  On that date, however, we
paid the Reparations Commission the sum of P37,629.80 representing 50% of
the  freights on reparations cargo *
* *.’ (Italics supplied) And per Exh. ‘8’ which is also a letter of
plaintiff-appellant to defendant-appellee, dated Feb. 6, 1964, and which
requests authority to load reparations cargoes on non-reparations vessels,
there is manifested therein:  ‘We
undertake to apply 10% of whatever freights collected on reparations cargo
loaded on the above vessels to the Reparations Commission for our
reparations account with you.’ (Italics supplied)”^[25]

All that plaintiff-appellant could say on the matter is the
following:  “It is respectfully
submitted, that even assuming arguendo only that on certain occasions
plaintiff-appellant would collect the freight charges from the end-users
concerned; nevertheless, that practice does not at all affect the question of
who is liable for the freight charges under the contracts of carriage, * *
*.  Just because herein
plaintiff-appellant would, on certain occasions, collect the freight charges
from the end-users by virtue of an understanding with the consignee or owner of
said reparations goods, it does not necessarily follow that under the said
contracts of affreightment, the end-users are already liable for said freight
charges which are collectible and demandable thereunder only from the consignee
thereof. “^[26]
This attempt by plaintiff-appellant to erode its conduct of its legal
significance is unavailing, considering that it is based on an assumption as to
defendant-appellee being liable for the payment of the freight charges, which,
as had been made clear, is at war with the specific language of the controlling
statutory provision.

Clearly, then, this assignment of error is lacking in merit.  Plaintiff-appellant, it must be stressed,
cannot possibly be unaware of the controlling legal provisions, considering
that it has been itself the beneficiary of the Reparations Act, not to mention
the fact that it has previously collected from end-users.  Such was a finding of the lower court, which
we are not at liberty to disturb, the appeal being purely on questions of law.  As the last two errors allegedly committed by
the lower court were based on plaintiff-appellant’s basic premise as to the
non-applicability of Section 11 of the Reparations Act, no useful purpose would
be served by any further discussion.  It
suffices to state that the appealed decision can thus stand the vigorous attack
launched against it.

3. One last word.  This
opinion deals with a shipping contract governed by specific provisions of the
Reparations Act.  Nothing in the opinion
is to be considered applicable to contracts of a similar nature where ordinarily
what has been explicitly agreed upon in the bill of lading is the measure of
the respective rights and obligations of the parties.

WHEREFORE, the lower court decision of March 29, 1968 is
affirmed.  With costs against
plaintiff-appellant.

Concepcion, C.J., Reyes, J.B.L., Makalintal, Zaldivar,
Teehankee, Barredo, Villamor, and
Makasiar, JJ., concur.

Ruiz Castro, J., did not take
part.

Dizon, J., on leave.

^[1]
Republic Act No. 1789 (1957), as amended by Republic Act No. 3079 (1961).

^[2]
Record on Appeal, Complaint, pars. 1 and 2.

^[3]
Ibid, par. 3.

^[4]
Ibid, par. 4.

^[5]
Ibid, Answer, pars. 1 to 3.

^[6]
Ibid, par. 5.

^[7]
Ibid, pp. 16 and 17.

^[8]
Ibid, p. 17.

^[9]
Ibid.

^[10]
Art. 1306.  This used to be Art. 1255 of
the old Civil code.

^[11]
39 Phil. 552.

^[12]
L-29474, 36 SCRA 437.

^[13]
December 19, 1970.

^[14]
United States v. Constantino, 39 Phil. 552, 556 (1919).

^[15]
Lakas Ng Manggagawang Makabayan (LMM) v. Abiera, L-29474, Dec. 19, 1970,
36 SCRA 437, 442.

^[16]
L-25389-90, June 27, 1968, 23 SCRA 1105.

^[17]
Ibid, p. 1115.  Manresa was
likewise cited to this effect: 
“Pero en los mas de sus preceptos, la ley, como se ha dicho muchas
veces, da un solo modelo del contrato, que pueden o no aceptar los
contratantes.  Sentado esto y siendo
costumbre la modificacion de este modelo legal, puede surgir la duda de si el
contrato que nada diga, se suple por los preceptos legales o por la practica
que los modifica.  La superioridad
incontrovertible de la ley, hace suponer que el problema se decidiria
generalmente por esta salvo dos excepciones: 
una indudable, cuando ella misma hace sus preceptos supletorios, no solo
del pacto, sino de los usos locales; otra legitima, cuando la costumbre es
constante, y ademas hay en el contrato datos para suponer su aceptacion.”
VIII Manresa, 5th ed., Part II, p. 535 (1950).

^[18]
Sec. 10 of Republic Act No. 3079 (1961) amending Sec. 11 of the original act
reads as follows:  “[Sec.] 11.  Terms of procurement. – As a general
rule, reparations goods shall be procured on an f. o. b. (free-on-board)
Japanese port basis:  Provided,
That the Mission may, if circumstances so warrant, procure such goods on c. and
f. (cost and freight) Philippine port, ex-factory or c.i.f. (cost, insurance
and freight) Philippine port basis, in which case the suppliers shall be
required to quote separately expenses for freight.  When reparations goods shall be paid on
installments, only the f.o.b. cost thereof, exclusive of the insurance, ocean
freight and other expenses incident to importation shall be considered in
computing the amount of the installments. 
The insurance shall be obtained from domestic insurance companies wholly
owned by Filipino citizens:  Provided,
That upon delivery of reparations goods, whether partial or complete, pursuant
to contract, to the end-user, whether a government agency or a private person
or entity, the end-user shall insure at his expense said goods or parts thereof
or attachment thereto, against loss or damage due to any and/or all causes,
including but not limited to war, theft, robbery, unauthorized dismantling,
with the Government Service Insurance System pursuant to the provisions of
Republic Act Numbered Six hundred fifty-six, or with any private insurance
company, eighty per cent of the capital of which is owned by Filipino citizens
and the management of which is vested in such citizens, the policy to be
endorsed in favor of the Commission to the extent of its insurable interest,
for as long as the government has any insurable interest on such goods.  The insurance, ocean freight and other
expenses incident to importation shall be paid by the end-user in accordance
with usual business practices.  As much
as possible in the transportation of reparations goods from Japan to the
Philippines, carriers of Philippine registry shall be preferred.  The inspection and testing of reparations
goods, whether intended for the government or for the private sector, shall be
undertaken only by agencies specifically designated by the Philippine
Government through the Mission:  Provided,
That preference shall be given to Philippine registered and internationally
recognized inspection and testing firms. 
Nothing herein shall be construed as exempting the end-user from paying
in full all the necessary costs, charges and expenses incident to the
application for and the procurement, production, delivery and acquisition, of,
the goods concerned.”

^[19]
Brief for Defendant-Appellee, p. 14.

^[20]
Record on Appeal, p. 12.

^[21]
Brief for Defendant-Appellee, p. 13.

^[22]
Civil Case No. 49030 of the Court of First Instance of Manila.

^[23]
Cf. People v. Mapa, L-22301, Aug. 30, 1967, 20 SCRA 1164; Pacific Oxygen
& Acetylene Co. v. Central Bank, L-21881, March 1, 1968, 22 SCRA
917; Dequito v. Lopez, L-27757, March 28, 1968, 22 SCRA 1352; Padilla v.
City of Pasay, L-24039, June 29, 1968, 23 SCRA 1349; Garcia v. Vasquez,
L-26808, March 28, 1969, 27 SCRA 505; La Perla Cigar & Cigarette Factory v.
Capapas, L-27948 & 28001-11, July 31, 1969, 28 SCRA 1085; Mobil Oil Phil.,
Inc. v. Diocares, L-26371, Sept. 30, 1969, 29 SCRA 656; Luzon Surety
Co., Inc. v. De Garcia, L-25659, Oct. 31, 1969, 30 SCRA 111; Vda. de
Macabenta v. Davao Stevedore Terminal Company, L-27489, April 30, 1970,
32 SCRA 553; Republic Flour Mills, Inc. v. Commissioner of Customs,
L-28463, May 31, 1971.

^[24]
Record on Appeal, Decision, p. 17.

^[25]
Brief for Defendant-Appellee, pp. 12 and 13.

^[26]
Brief for the Plaintiff-Appellant, pp. 16-17.