MANILA PORT SERVICE AND MANILA RAILROAD COMPANY, PETITIONERS, VS. COURT OF APPEALS AND MARCELO LAPEÑA, DOING BUSINESS UNDER THE NAME AND STYLE “LAPEÑA ENTERPRISES”, RESPONDENTS.

On December 5, 1959, there were discharged into the custody of
the Manila Port Service, a subsidiary of the Manila Railroad Company, from the
SS “Juno”, five cases of baby soothers (500 gross) and ten cases of
es­sential oil (510 lbs.), in good order and condition.  This shipment was consigned to Marcelo Lapeña.  About four
or five days after the discharge of the goods from the carrier, and while they
were in the custody of the Manila Port Service, Dalmacio
Villanueva, the head checker of the J. de Vera Brokerage, the broker re­presenting
Marcelo Lapeña, examined the packages or cases
containing the goods and found the same in good condition.  However, two or three days after Christmas of
1959, Dalmacio Villanueva noticed that the cartons or
cases containing the goods were damaged, and so he brought the matter to the
attention of their claim clerk, Augurio de Vera.  On December
29, 1959, De Vera prepared a
provisional claim for any damage or shortage to the cargo, and had said
claim filed with the Manila Port Service on January 4, 1960. 
Upon actual delivery of the goods on February 3, 1960, to Marcelo Lapeña, it was noted that there was a shortage of 30 gross
of baby soothers and 123 pounds of essential oil all valued at P1,370.00.

The provisional claim, which was filed on January 4, 1960 by the broker of Marcelo Lapeña, was followed by a formal claim on February 29, 1960.  Both the provisional claim and the formal
claim were rejected by the Manila Port Service on April 22, 1960.  The
ground of the Manila Port Service in rejecting the claim was that the claim was
presented after the lapse of the 15-day period from the day that the last
package containing the goods was discharged from the carrying vessel as
required in sec­tion 15 of the management contract entered into between the
Bureau of Customs and the Manila Port Service as the arrastre
operator in the port of Manila.  Because
of the denial of the claim, Marcelo Lapeña filed an
action in the Municipal Court of Manila against the Manila Port Service and the
Manila Railroad Company to recover the value of the goods that were missing,
plus attorney’s fees.

In their answer to the complaint, defendants Manila Port Service
and Manila Railroad Company set up the de­fense that since no provisional claim
was filed by the plaintiff with defendant Manila Port Service within the 15-day
period from the date of the discharge from the carrying vessel, the defendants
were completely relieved and released of any and all liability for loss,
shortage in contents of, or damage to, the cargo in accordance with the
pertinent provisions of the management contract entered into by and between the
Bureau of Customs and the Manila Port Service. 
The Municipal Court of Manila rendered judgment in favor of plaintiff
Marcelo Lapeña, and defendants Manila Port Service
and Manila Railroad Company appealed to the Court of First Instance.  After trial, the Court of First Instance of
Manila, on January 4, 1961, in its Civil Case No. 44498, rendered judgment in
favor of plaintiff Marcelo Lapeña ordering the de­fendants
Manila Port Service and the Manila Railroad Company to pay said plaintiff the
sum of P1,370.00 re­presenting the value of the goods lost, with legal interest
from the date of the filing of the complaint, the sum of P200.00 as attorney’s fees, and the costs.

The defendants, Manila Port Service and Manila Railroad Company,
appealed from the decision of the Court of First Instance to the Court of
Appeals.  The Court of Appeals, in a
decision rendered on July 19, 1963,
affirmed the decision of the Court of First Instance.  Not satisfied with the decision of the Court
of Appeals, and of its order denying the motion for re­consideration of the
decision, the Manila Port Service and Manila Railroad Company appealed to this
Court on a petition for certiorari.

In their appeal before this Court petitioners Ma­nila Port Service and Manila
Railroad Company contend: (1) that the Court of Appeals erred in affirming the
finding of the Court of First Instance of Manila that the requirement,
regarding the filing of the claim with­in
the 15-day period as provided in section 15 of the management contract
between the Bureau of Customs and the Manila Port Service, had been complied
with; (2) that the Court of Appeals erred in holding that the limited liability
clause of section 15 of the management contract – limiting the liability of the
arrastre oper­ator to not more than P500.00 per
package – was not pleaded nor put in issue before the trial court; and (3) that
the Court of Appeals erred in affirming the deci­sion of the trial court which
ordered the petitioners to pay respondent Marcelo Lapeña
the sum of P1,370.00 with legal interest and the costs.

In support of their first contention, petitioners maintain that
the action of respondent Lapeña is barred because he
did not file a claim with the petitioner Ma­nila Port Service within the period of 15 days from the date of
the discharge of the last package from the car­rying vessel as required under
section 15 of the manage­ment contract between the Bureau of Customs and the Ma­nila
Port Service.  The pertinent provision of
section 15 of the management contract, invoked by petitioners, reads as follows:

“x x x in
any event the CONTRACTOR shall be relieved and released of any and all
responsibility or liability for loss, damage, misdelivery,
and/or non­delivery of goods, unless suit in the
court of proper jurisdiction is brought within a period of one (1) year from
the date of the discharge of the goods, or from the date when the claim for the
value of such goods have been rejected or denied by the CONTRACTOR, provided
that such claim shall have been filed with the CONTRACTOR within fifteen (15)
days from the date of discharge of the last package from the carrying
vessel.”

The petitioners point out that the last package of the shipment
consigned to respondent Marcelo Lapeña was discharged
from the carrying vessel on December
5, 1959, while the provisional claim for damage or loss was filed
with the Manila Port Service
only on January 4, 1960, or
thirty days after the discharge of the last package.  It is the position of the petitioners that
because the provisional claim was filed after fifteen days had elapsed from the
date of the discharge of the last package, the action filed by respondent
Marcelo Lapeña against petitioners was barred
under the above-quoted provision of section 15 of the management con­tract.

It is not denied that respondent, Marcelo Lapeña
filed his provisional claim with petitioner Manila Port Service only on January 4, 1960, or thirty days after the
discharge of the last package.  But the
evidence shows, and the Court of Appeals so found, that four or five days after
the discharge of the packages or cases containing the goods, and while those
packages or cases were already in the possession and custody of petitioner
Manila Port Service, they were actually examined and found by the broker of
respondent Marcelo Lapeña to be in good
condition.  The evidence also shows, and
the Court of Appeals so found, that about two or three days after Christmas (or
about December 27, 1959), the broker of res­pondent Marcelo Lapefia
found that the cartons or cases containing the goods were damaged, so that on
December, 29, 1959 the claim clerk of the broker prepared a provisional claim which was actually filed with petitioner
Manila Port Service on January 4, 1960. 
It will thus be noted that from the day when the broker of respondent
Marcelo Lapeña found that the cartons and packages
containing the goods were damaged (on December 27, 1959) and the day when the provisional claim was
filed with petitioner Manila Port Service, (on January 4, 1960) only eight days had elapsed.

We believe that the circumstances obtaining in this case warrant a liberal and realistic application
of the requirement regarding the presentation of the claim within the 15-day
period as a condition precedent to the bringing of a suit under section 15 of
the management contract.  In the case of
David Consunji, et al., vs. Manila Port Service, et
al., G.R. No.L-15551, Novem­ber 29, 1960, this Court had occasion to point out
the inequity of applying literally the proviso regarding the filing of the
claim with the arrastre contractor within fifteen
days from the date of the discharge of the last package where the consignee
comes to know about the damage or loss only after the lapse of the 15-day
period.  This Court said:

“In this connection, we realize the seeming inequity of
applying this 15-day proviso where the consignee comes to know the damage or
loss only after the lapse of such 15-day period, for instance, where
delivery by the contractor takes place 16 days after discharge of the last
package from the vessel.  And it might be
unfair to apply the limitation where the claimant comes to know of such condition
precedent (the filing of claim for damage or loss) only after the 15-day
period x x x.”^[1]

And, in the case of Rizal Surety &
Insurance Co., vs. Manila Railroad Co., et al., G. R. No. L-19485, February 17,
1967, this Court also pointed out the in­correctness, and the oppressiveness,
of applying literal­ly the provision of section 15 of the management con­tract
to the case of a consignee, who
had not filed a claim within fifteen days from the discharge of the goods
consigned to him, but who had shown diligence in protecting his rights by
filing his claim soon after he became aware of the loss or damage of the
goods.  In this Rizal
Surety case, the cargo consisting of 454 cases of corned beef was discharged
into the custody of the Manila Port Service in good condition, except one case
which was damaged.  When delivery was
made on January 20, 1960, it was found that the shipment was short of 96
cases.  On January 21, 1960, or the day
following delivery, the consignee filed a claim with the Manila Port Service
for short delivery.  The claim was reject­ed
by the Manila Port Service, and so suit was commenced by the consignee on
October 14, 1960.  The defense of Manila
Port Service was that the claim was filed beyond the period of fifteen days
from the date of the discharge of the last package from the carrying vessel, as required
by section 15 of the management contract. 
In disregarding this defense of the arrastre
operator, this Court dec­lared:

“Furthermore, the stipulation of facts shows that the shipment was
com­pletely discharged into the custody of appellant, all the 454 cases being in good order except one, which had suf­fered
some damage.  The loss, therefore,
happened while the merchandize was in appellant’s hands.  There is no evidence as to the exact date the
loss occurred and the consignee had no reason to file a claim until she was in a position to know about the loss; and
the earliest date she could possibly have discovered it was January 18, 1960,
as it was only then that the Bureau of
Customs issued the delivery permit, assuming that she could have obtained the
necessary gate pass and actually taken delivery of the shipment on the same
date.  Under the circumstances, a literal
compliance with the disputed provision of the management contract would be illogical
and oppres­sive x x x.”

It will thus be seen that
in applying the require­ment regarding the filing of a claim within the 15-day
period as provided in section 15 of the management con­tract, this Court has
chosen to interpret that proviso liberally, in an endeavor to promote fairness,
equity and justness.  This Court has chosen to take into consider­ation
the circumstances obtaining in a given situation in applying the provisions of
section 15 of the manage­ment contract.

In the case now at bar, while it is true that res­pondent Marcelo
Lapeña had not filed his claim within the 15-day
period from the date of the discharge of the last package, it is nevertheless
shown that said res­pondent had no reason to file a claim within the 15-day
period from December 5, 1959 – the day of the discharge – because he had no
knowledge of, or reason to believe that he suffered, a loss during that
period.  The facts as found by the Court
of Appeals is that the shipment was discharged into the custody of the Manila
Port Service on December 5, 1959, in good order and condition; that four or
five days after the discharge of the shipment the packages and cases containing
the goods were found to be in good condition; that it was not until December
27, 1959 (two days after Christmas) when it was found that the packages and
cases containing the goods were damaged, and on January 4, 1960 the claim for
loss was filed with the petitioner Manila Port Service.  Under the circum­stances We believe that
respondent Marcelo Lapeña had complied with the
requirement contemplated in section 15 of the management contract; and since he
brought suit against the petitioners herein on July 10, 1960, or with­in one
year from the time the petitioners had rejected his claim – the rejection took
place on April 22, 1960 – the action of respondent Marcelo Lapeña
against the pe­titioners had been filed in accordance with section 15 of the
management contract, and is not barred.^[2]

We fully agree with the
observations of the Court of Appeals, quoted from the decision appealed from, as follows:^[3]

“Indeed it would be unjust and iniquitous to require, as a condition
sine qua non to the bringing of suit in the courts of
justice, the presentation of a claim with the Manila Port Service within 15
days from the date of dis­charge of the cargo where, as in this case, the
failure to do so was due to the fact that delivery was effected only after the lapse of said period and where there
was then no reason to justify the filing of such claim as the goods were
received by the Manila Port Service from the carrying vessel com­plete and in
good order and condition.  Besides, since
it is not denied that the possibility of loss or shortage was only discovered two or three days
after Christmas, when the cartons containing the goods were found to be in a
damaged condition, we believe that the presenta­tion of the provisional claim
by or in behalf of the plaintiff on January 4, 1960 constitutes a substantial
com­pliance with the requirement of Section 15 of the management contract
relative to the filing of a claim.”

As regards the second contention of the petitioners, We find the
same without merit.  We agree with the
find­ing of the Court of Appeals that the question regarding the limited
liability of herein petitioners, pursuant to section 15 of the management
contract, had not been pleaded or put in issue before the trial court.

We have examined the answer of the petitioners to the complaint,
and while it is true that in paragraph 1 thereof, they admit that the Manila
Port Service is an arrastre operator for the Port of
Manila and its operation is subject to the terms, conditions, restrictions, and
subjections imposed by the management contract entered into by and between the
Bureau of Customs and the Manila Port Service, yet there is no specific allegation in the
answer about the defense of limited liability as provided in section 15 of the
management contract.  On the other hand, the answer alleges that if the petitioners – as
defendants in the court below – failed to pay plaintiff’s claim
as alleged in paragraph 9 and 10 the complaint the reason is, as stated in
their special defenses, “that since no provisional claim was filed by
the consignee …. against the
defendant Manila Port Service within the 15-day period from the date of
discharge from the carrying vessel at the Port of Manila, the defendants are
completely relieved or released of any and all liability for loss, shortage in
contents of, or damage to, the cargo in accordance with the pertinent
provisions of the management contract ….”^[4] Nowhere
is there in the answer any mention of any defense based on the limited
liability of the arrastre contractor as provided in
the manage­ment contract.  We have also
noted that in the “partial stipulation of facts” there is copied the
particular provision of section 15 of the management contract in connection
with the special defense regarding the fail­ure of the consignee to file a claim within the 15-day period from the date of the discharge of the last
package.  True it is, that in the
“additional stipula­tion of facts” there is a statement “that
the defend­ants’ main defense in this case is section 15 of their management
contract marked as Annex 1-A in Exh.
1″, but this statement is too general that it can not be construed as referring to the particular clause in section 15 of the management
contract regarding the arrastre contractor’s limited
liability.  Rather, that statement can be
construed as referring only to the clause in section 15 of the management
contract regarding the requirement of the filing of the claim within the 15-day
period because that matter is pleaded as a special defense in the answer.

Counsel for the
petitioners quote in their brief a portion of the transcript of stenographic
notes taken during the trial to support petitioners’ claim that they had raised
the issue of limited liability before the trial court.  We have read that quoted portion of the
transcript, but we can not conclude that the defense of limited liability under
the management con­tract was put in issue before the trial court.  Issues before the trial court must be
embodied in the pleadings.  We have also
noted that in the decision of the Court of First Instance of Manila the matter
regarding the limited liability of the defendants was not touched at all – and
to Us this is an indication that the issue of limited liability was not raised
before the trial court.  If that issue was raised before the trial court, as
claimed by petitioners, and the trial court did not pass upon the issue,
petitioners should have filed a motion for re­consideration of the decision of
the trial court and ask for the resolution of the issue.  This, the petitioners did not do.

Indeed the Court of
Appeals was right in not pass­ing on the issue of limited liability on the part
of the petitioners because that issue was not properly raised before the trial
court.  Settled is the rule that a
special defense must be
specifically pleaded in order to afford the trial court an opportunity to pass
upon the issue raised by the special defense, and the defense that was
not properly pleaded before the trial court can not be raised for the first
time on appeal.

Having found that the action of respondent Marcelo Lapeña is not barred, and that the defense of limited
liability under section 15 of the management contract is not available to the
petitioners on appeal because that defense was not pleaded before the trial
court, it follows that the Court of Appeals did not err when it affirmed the
decision of the trial court which ordered herein petitioners to pay respondent
Marcelo Lapeña the sum of P1,370.00 representing the
value of the goods that were lost, plus P200.00 for attorney’s fees, and the
costs.  We, therefore, find the third
contention of the petitioners as also without merit.

IN VIEW OF THE FOREGOING, the decision of the Court of
Appeals, appealed from, is affirmed, with costs against the petitioners.

IT IS SO
ORDERED.

Reyes, Acting C.J., Dizon, Makalintal, Sanchez, Angeles, and
Fernando, JJ., concur.

Castro, J., did not take part.

Concepcion, C.J., is on official leave of absence.

Bengson, J., did not take part.

^[1]
Words in parenthesis supplied.

^[2]
See Republic of the Philippines v. Manila Port Service, G.R. No. L-19115, March
31, 1964; Chiok Ho v. Campañia Maritima;, et al., G.R. No. L-20553, April 30,
1965; Yu Kimteng Construction Corporation v. Manila Railroad
Company, et al., G.R. No. L-17027, November 29, 1965; Firemen’s Insurance Co. v. Manila Port Service, et al., August 31, 1967.

^[3]
Appellants’ brief, p. 40 (CA decision is appended to appellants’ brief).

^[4]
Record on Appeal, pp. 7-8.