YU KIMTENG CONSTRUCTION CORPORATION, PLAINTIFF-APPELLANT, VS. MANILA RAILROAD COMPANY AND MANILA PORT SERVICE, DEFENDANTS-APPELLEES.

Yu Kimteng Construction versus Manila Railroad

The Case

This is a claim for damages brought by Yu Kimteng Construction Corporation against the Manila Railroad Company and the Manila Port Service for five lifts of reinforced steel bars that went missing while the shipment was in the custody of the arrastre operator. The case matters because it fixes the reckoning point for the fifteen-day claim period in the management contract governing arrastre operations: the period runs not from the discharge of the last package from the carrying vessel, but from the date the consignee learned or could have learned of the loss, damage, or misdelivery. It is also a working lesson on how a defendant who sleeps on a defense may lose it on appeal.

Procedural History

The case began in the trial court, which rendered judgment in favor of the consignee. On appeal, the Supreme Court, in a decision dated November 29, 1965, affirmed and ordered the Manila Railroad Company and the Manila Port Service to pay compensatory damages of 7,935 pesos and 1,000 pesos as attorney's fees and litigation expenses, including costs. The defendants then filed a motion for reconsideration of that decision, raising four grounds: that the Court had departed from prior rulings upholding the validity of paragraph 15 of the management contract; that their liability, if any, was limited to 500 pesos per package; that the finding that the consignee learned of the missing bars only upon delivery of the three lifts was erroneous; and that attorney's fees should not have been imposed. The matter now before the Court is the resolution of that motion for reconsideration.

Facts

The carrying vessel arrived in Manila on May 28, 1957. The next day, May 29, the Bureau of Customs delivered to the consignee the three delivery permits covering the shipment of eight lifts of reinforced steel bars. On May 31 the shipment was completely discharged from the ship into the custody of the arrastre operator. On June 3 the consignee presented the three permits to the Manila Port Service, promptly expressing its desire to take delivery.

On June 16 the Manila Port Service billed the consignee's broker for arrastre charges on the entire shipment of eight lifts, in the sum of 348 pesos and 48 centavos. One bill was dated June 2, while the other two were dated June 16, but all three were presented for payment on the same day, June 16. From this the Court drew the inference that as of that date the shipment was still intact; otherwise the operator would not have billed the consignee for arrastre charges on the whole of it.

On June 20 the Manila Port Service issued a gate pass and delivered to the consignee's customs broker three lifts only. On that same day the broker filed provisional claims for the five missing lifts. The defense set up in the answer was singular: that the claim should have been filed within fifteen days from the complete discharge of the goods from the carrying vessel under paragraph 15 of the management contract.

Issues

• Whether or not the provisional claim was filed within the fifteen-day period fixed in paragraph 15 of the management contract, counted from the date the consignee learned of the loss rather than from the discharge of the last package from the vessel.
• Whether or not the arrastre operator's liability is limited to 500 pesos for each package under paragraph 15 of the management contract.
• Whether or not the award of attorney's fees was proper.

Applicable Provisions

Paragraph 15 of the management contract, as quoted in the decision, provides:

The Contractor shall be solely responsible as an independent contractor for, and promptly pay to the steamship company, consignee, consignor, or other interested party or parties the invoice value of each package but which in no case shall be more than five hundred pesos (P500.00) for each package unless the value is otherwise specified or manifested and the corresponding arrastre charges had been paid.

This is the clause that supplies both the fifteen-day claim requirement invoked as a condition precedent to suit and the 500-peso per package limitation invoked to reduce the award.

Ruling

On the first issue, the Court denied reconsideration and held that the fifteen-day period must be counted from the date the consignee learned or could have learned of the loss. The shipment was still intact on June 16, when the operator billed the entire eight lifts; the loss therefore occurred after the lapse of fifteen days from discharge, so the consignee could not possibly have filed a claim within that period. It filed its provisional claim on June 20, within fifteen days of learning of the loss. The Court distinguished the earlier cases: in Shell Company of the Philippines versus Compania General de Tabacos the claim was filed before discharge and was premature and speculative; in Commercial Union Assurance Company versus Manila Port Service and in the Government Service Insurance System case the consignee knew of the loss at the time of delivery, which fell within the fifteen-day window. Here, as in the rule laid down in this very case, the period runs from knowledge of the loss.

On the second issue, the Court acknowledged that there was no showing that the consignee had declared the value of the five missing lifts, and that arrastre fees had been paid on the basis of weight. Nevertheless, the 500-peso limitation was not interposed in the answer; the only ground pleaded for refusing the claim was late filing, and evidence of the actual value of the missing lifts and of the cost of replacement was admitted at trial without objection. The Court held it was quite late to raise the new defense for the first time on appeal.

On the third issue, the Court sustained the award of attorney's fees. In the stipulation of the parties below they expressly left the amount to the discretion of the court, and the 1,000 pesos awarded was just and reasonable.

Doctrine

First, the fifteen-day period in paragraph 15 of the management contract is not counted from the discharge of the last package from the carrying vessel, but from the date the consignee learned or could have learned of the loss, damage, or misdelivery. The condition is not strictly applied where it would be unfair and iniquitous, as when the loss occurs after the fifteen-day period has already lapsed, for then compliance within that period is impossible and the condition is deemed not imposed.

Second, a defense not pleaded in the answer, and raised for the first time on appeal, comes too late. The 500-peso per package limitation, though written into the contract, will not reduce the award if the defendant rested its refusal solely on late filing and allowed evidence of actual value to be taken at trial.

Third, attorney's fees may be awarded where the parties themselves stipulated that the amount is left to the sound discretion of the court.

Disposition

The motion for reconsideration was denied, and the defendants remained liable to pay the consignee 7,935 pesos as compensatory damages and 1,000 pesos as attorney's fees and litigation expenses, including costs.

Remember This

The line worth memorizing is that the fifteen-day arrastre claim period runs from the date the consignee learned or could have learned of the loss, not from the discharge of the last package. Examiners use this case to test the reckoning of the claim period under the management contract and the procedural rule that new defenses cannot be raised for the first time on appeal.