MANILA PORT SERVICE AND MANILA RAILROAD COMPANY, PETITIONERS, VS. COURT OF APPEALS AND NORTHWEST INSURANCE & SURETY CO., INC., RESPONDENTS.

Appeal from a decision of the Court of Appeals.  As therein set forth, the facts are:

“On July 25, 1960,
Smith Bell & Co. (London) Ltd.
shipped on board the steamship ‘Aeneas’ one case containing spare parts and
accessories for the Victoria Precision Milling Machine valued at $2,105.30 and
consigned to J.C.A.  Lumber
and Gen­eral Merchandise at Manila.  The consignee
insured the shipment with the Northwest Insurance & Surety Co., Inc.,
against loss or damage that may be suf­fered by him, in the sum of P5,514.83.

“Upon arrival of the carrying vessel, the cargo was discharged
therefrom and was received on September 4, 1960 in good order and
condition by the Manila Port Service, a subsidiary of the Manila Railroad
Company and the sole arrastre operator for the Port
of Manila, as per the ‘Manage­ment
Contract’ (Exh. 2) executed
by and between the Service and the Bureau of Customs on February 29, 1966.

“A customs broker, the Eastern Brokerage Co., Inc., was
engaged by the consignee to clear the shipment thru the Bureau of Customs and
to obtain delivery thereof.  On September
8, 1960, pending the issuance of the corresponding deli­very permit, the
broker filed a provisional claim for any loss or damage to
the cargo with the Ma­nila Port Service (Exh.
M).  The delivery permit having been
issued the brokerage firm presented it to the Manila Port Service in order to
take deli­very of the shipment but, after diligent search, the same could not
be located.  For this reason, no gate
pass was ever issued and the delivery per­mit was surrendered to the Manila
Port Service, which issued on November
10, 1960, a certification to the effect that the shipment in
question was not delivered to the consignee or its agent (Exh.
D).

“In view of the non-delivery of the cargo, the customs broker
filed a formal claim with the Manila Port Service on November 2, 1960 (Exh.
I).  A simi­lar claim was submitted to
the Northwest Insurance & Surety Co., Inc. on the basis of the policy
issued by it over the cargo in question (Exh. C).  The in­surance
company settled the claim, paying the con­signee the face value of the policy –
i.e., P5,514.83 (Exhs. E and F).

“The Northwest Insurance & Surety Co., Inc., as the subrogee of the assured-consignee, pursued the claim filed
with the Manila Port Service for the value of the lost cargo, but the latter
failed and refused to settle the same.  Hence this action commenced on September 4, 1961, in the Court of First Instance of Manila.

“The appeal under consideration was interposed by
defendants Manila Port Service and Manila Railroad Company against the judgment
of the court a quo ordering them to pay, jointly and severally, to the plain­tiff
the sum of P5,514.83, with interest at the legal rate
from the date of the filing of the complaint until fully paid and further to
pay the costs.”

The decision of the trial court having been affirmed by the Court
of Appeals, with costs against the Manila Port Service and the Manila Railroad
Company – hereinafter referred to as Appel­lants – the latter have brought the
matter before the Supreme Court on petition for review by certiorari, to which
we gave due course.

The main issue in this case is whether or not the Northwest
Insurance & Surety Co., Inc., as subrogee of
J.C.A. Lumber and General Merchandise – hereinafter referred to as consignee is
bound by the provisions of the Management Contract between the Manila Port
Service – hereinafter referred to as the arrastre
operator – and the Bureau of Customs, particularly the stipulations in said
contract fixing the period of time within which the consignee of goods lost in
the possession of the arrastre operator may file a
claim for reimbursement of the value of said goods, and limiting the liability there­for to P500 per package, unless the value of the
goods is otherwise specified.

Although, admittedly the Consignee herein and the Northwest
Insurance & Surety Co., Inc. – hereinafter referred to as the subrogee – are not parties to the Management Contract
aforementioned, the arrastre operator maintains that
the same is binding upon them, because the Consignee had been notified and had
acted with prior knowledge of the provisions of said contract.

This pretense is manifestly devoid of merit.  A contract between two (2) persons can not
bind another, not a party thereto, merely because he is aware of such contract
and has acted with knowledge thereof. 
Although, in the cases cited by appellants,^[1]
the provisions of the Management Contract in ques­tion have been held binding
upon consignees who were not par­ties to the agreement, this was due to the
fact that they were barred from objecting to the application of the provisions
of said agreement, they having availed themselves of the benefits resulting
from the operation thereof, by taking delivery of some of the goods
consigned to them, through the use of a per­mit or gate pass issued by
the arrastre operator, with a state­ment, stamped
on the back thereof, to the effect that said permit or pass was “subject
to all the terms and conditions of the Management Contract x x x.”

Such is not the situation obtaining in the case at bar.  Indeed, the plea of estoppel
has not been set up in the answer filed by herein appellants with the
trial court.  Said pleading merely assumes
that the consignee is subject to the provisions of the Management Contract.  What is more, the facts proven do not
disclose any circumstance tending to show that the consignee herein had taken
advantage of and received benefits under said contract.  On the contrary – unlike the above-mentioned
cases relied upon by appellants herein – in one case at bar: 1) there has been no
partial delivery of the goods in question, all of which had been
lost; 2) no gate pass had been issued to, or used by, the Consignee, for there
were no goods it could have withdrawn, none having been found; 3) the permit
issued by the latter was, for the same reason, not used by the
Consignee; and 4) there is even no allegation in the pleadings or proof that,
when said permit was delivered to the Consignee, it contained any reference
whatsoever to the Management Contract.

This case is controlled by Shell Company of the Philippines, Ltd.
vs. Compañia General de Tabacos
de Filipinas^[2]
in which, speaking through Mr. Justice Jose P. Bengzon,
this Court used the following language:

“In a long line of decisions we have con­sistently ruled that
a consignee who, personally or through a broker, secures from the Bureau of
Customs a delivery permit wherein is reproduced the limitations contained in
the ‘Important Notice’ quoted above, signs and presents it to the arrastre contractor, and obtains, thereunder
partial delivery of the goods, is bound by the provisions of the management
contract between the Bureau of Customs and the arrastre
contractor as if he were a party thereto. 
(Tomas Grocery vs. Delgado Bros., Inc., 56 O.G. (27) 4422; Northern
Motors Inc. vs. Prince Lines, L-13884, Feb. 29, 1960; Bernabe
vs. Delgado Bros., Inc., L-14360, Feb. 29, 1960; Bernabe
vs. Delgado Bros., Inc., 58 O.G. (38) 6774; Juan Ysmael
& Co., Inc. vs. United States Lines Co., L-14394, April 30, 1960; Domestic
Insurance Co. vs. Manila Port Service, L-15060, August 31, 1960; Ong Yet Hua Hardware Co., Inc.
vs. Manila Railroad Co., L-15271, Nov. 29, 1960; Villanueva vs. Barber Wilhemsen Line, L-14764, Nov. 30, 1960; Commercial Union
Assurance Co., Ltd. vs. Manila Port Service, L-14948, Oct. 31, 1961; Insurance
Company of North America vs. Manila Port Service, L-17331, Nov. 29, 1961;
Domestic Insurance Co. of the Philippines vs. Manila Port Service, L-13439,
Jan. 31, 1962; Atlantic Mutual Insurance Co. vs. Manila Port Service, L-16789,
Oct. 31, 1962; Insurance Company of North America vs. United States Lines,
L-17032, March 31, 1964.)  In such cases
the consignee was not only aware of the limitations contained in Paragraph 15
of the management contract but it also took advan­tage of and received benefits
under said contract.  In those cases,
however, where the consignee did not sign the delivery permit and completely
failed to obtain delivery thereunder because all the
goods were missing or could not be located, we denied enforceability of the pro­visions
of the management contract upon the con­signee. 
(Sun Bros. & Co. vs. Manila Port Service, 58 O.G.
(9) 1722; Reliance Surety & In­surance Co. vs. Manila Railroad Co.,
L-19589, April 30, 1964.)

“The consignee in the instant case did not make use of the
delivery permit and derived no benefit from the management contract.  Shell Co. of the Philippines, Ltd., could not have made use of the delivery permit or
accepted the services of the Manila Port Service for no delivery, par­tial or
total, was made because all the goods could not be found.  As a matter of fact, the Manila Port Service
certified to the non-delivery of said goods.

“Sheer notice of the provisions of the Man­agement
Contract on the part of Shell Company does not suffice to bind it as a party
thereto.  Where the consignee did not,
personally or thru its broker, make use of any delivery permit as the goods
were never withdrawn from the piers, it is not bound by the notice appearing on
the back of the permit that claims for losses must be filed within 15 days from
the discharge of the goods.”

It should be noted that, in the aforementioned Shell case, a
delivery permit was issued; that, at the back thereof, the statement to the
effect that it was subject to the perti­nent provisions of the management
contract, had been stamped; and that the consignee’s broker and agent had
signed thereon, as well as presented the permit to the arrastre operator, but was unable to take delivery of
any of the goods consigned to its principal, none having been found in the
possession of said operator.

WHEREFORE, the decision appealed from should, as it is
hereby, affirmed, with costs against appellants herein.

Reyes, Dizon, Makalintal,
Zaldivar, Sanchez, Castro, Angeles, and Fernando, JJ., concur.

Bengzon, J.P., J., took no part.

^[1]
Northern Motors vs. Prince Lines, L-13884, Feb. 29, 1960; Sun Brothers,
Inc. vs. Manila Port Service, L-13500, Apr. 29, 1960; Commercial Union
Assurance Co., Ltd. vs. Manila Port Service, L-14448 & L-14972, Oct.
31, 1961; Domestic Insurance Co. of the Phil. vs. Manila Port Service,
Jan. 31, 1962; Mendoza vs. Philippine Airlines, L-3668, Feb. 29, 1962.

^[2]
L-20230, July 30, 1965.