THE MANILA RAILROAD CO., PLAINTIFF AND APPELLANT, VS. LA COMPAÑIA TRASATLANTICA, DEFENDANT AND APPELLEE, AND THE ATLANTIC, GULP & PACIFIC CO., DEFENDANT AND APPELLANT.

In March, 1914, the steamship Alicante, belonging to the
Compañia Trasatlantica de Barcelona, arrived at Manila with two
locomotive boilers aboard, the property of The Manila Railroad Company. The
equipment of the ship for discharging heavy cargo was not sufficiently strong to
handle these boilers, and it was therefore necessary for the Steamship Company
to procure assistance in the port of Manila.

The Atlantic, Gulf and Pacific Company (hereafter called the Atlantic
Company) was accordingly employed by the Steamship Company, as having probably
the best equipment for this purpose of any contracting company in the city. The
service to be performed by the Atlantic Company consisted in bringing its
floating crane alongside the Alicante, lifting the boilers out of the
ship’s hold, and transferring them to a barge which would be placed ready to
receive them.

Upon the arrival of the Alicante, the Atlantic Company sent out its
crane in charge of one Leyden. In preparing to hoist the first boiler the sling
was unfortunately adjusted near the middle of the boiler, and it was thus raised
nearly in an horizontal position. The boiler was too long to clear the hatch in
this position, and after one end of the boiler had emerged on one side of the
hatch, the other still remained below on the other side. When the boiler had
been gotten into this position and was being hoisted still further, a rivet near
the head of the boiler was caught under the edge of the hatch. The weight on the
crane was thus increased by a strain estimated at fifteen tons with the result
that the cable of the sling parted and the boiler fell to the bottom of the
ship’s hold. The sling was again id justed to the boiler but instead of being
placed near the niddle it was now slung nearer one of the ends, as should lave
been done at first. The boiler was again lifted; but is it was being brought up,
the bolt at the end of the lerrick boom broke, and again the boiler fell.

The crane was repaired and the boiler discharged, but t was found to be so
badly damaged that it had to be rehipped to England where it was rebuilt, and
afterwards vas returned to Manila. The Railroad Company’s damage by reason of
the cost of repairs, expenses, and loss of he use of the boiler proved to be
P22,343.29; and as to the amount of the damage so resulting there is practically
io dispute. To recover these damages the present action was instituted by the
Railroad Company against the Steamship Company. The latter caused the Atlantic
Company to be brought in as a codefendant, and insisted that whatever liability
existed should be fixed upon the Atlantic Company as an independent contractor
who had underaken to discharge the boilers and had become responsible or such
damage as had been done.

The judge of the Court of First Instance gave judgment in favor of the
plaintiff against the Atlantic Company, but absolved the Steamship Company from
the complaint. The plaintiff has appealed from the action of the court in
failing to give judgment against the Steamship Company, while the Atlantic
Company has appealed from the judgment against it.

The mishap was undoubtedly due, as the lower court found, to the negligence
of one Leyden, the foreman in charge; and we may add that the evidence tends to
show that his negligence was of a type which may without exaggeration be
denominated gross. The sling was in the first place improperly adjusted, and the
attention of Leyden was at once called to this by the man in charge of the
stevedores. Nevertheless he proceeded and, instead of lowering the boiler when
it was seen that it could not readily pass through the hatch, he attempted to
force it through; and the ship’s tackle was brought into use to assist in this
maneuver. The second fall was, it appears, caused by the weakening of the bolt
at the head of the derrick boom, due to the shock incident to the first
accident. This defect was possibly such as not to be patent to external
observation but we are of the opinion that a person of sufficient skill to be
trusted with the operation of machinery of this character should have known that
the crane had possibly been weakr ened by the jar received in the first
accident. The foreman was therefore guilty of negligence in attempting to hoist
the boiler the second time under the conditions that had thus developed. It
should be noted that the operation was at all its stages entirely under Leyden’s
control; and, although in the first lift he utilized the ship’s tackle to aid in
hoisting the boiler, everything was done under his immediate supervision. There
is no evidence tending to show that the first fall of the boiler might hatfe
been due to any hidden defect in the lifting apparatus; and if it had not been
for the additional strain caused by one end of the boiler catching under the
hatch, the operation would doubtless have been accomplished without difficulty.
The accident is therefore to be attributed to the failure of Leyden to exercise
the degree of care which an ordinarily competent and prudent person would have
exhibited under the circumstances which then confronted him. This conclusion of
fact cannot be refuted; and, indeed, no attempt is here made by the appellant to
reverse this finding of the trial court.

Three questions are involved in the case, namely: (1) Is the Steamship
Company liable to the plaintiff by reason of having delivered the boiler in
question in a damaged condition? (2) Is the Atlantic Company liable to be made
to respond to the steamship company for the amount the latter may be required to
pay to the plaintiff for the damage done? (3) Is the Atlantic Company directly
liable to the plaintiff, as the trial court held?

It will be observed that a contractual relation existed between the Railroad
Company and the Steamship Company; and the duties of the latter with respect to
the carrying and delivery of the boilers are to be discovered by considering the
terms and legal effect of that contract. A contractual relation also existed
between the Steamship Company and the Atlantic Company; and the duties owing by
the latter to the former with respect to the lifting and the transferring of the
boilers are likewise to be discovered by considering the terms and legal effect
of the contract between these parties. On the other hand, no contractual
relation existed directly between the Railroad Company and the Atlantic
Company.

We are all agreed, that, under the contract for transportation from England
to Manila, the Steamship Company is liable to the plaintiff for the injury done
to the boiler while it was being discharged from the ship. The obligation to
transport the boiler necessarily involves the duty to convey and deliver it in a
proper condition according to its nature, and conformably with good faith,
custom, and the law (art. 1258, Civ. Code). The contract to convey imports the
duty to convey and deliver safely and securely with reference to the degree of
care which, under the circumstances, are required by law and custom applicable
to the case. The duty to carry and to carry safely is all one.

Such being the contract of the Steamship Company, said company is necessarily
liable, under articles 1103 and 1104 of the Civil Code, for the consequences of
the omission of the care necessary to the proper performance of its obligation.
The contract to transport and deliver at the port of Manila a locomotive boiler,
which was received by it in proper condition, is not complied with by delivery
at the port of destination of a mass of iron the utility of which had been
destroyed.

Nor does the Steamship Company escape liability by reason of the fact that it
employed a competent independent contractor to discharge the boilers. The law
applicable to this feature of the case will be more fully discussed further on
in this opinion. At this point we merely observe that in the performance of this
service the Atlantic Company was no more than a servant or employee of the
Steamship Company, and it has never yet been held that the failure to comply
with a contractual obligation can be excused by showing that such delinquency
was due to the negligence of one to whom the contracting party had committed the
performance of the contract.

Coming to the question of the liability of the Atlantic Company to respond to
the Steamship Company for the damages which the latter will be compelled to pay
to the plaintiff, we observe that the defense of the Atlantic Company comprises
two contentions, to-wit, first, that by the terms of the engagement in
accordance with which the Atlantic Company agreed to render the service, all
risk incident to the discharge of the boilers was assumed by the Steamship
Company; and secondly, that the Atlantic Company should be absolved under the
last paragraph of article 1903 of the Civil Code, inasmuch as it had used due
care in the selection of the employee whose negligent act caused the damage in
question.

At the hearing in first instance the Atlantic Company introduced four
witnesses to prove that at the time said company agreed to lift the boilers out
of the Alicante, as upon other later occasions, the Steamship Company
was notified that the service would only be rendered upon the distinct
understanding that the Atlantic Company would not be responsible for damage. In
this connection the president of the company testified that he stipulated that
the company would assume no responsibility for any damage which might be done to
the lifts or to the steamer or to its contents or to individuals during the
progress of making these lifts, from any source whatever in connection with the
breaking of the lifting equipment. The vice-president of the Atlantic Company
testified that he was present upon the occasion when the agent .of the Steamship
Company made arrangements for the discharge of the boilers and he heard the
conversation between the president and said agent. According to this witness the
substance of the agreement was that, while the Atlantic Company would use all
due care in getting the boilers out, no responsibility was assumed for damage
done either to ship or cargo. The intermediary who acted as agent for the
Steamship Company in arranging for the performance of this service stoutly
denied that any such terms were announced by the officials or anybody else
connected with the Atlantic Company at any time while the arrangements were
pending.

In the conflict of the evidence, we recognize that, by a preponderance of the
evidence, some reservation or other was made as to tlie responsibility of the
Atlantic Company; and though the agent who acted on behalf of the Steamship
Company possibly never communicated this reservation to his principal, the
latter should nevertheless be held bound thereby. It thus becomes necessary to
discover what the exact terms of this supposed reservation were.

We think that we must put aside at once the words of studied precision with
which the president of the Atlantic Company would exclude the possibility of any
liability attaching to his company, though we may accept his statement as
showing that the excepted risk contemplated breakage of the lifting equipment.
There is undoubtedly a larger element of truth in the more reasonable statement
by the vice-president of the company. According to this witness the contract
combined two features, namely, an undertaking on the part of the Atlantic
Company to use all due care, combined with a reservation concerning the
company’s liability for damage.

The Atlantic Company offered in evidence a. number of letters which had been
written by it at different times, extending over a period of years, in response
to inquiries made by other firms and persons in Manila concerning the terms upon
which the Atlantic Company would make heavy lifts. These letters tend to show
that the Atlantic Company was not accustomed to assume the risk incident to such
work and required the parties for whom the service might be rendered either to
carry the risk or insure against it. One such letter, dated nearly four years
prior to the occurrence which gave rise to this lawsuit, was addressed to the
Compañia Trasatlantica de Barcelona one of the defendants in this case.
It was stated in this communication that the company’s derrick would be subject
to inspection prior to making the lift but that the Atlantic Company would not
assume responsibility for any damage that might occur either to ship or cargo
from any cause whatsoever. The Steamship Company rejected the services of the
Atlantic Company in that instance as being too onerous.

The letters directed to third parties, it may be observed, would not,
generally speaking, be admissible as against the plaintiff for the purpose of
proving that a similar reservation was inserted in the contract with it on this
occasion; but if knowledge of such custom is brought home to the Steamship
Company, the fact that such reservation was commonly made is of some probative
force. Reference to a number of these letters will show that no particular
formula was used by the Atlantic Company in defining its exemption, and the
tenor of these various communications differs materially. We think, however,
that some of the letters are of value as an aid in interpreting the reservation
which the Atlantic Company may have intended to make. We therefore quote from
some of these letters as follows:

“We will use our best endeavors to carry out the work successfully and will
ask you to inspect our plant but we wish it distinctly understood that we cannot
assume responsibility for damage which may occur * * * while the lift is being
made.” (To Rear Admiral, U. S. N., Oct. 4, 1909.)

“Our quotation is based on the understanding that we assume no responsibility
whatever from any accident which may happen during our operations. We always
insert this clause as a precautionary measure, but we have never had to avail
ourselves of it as yet and do not expect to now.” (To “El Varadero de Manila,”
Nov. 1, 1913.)

“As is customary in these cases, we will use all precautions necessary to
handle the gun in a proper manner. Our equipment has been tested and will be
again, before making the lift, but we do not assume any responsibility for
damage to the gun ship, or cargo.” (To Warner, Barnes & Co., June 7,
1909.)

The idea expressed in these letters is, we think, entirely consonant with the
interpretation which the vice-president of the company placed upon the contract
which was made with the Steamship Company upon this occasion, that is, the
company recognized its duty to exercise due supervisory care; and the exemption
from liability, whatever may have been its precise words, had reference to
disasters which might result from some inherent hidden defect in the lifting
apparatus or other unforeseen occurrence not directly attributable to negligence
of the company in the lifting operations. Neither party could have supposed for
a moment that it was intended to absolve the Atlantic Company from its duty to
use due care in the work.

It is not pretended that negligence on the part of the Atlantic Company or
its employees was expressly included in the excepted risk, and we are of the
opinion that the contract should not be understood as covering such an
exemption. It is a rudimentary principle that the contractor is responsible for
the work executed by persons whom he employs in its performance, and this is
expressed in the Civil Code in the form of a positive rule of law (art. 1596).
It is also expressly declared by law that liability arising from negligence is
demandable in the fulfillment of all kinds of obligations (art. 1103, Civil
Code). Every contract for the prestation of service therefore has annexed to it,
as an inseparable implicit obligation, the. duty to exercise due care in the
accomplishment of the work; and no reservation whereby the person rendering the
services seeks to escape from the consequences of a violation of this obligation
can be viewed with favor.

“Contracts against liability for negligence are not favored by the law. In
some instances, such as common carriers, they are prohibited as against public
policy. In all cases such contracts should be construed strictly, with every
intendment against the party seeking its protection.” (Crew vs.
Bradstreet Company, 134 Pa. St., 161; 7 L. R. A., 661; 19 Am. St. Rep.,
681.)

The strictness with which contracts conferring such an unusual exemption are
construed is illustrated in Bryan vs. Eastern & Australian S. S.
Co. (28 Phil. Rep., 310). The decision in that case is not precisely applicable
to the case at bar, since the court was there applying the law of a foreign
jurisdiction, and the question at issue involved a doctrine peculiar to
contracts of common carriers. Nevertheless the case is instructive as
illustrating the universal attitude of courts upon the right of a contracting
party to stipulate against the consequences of his own negligence. It there
appeared that the plaintiff had purchased from the defendant company a ticket
for the transportation of himself and baggage from Hongkong to Manila. By the
terms of the contract printed in legible type upon the back of the ticket it was
provided that the company would not hold itself responsible for any loss or
damage to luggage, under any circumstances whatsoever, unless it had been paid
for as freight. It was held that this limitation upon the liability of the
defendant company did not relieve it from liability for negligence of its
servants by which the baggage of the passenger was lost. Said the court:
“Ordinarily this language would seem to be broad enough to cover every possible
contingency, including the negligent act of the defendant’s servants. To so
hold, however, would run counter to the established law of England and the
United States on that subject. The court then quoted the following proposition
from the decision of the King’s Bench Division in Price & Co. vs.
Union Lighterage Co. ([1903], 1 K. B. D., 750, 754) :

” ‘An exemption in general words not expressly relating to negligence, even
though the words are wide enough to include loss by negligence or default of
carriers’ servants, must be construed as limiting the liability of the carrier
as assurer, and not as relieving him from the duty of exercising reasonable
skill and care.’ “

Even admitting that, generally speaking, a person may stipulate against
liability for the consequences of negligence, at least in those cases where the
negligence is not gross or wilful, the contract conferring such exemption must
be so clear as to leave no room for the operation of the ordinary rules of
liability consecrated by experience and sanctioned by the express provisions of
law.

If the exemption should be understood in the sense which counsel for the
Atlantic Company now insists it should bear, that is, as an absolute exemption
from all responsibility for negligence, it is evident that the agreement was a
most inequitable and unfair one, and hence it is one that the Steamship Company
can not be lightly assumed to have made. Understood in that sense it is the
equivalent of licensing the Atlantic Company to perform its tasks in any manner
and fashion that it might please, and to hold it harmless from the
consequences.

It is true that, in these days, insurance can usually be obtained in the
principal ports of commerce by parties circumstanced as was the steamship
company in the case now before us. But the best insurance against disasters of
this kind is found in the exercise of due care; and the chief incentive to the
exercise of care is a feeling of responsibility on the part of him who
undertakes the work. Naturally the courts are little inclined to aid in the
efforts of contractors to evade this responsibility.

There may have been in the minds of the officials of the Atlantic Company an
idea that the promise to use due care in the lifting operations was not
accompanied by a legal obligation, such promise being intended merely for its
moral effect as an assurance to the steamship company that the latter might rely
upon the competence and diligence of the employees of the Atlantic Company to
accomplish the work in a proper way. The contract can not be permitted to
operate in this onesided manner. The two features of the engagement, namely, the
promise to use due care and the exemption from liability for damage should be so
construed as to give some legal effect to both. The result is, as already
indicated, that the Atlantic Company was bound by its undertaking to use due
care and that the exemption was intended to cover accidents due to hidden
defects in the apparatus or other unforeseeable occurrences not having their
origin in the immediate personal negligence of the party in charge of the
operations.

We now proceed to consider the contention that the Atlantic Company should be
absolved from liability to the Steamship Company under the last paragraph of
article 1903 of the Civil Code, which declares that the liability there referred
to shall cease when the persons mentioned therein prove that they employed all
the diligence of a good father of a family to avoid the damage. In this
connection the conclusion of fact must be conceded in favor of the Atlantic
Company that it had used proper care in the selection of Leyden and that, so far
as the company was aware, he was a person to whom might properly be committed
the task of discharging the boilers. The answer to the contention, however, is
that the obligation of the Atlantic Company was created by contract, and article
1903 is not applicable to negligence arising in the course of the performance of
a contractual obligation. Article 1903 is exclusively concerned with cases where
the negligence arises in the absence of agreement.

In discussing the liability of the Steamship Company to the plaintiff
Railroad Company we have already shown that a party is bound to the full
performance of his contractual engagements under articles 1101 et seq.
of the Civil Code, and other special provisions of the Code relative to
contractual obligations; and if he falls short of complete performance by reason
of his own negligence or that of any person to whom he may commit the work, he
is liable for the damages resulting therefrom. What was there said is also
applicable with reference to the liability of the Atlantic Company upon its
contract with the Steamship Company, and the same need not be here repeated. It
is desirable, however, in this connection, to bring out somewhat more fully the
distinction between negligence in the performance of a contractual obligation
(culpa contractual) and negligence considered as an independent source of
obligation between parties not previously bound (culpa aquiliana).

This distinction is well established in legal jurisprudence and is fully
recognized in the provisions of the Civil Code. As illustrative of this, we
quote the following passage from the opinion of this Court in the well-known
case of Rakes vs. Atlantic, Gulf & Pacific Co. (7 Phil. Rep., 359,
365), and in this quotation we reproduce the first paragraph of the passage from
Manresa chiefly for the purpose of here presenting a more correct English
version of said passage.

“The acts to which these articles are applicable are understood to be those
not growing out of preexisting duties of the parties to one another. But where
relations already formed give rise to duties, whether springing from contract or
quasi contract, then breaches of those duties are subject to articles 1101,
1103, and 1104 of the same code. A typical application of this distinction may
be found in the consequences of a railway accident due to defective machinery
supplied by the employer. His liabilty to his employee would arise out of the
contract of employment, that to the passengers out of the contract for passage,
while that to the injured by-stander would originate in the negligent act
itself. This distinction is thus clearly set forth by Manresa in his commentary
on article 1093:

” ‘We see with reference to such obligations, that culpa, or
negligence, may be understood in two different senses, either as culpa,
substantive and independent, which of itself constitutes the
source of an obligation between two persons not formerly bound by any other
obligation; or as an incident in the performance of an obligation which
already existed, which can not be presumed to exist without the other, and which
increases the liability arising from the already existing obligation.1″

Justice Tracey, the author of the opinion from which we have quoted, proceeds
to observe that Manresa, in commenting on articles 1102 and 1104, has described
these two species of negligence as contractual and extra-contractual, the latter
being the culpa aquiliana of the Roman law. “This terminology is unreservedly
accepted by Sanchez Roman (Derecho Civil, fourth section, chapter XI,
article II, No. 12), and the principle stated is supported by decisions of the
supreme court of Spain, among them those of November 20, 1896 (80
Jurisprudencia Civil, No. 151), and June 27, 1894 (75
Jurisprudencia Civil, No. 182.)”

The principle that negligence in the performance of a contract is not
governed by article 1903 of the Civil Code but rather by article 1104 of the
same Code was directly applied by this court in the case of Baer Senior &
Co.’s Successors vs. Compañia Maritima (6 Phil. Rep., 215); and the
same idea has been impliedly if not expressly recognized in other cases (N. T.
Hashim & Co. vs. Rocha & Co., 18 Phil. Rep., 315; Tan Chiong
Sian vs. Inchausti & Co., 22 Phil. Rep., 152).

What has been said suffices in our opinion to demonstrate that the Atlantic
Company is liable to the Steamship Company for the damages brought upon the
latter by the failure of the Atlantic Company to use due care in discharging the
boiler, regardless of the fact that the damage was caused by the negligence of
an employee who was qualified for the work and who had been chosen by the
Atlantic Company with due care.

This brings us to the last question here to be answered, which is; Can the
Atlantic Company be held directly liable to the Railroad Company? In other
words, can the judgment entered in the trial court directly in favor of the
plaintiff against the Atlantic Company be sustained? To answer this it is
necessary to examine carefully the legal relations existing between the Atlantic
Company and the Railroad Company with reference to this affair; and we shall for
a moment ignore the existence of the contract between the Steamship Company and
the Atlantic Company, to which the railroad company was not a party.

Having regard then to the bare fact that the Atlantic Company undertook to
remove the boiler from the ship’s hold and for this purpose took the property
into its power and control, there arose a duty to the owner to use due care in
the performance of that service and to avoid damaging the property in the course
of such operation. This duty was obviously in existence before the negligent act
was done which resulted in damage, and said negligent act may, if we still
ignore the existence of the express contract, be considered as an act done in
violation of this duty.

The duty thus to use due care is an implied obligation, of a quasi
contractual nature, since it is created by implication of law in the absence of
express agreement. The conception of liability with which we are here confronted
is somewhat similar to that which is revealed in the case of the depositary, or
commodatary, whose legal duty with respect to the property committed to their
care is defined by law even in the absence of express contract; and it can not
be doubted that a person who takes possession of the property of another for the
purpose of moving or conveying it from one place to another, or for the purpose
of performing any other service in connection therewith (locatio operis
faciendi), owes to the owner a positive duty to refrain from damaging it,
to the same extent as if an agreement for the performance of such service had
been expressly made with the owner. The obligation here is really a species of
contract re, and it has its source and explanation in the vital fact
that the active party has taken upon himself to do something with or to the
property and has taken it into his power and control for the purpose of
performing such service. (Compare art. 1889, Civil Code.)

In the passage which we have already quoted from the decision in the Rakes
case this Court recognized the fact that the violation of a quasi contractual
duty is subject to articles 1101, 1103, and 1104 of the Civil Code and not
within the purview of article 1903. Manresa also, in the paragraph reproduced
above, is of the opinion that negligence, considered as a substantive and
independent source of liability, does not include cases where the parties are
previously bound by any other obligation. Again, it is instructive in this
connection to refer to the contents of article 1103 of the Civil Code, where it
is declared that the liability proceeding from negligence is demandable in the
fulfillment of all kinds of obligations. These words evidently comprehend both
forms of positive obligations, whether arising from express contract or from
implied contract (quasi contract).

In this connection it is instructive to recall the celebrated case of Coggs
vs. Bernard (2 Ld. Raym, 909), decided in the court of the King’s Bench
of England in the year 1703. The action was brought by the owner of certain
casks of brandy to recover damages from a person who had undertaken to transport
them from one place to another. It was alleged that in so doing the defendant so
negligently and improvidently put them down that one of the casks was staved and
the brandy lost. The complaint did not allege that the defendant was a common
carrier or that he was to be paid for his services. It was therefore considered
that the complaint did not state facts sufficient to support an action for
breach of any express contract. This made it necessary for the court to go back
to fundamental principles and to place liability on the ground of a violation of
the legal duty incident to the mere fact of carriage. Said Powell, J.: “An
action indeed will not lie for not doing the thing, for want of a sufficient
consideration ; but yet if the bailee will take the goods into his custody, he
shall be answerable for them; for the taking of the goods into his custody is
his own act.” So Gould, J.: “* * * any man that undertakes to carry goods is
liable to an action, be he a common carrier or whatever he is, if through his
neglect they are lost or come to any damage: * * *.” Behind these expressions
was an unbroken line of ancient English precedents holding persons liable for
damage inflicted by reason of a misfeasance in carrying out an undertaking. The
principle determined by the court in the case cited is expressed in the syllabus
in these words: “If a man undertakes to carry goods safely and securely, he is
responsible for any damage they may sustain in the carriage through his neglect,
though he was not a common carrier and was to have nothing for the carriage.”
Though not stated in so many words, this decision recognizes that from the mere
fact that a person takes the property of another into his possession and control
there arises an obligation in the nature of an assumpsit that he will use due
care with respect thereto. This must be considered a principle of universal
jurisprudence, for it is consonant with justice and common sense and as we have
already seen harmonizes with the doctrine above deduced from the provisions of
the Civil Code.

The conclusion must therefore be that if there had been no contract of any
sort between the Atlantic Company and the Steamship Company, an action, could
have been main tained by the Railroad Company, as owner, against the Atlantic
Company to recover the damages sustained by the former. Such damages would have
been demandable under article 1103 of the Civil Code and the action would not
have been subject to the qualification expressed in the last paragraph of
article 1903.

The circumstance that a contract was made between the Atlantic Company and
the Steamship Company introduces, however, an important, and in our opinion,
controlling factor into this branch of the case. It cannot be denied that the
Steamship Company had possession of this .boiler in the capacity of carrier and
that, as such, it was authorized to make a contract with the Atlantic Company to
discharge the same from the ship. Indeed, it appears in evidence that even
before the contract of affreightment was made the Railroad Company was informed
that it would be necessary for the Steamship Company to procure the services of
some contractor in the port of Manila to effect the discharge, as the ship’s
tackle was inadequate to handle heavy cargo. It is therefore to be assumed that
the Railroad Company had in fact assented to the employment of a contractor to
perform this service.

Now, it cannot be admitted that a person who contracts to do a service like
that rendered by the Atlantic Company in this case incurs a double
responsibility upon entering upon performance, namely, a responsibility to the
party with whom he contracted, and another entirely different responsibility to
the owner, based on an implied contract. The two liabilities can not in our
opinion coexist. It is a general rule that an implied contract never arises
where an express contract has been made.

If double responsibility existed in such a case as this, it would result that
a person who had limited his liability by express stipulation might find himself
liable to the owner without regard to the limitation which he had seen fit to
impose by contract. There appears to be no possibility of reconciling the
conflict that would be developed in attempting to give effect to those
inconsistent liabilities. The contract which was in fact made, in our opinion,
determines not only the character and extent of the liability of the Atlantic
Company but also the person or entity by whom the obligation is exigible. It is
of course quite clear that if the Atlantic Company had refused to carry out its
agreement to discharge the cargo, the plaintiff could not have enforced specific
performance and could not have recovered damages for non-performance. (Art.
1257, Civil Code; Donaldson, Sim & Co. vs. Smith, Bell & Co., 2
Phil. Rep., 766; Uy Tarn and Uy Yet vs. Leonard, 30 Phil. Rep., 471.)
In view of the preceding discussion it is equally obvious that, for lack of
privity with the contract, the Railroad Company can have no right of action to
recover damages from the Atlantic Company for the wrongful act which constituted
the violation of said contract. The rights of the plaintiff can only be made
effective through the Compania Trasatldntica de Barcelona with whom the contract
of affreightment was made.

The judgment entered in the Court of First Instance must, therefore, be
reversed not only with respect to the judgment entered in favor of the plaintiff
directly against the Atlantic Company but also with respect to the absolution of
the Steamship Company and the further failure of the court to enter judgment in
favor of the latter against the Atlantic Company. The Compañia Trasatlantica
de Barcelona should be and is hereby adjudged to pay to the Manila Railroad
Company the sum of twenty two thousand three hundred forty three pesos and
twenty nine centavos (P22,343.29), with interest from May 11, 1914, until paid;
and when this judgment is satisfied, the Compañia Trasatlantica de
Barcelona is declared to be entitled to recover the same amount from the
Atlantic Gulf & Pacific Company, against whom judgment is to this end hereby
rendered in favor of the Compañia Trasatlantica de Barcelona. No
express adjudication of costs of either instance will be made. So ordered.

Arellano, C. J., Torres, Araullo, and Avanceña, JJ.,
concur.

Johnson, J., with whom concurs Malcolm, J.

---

DISSENTING OPINION

JOHNSON, J., dissenting:

The only question presented by the appellant, the Atlantic, Gulf &
Pacific Company, is whether or not. it is liable, either to the Manila Railroad
Company, or to the Compañia Trasatlantica, for the damage caused to a
certain locomotive boiler while being discharged at the port of Manila.

The essential facts important for a decision upon the rights and liabilities
of the Atlantic, Gulf & Pacific Company may be stated as follows:

(1) That the Manila Railroad Company purchased certain locomotive boilers in
Europe and contracted with the Compañia Trasatlantica to transport the
same to Manila by its steamship Alicante; (2) That the tackle and equipment of
the steamship Alicante being insufficient to discharge said locomotive
boilers, the Compañia Trasatlantica entered into a contract with the
Atlantic, Gulf & Pacific Company by virtue of the terms of which the latter
company agreed to discharge the said locomotive boilers from the said steamship
Alicante by using its tackle and equipment for that purpose; (3) That
in the effort of the Atlantic, Gulf & Pacific Company to discharge the said
locomotive boilers from the said steamship, the apparatus, used, broke and one
of the boilers was discharged in the manner described in the complaint and
damaged to the amount found by the lower court; (4) That while the Atlantic,
Gulf & Pacific Company attempted to show, during the trial of the cause,
that it and its employees exercised due care and diligence, it admitted in this
court that its employees had perhaps been negligent in the performance of their
duties.

Considering that the relations between the Compañia Trasatlantica
and the Atlantic, Gulf & Pacific Company were contractual, it becomes
important to ascertain what were the terms of the contract, in order to properly
understand the rights and liabilities of the parties thereto, in relation to the
admission of the Atlantic, Gulf & Pacific Company that its employees had
perhaps been guilty of negligence in the discharge of said boiler.

The contract was not wholly reduced to writing; it was partly written and
partly oral. The Compañia Trasatlantica alleged that under the terms of
the contract the Atlantic, Gulf & Pacific Company was to discharge said
boilers from the steamship Alicante, using its tackle and apparatus therefor,
and that no condition of any character was imposed, while the Atlantic,
Gulf & Pacific Company alleged that it agreed to discharge said boilers and
to use its tackle and equipment for that purpose, but with the express
condition that it was, under no circumstances or conditions, to assume any
responsibility for any damage whatever which might be occasioned thereby, either
to the cargo, ship or persons.

In support of the allegation of the Compañia Trasatlantica, it
really presented but one witness, while the Atlantic, Gulf & Pacific Company
presented several witnesses, including its president, vice-president and several
others, together with a number of documents showing that the contract was in
conformity with its usual custom in making similar contracts. The Atlantic, Gulf
& Pacific Company also showed that the Compañia Trasatlantica had
actual knowledge of such custom.

A careful examination of the proof, in our opinion, clearly shows by a large
preppnderance, that the contract in question was as the Atlantic, Gulf &
Pacific Company alleged ‘and that by its terms said company (A. G. & P.) was
relieved “of any responsibility for any damage which might occur either to the
ship, cargo or persons, from any cause whatsoever“

The contract is the law governing the rights and obligations of the parties,
subject to certain well defined exceptions. Persons have a right to enter into
any contract with any clauses, or conditions, or limitations which they may deem
convenient and advisable so long as such clauses or conditions do not conflict
with the existing laws, morals or public order. (Art. 1255, Civil Code.) There
are some well defined exceptions to that rule, the most notable of which are
contracts with common carriers. (Hartford F. Ins. Co., vs. Chicago, M.
& St. P. Railway Co., 175 U. S., 91, 97.) The Atlantic, Gulf & Pacific
Company, so far as the record shows, is not a common carrier, and the exception,
therefore, just noted does not apply to it. Neither was the contract between the
Compañia Trasatlantica and the Atlantic, Gulf & Pacific Company a
contract for the carriage of merchandise. It was a contract for services of an
entirely different character from that of a common carrier.

If then, generally speaking, persons may enter into contractual relations
with any clauses or conditions which they may deem advisable and convenient,
which do not conflict with existing laws, morals or public order, we may ask: Is
a contract of the character of that before us in which one of the parties
stipulates “that he will not assume any responsibility for any damage which may
occur from any cause whatsoever” in the execution of said contract, contrary to
the laws, morals or public order?

The contract in question was not one which the parties were obliged to enter
into. In that respect, it differed from contracts with common carriers, wherein
the latter have no option, generally speaking. In the present case, the
Atlantic, Gulf & Pacific Company had a perfect right to refuse to enter into
the contract in question until and unless its terms were satisfactory and
acceptable. The parties being at perfect liberty to enter into the contract or
to refuse so to do, they must be bound by the law which they themselves have
made for themselves. Having voluntarily made the law (contract), they must abide
by its terms until it can be shown that the same is contrary to the laws, morals
or public order.

It is a fundamental rule of the law that what one may refuse to do entirely,
he may agree to do upon such terms as he pleases so long as he does not
contravene the laws, morals or public order. The Atlantic, Gulf & Pacific
Company having had the right to refuse absolutely to enter into the contract, it
must have had the right to refuse to enter into it except upon just such terms
and conditions as it saw fit to require. The Atlantic, Gulf & Pacific
Company, therefore, had a right to refuse to enter into the contract in question
until and unless the Compañia Trasatlantica agreed to relieve it of all
responsibility for any damages which might occur either to the ship,
cargo or persons from any cause whatsoever. By the terms of the
contract the Compañia Trasatlantica assumed all responsibility
for damages in the discharge of the said locomotive boilers. That must be true
considering that, by the terms of the contract, the Atlantic, Gulf & Pacific
Company was relieved from any and all damages whatsoever which might occur.

The only purpose on the part of the Atlantic, Gulf & Pacific Company, in
imposing the condition above-mentioned, was to avoid the consequences of the
negligence of its agents or employees or of any act or accident which might
cause damage, and to avoid possible lawsuits growing out of the alleged
negligent acts.

The question which we are discussing is not a new one in jurisprudence. The
courts have been called upon many times to interpret contracts with conditions
like those contained in the contract before us. (Coup vs. Wabash, St.
Louis & Pac. Railway Co., 56 Mich., Ill; 56 Am. Rep., 374; Mann vs.
Pere Marquette R. Co., 135 Mich., 210; Stephens vs. Southern Pacific
Co., 109 Cal., 86; 29 L. R. A., 751; Quimby vs. Boston & Maine R.,
150 Mass., 365; 5 L. R. A., 846; Pittsburgh, etc. Railway Co. vs.
Mahoney, 148 Ind., 196; Russell vs. Pittsburgh, etc., R. Co., 157 Ind.,
305; 55 L. R. A., 253; Hartford Fire Ins. Co. vs. Chicago, M. & St.
P. Railway Co., 175 U. S., 91, 97; Baltimore, etc. Railway Co. vs.
Voigt, 176 U. S., 498; Osgood vs. Railway Co., 77 Vermont, 334; 70 L.
R. A., 930.)

In the case of the Hartford Insurance Company vs. Chicago, M. &
St. P. Railway Co. (175 U. S., 91, 97, supra). a contract was made by
which one of the parties was relieved from all liability for damage, et
cetera, et cetera, even the liability for damage which might result “from the
carelessness or negligence of employees or agents of said railway company,” and
the Supreme Court of the United States held that such a condition in contracts
of that character was not void as against public policy, or public morals or
contrary to law. (Baltimore, etc. Railway Co. vs. Voigt, 176 U. S.,
498; Osgood vs. Central Vermont R. Co., 77 Vermont, 334; 70 L. R. A.,
930.)

Courts must not forget that they are not to extend, arbitrarily, those rules
which say that a given contract is void as being against public policy, or
public laws, because if there is one thing which more than another public policy
requires, it is that men of full age and competent understanding shall have the
utmost liberty of contracting, and that their contracts when entered into freely
and voluntarily, shall be held sacred and must be enforced in courts of justice.
Courts should not lightly interfere with the freedom of contracts. (Baltimore,
etc., Railway Co. vs. Voigt, 176 U. S., 498; Printing, etc. Company
vs. Sampson, Law Reps., 19 Equity, 465; Osgood vs. Central
Vermont R. Co., 77 Vermont, 334.)

The record shows that the Atlantic, Gulf & Pacific Company had, at
various times, discharged other freight from steamships in Manila Bay of much
greater weight than the boiler in question, by means of the same tackle and
equipment and by the same employees which were used in the present case. The
record also shows that the tackle and equipment was ample and that the men in
charge were experienced in the work they were to perform. The record further
shows that the Atlantic, Gulf & Pacific Company undertook the discharge of
said boilers at a very low price, for the very reason that they were relieved of
all liability whatsoever for damages in the discharge of the same. The record
further shows that the representative of the Compañia Trasatlantica,
who made the contract in question, was requested to and did make a casual
examination of the tackle and equipment which were to be used in the discharge
of the boilers. The record further shows that said company, after receiving the
information that the tackle and equipment and employees of the Atlantic, Gulf
& Pacific Company had discharged, on various occasions, other and heavier
freight without accident or mishap, and after having made a casual examination
of such equipment, voluntarily and willingly and without any objection or
protest for and on behalf of the Compañia Trasatlantica, entered into
the contract as above described, accepting fully and without protest the
conditions imposed by the Atlantic, Gulf & Pacific Company. Having entered
into the contract in question and the same not being in contravention of the
laws, morals or public order, the Compañia Trasatlantica is bound by
its terms.

The rule above announced may seem to be a hard one, but when we remember that
the right to enter into contracts carries with it the freedom to impose such
conditions as the parties may see fit to impose, subject to specific
limitations, the hardship, if any, is one self-imposed by the parties.

An example may serve to make the rule which we have announced plainer:

A is the owner of an automobile at Manila which he desires to deliver at
Baguio. B is the owner of a garage at Manila and has in his employ experienced
chauffeurs. A desires to employ B to take the automobile to Baguio and offers a
certain price for the services. B accepts A’s proposition with the condition
that he will assume no responsibility whatever for any damages which might occur
to the said automobile in the course of it? delivery. In passing the
zigzag on the way to Baguio, an unforeseen accident happens through the
casual neglect or lack of care on the part of the chauffeur and the automobile
is damaged. Can B be held liable, in an action upon the contract, for the
damages in the face of the fact that A had relieved him of all liability for any
damages which might occur? The cases which we have cited above, together with
many others which might be cited, all answer that question in the negative. That
question is answered in the negative upon the theory that A, by the terms of his
contract, relieved B, in an action upon the contract, from all liability
whatsoever.

It must not be forgotten that what we have said relates to actions upon the
contract with the conditions mentioned and not to actions for damages in an
action ex delicto resulting from the negligent performance of duties
and obligations assumed.

The appellant, the Atlantic, Gulf & Pacific Company, contends that
inasmuch as it had exercised the care of a good father of a family in selecting
its employees, that it should be relieved from all liability by virtue of the
provisions of article 1903 of the Civil Code. We do not believe that the
provisions of said article can be invoked when the rights and liabilities of
parties to an action depend upon a contract. The rights of parties are defined
by the contract and there is no occasion to invoke the statute. The argument
employed by the Atlantic, Gulf & Pacific Company, if valid, would also
relieve the Compañia Trasatlantica from all liability. Certainly, the
Atlantic, Gulf & Pacific Company would not deny that the Compañia
Trasatlantica had not exercised the care of a good father of a family in
selecting it for the discharge of said boilers. Neither do we believe that the
provisions of article 1902 of the Civil Code can be invoked in favor of the
Compañia Trasatlantica, for the reason that the contract governs the
rights and liabilities and by the terms of the contract the Atlantic, Gulf &
Pacific Company is relieved from all liability whatsoever. A relief
from all liability is a relief from any liability caused by negligence,
especially so when the action is based upon a contract. Whether or not that rule
should be followed in an action of tort growing out of wilful negligence,
quaere?

From all of the foregoing, we are persuaded that the judgment of the lower
court should be modified and that the Atlantic, Gulf & Pacific Company
should be relieved from all liability under the complaint.