1979 – Eastern Shipping Lines, Inc v. Margarine-Verkaufs-Union GmbH, GR No. L-31087 (Copra Shipment, Bill of Lading, Contract of Adhesion, Ambiguity)

3.1. DATE OF PROMULGATION

• September 27, 1979

3.2. DECIDING COURT

• Supreme Court of the Philippines

3.3. DIVISION

• First Division

3.4. PONENTE

• Teehankee

3.5. CONCURRENCE AND ATTENDANCE

3.6. SEPARATE OPINIONS

3.7.PARTIES

3.8. COUNSEL

3.9. NATURE OF ACTION

• Petition for review on a lower court decision on the basis of questions of law

3.10. LAWS AND PROVISIONS CITED

• Civil Code, Article 2208
• Code of Commerce, Article 848

3.11. CASES CITED

• Buan vs. Camaganacan, 16 SCRA 321 (1966)

4.1. FACTS

• Respondent corporation, a West German corporation not engaged in business in the Philippines, was the consignee of 500 long tons of Philippine copra in bulk with a total value of US$108,750.00 shipped from Cebu City on board petitioner’s (a Philippine corporation) vessel, the SS “EASTERN PLANET” for discharge at Hamburg, Germany. Petitioner’s bill of lading for the cargo provided as follows:
  • “. . . Except as otherwise stated herein and in the Charter Party, this contract shall be governed by the laws of the Flag of the Ship carrying the goods. In case of average, same shall be adjusted according to York- Antwerp Rules of 1950.”
• While the vessel was off Gibraltar, a fire broke out aboard the vessel and caused water damage to the copra shipment in the amount of US$591.38.
• Petitioner corporation rejected respondent’s claim for payment of the damage

4.2. PROCEDURAL HISTORY

• Court of First Instance Manila
  • Respondent filed its complaint against petitioner as defendant for recovery of the same and US$250.00-attorney’s fees and expenses of litigation.
  • After trial, the lower court rejected petitioner’s defense that it was not liable under Philippine Law for the damage which did not exceed 5% of respondent’s interest in the cargo and rendered judgment on April 25, 1969 “ordering the defendant, Eastern Shipping Lines, Inc. to pay to the plaintiff, Margarine-Verkaufs Union GMBH, the sum of US$591.38, with interest at the legal rate from the date of the filing of the complaint until fully paid, plus US$250.00 as attorney’s fees and the costs of the suit.
• Supreme Court
  • Petitioner files a petition for review on a lower court decision on the basis of questions of law, assigning the following errors:
    • Article 848 of the Code of Commerce which would bar claims for averages not exceeding 5% of the claimant’s interest should be applied rather than the lower court’s ruling that petitioner’s bill of lading expressly contained “an agreement to the contrary,” i.e. for the application of the York-Antwerp Rules which provide for respondent’s full recovery of the damage loss.
    • on the award of attorney’s fees of US$250.00

4.3. ISSUES

• Whether Article 848 of the Code of Commerce is applicable in this case?
• Whether lower court erred on its award of attorney’s fees against petitioner?

4.4. HELD

• Whether Article 848 of the Code of Commerce is applicable in this case?
  • No
  • The Court finds no error and upholds the lower court’s ruling sustaining respondent’s damage claim although the amount thereof did not exceed 5% of respondent’s interest in the cargo and would have been barred by the cited article of the Commerce Code. We hold that the lower court correctly ruled the cited codal article to be “not applicable in this particular case for the reason that the bill of lading contains ‘an agreement to the contrary’ for it is expressly provided in the last sentence of the first paragraph that ‘In case of average, same shall be adjusted according to York-Antwerp Rules of 1950.’
  • The insertion of said condition is expressly authorized by Commonwealth Act No. 65 which has adopted in toto the U.S. Carriage of Goods by Sea Act. Now, it has not been shown that said rules limit the recovery of damage to cases within a certain percentage or proportion that said damage may bear to claimant’s interest either in the vessel or cargo as provided in Article 848 of the Code of Commerce.
  • On the contrary, Rule 3 of said York-Antwerp Rules expressly states that ‘Damage done to a ship and cargo, or either of them, by water or otherwise, including damage by breaching or scuttling a burning ship, in extinguishing a fire on board the ship, shall be made good as general average . . .”‘
  • There is a clear and irreconcilable inconsistency between the York-Antwerp Rules expressly adopted by the parties as their contract under the bill of lading which sustains respondent’s claim and the codal article cited by petitioner which would bar the same. Furthermore, as correctly contended by respondent, what is here involved is a contract of adhesion as embodied in the printed bill of lading issued by petitioner for the shipment to which respondent as the consignee merely adhered, having no choice in the matter, and consequently, any ambiguity therein must be construed against petitioner as the author.
• Whether lower court erred on its award of attorney’s fees against petitioner?
  • Yes
  • We find, however, petitioner’s second and only other assignment of error against the award of attorney’s fees of US$250.00 to be well taken. The text of the lower court’s decision stated no justification nor reason for the award of attorney’s fees and should therefore be disallowed. As restated in Buan vs. Camaganacan, the general rule is that it is contrary to sound public policy to place a penalty on the right to litigate nor should attorney’s fees be awarded everytime a party wins a lawsuit. Hence, Article 2208 of the Civil Code provides that “in the absence of stipulation, attorney’s fees end expenses of litigation, other than judicial costs, cannot be recovered,” save for the eleven exceptions therein expressly provided.
  • Insofar as the present case is concerned, the lower court made no finding that it falls within any of the exceptions that would justify the award for attorney’s fees, such as gross and evident bad faith in refusing to satisfy a plainly valid, just and demandable claim. Even under the broad eleventh exception of the cited article which allows the imposition of attorney’s fees “in any other case where the court deems it just and equitable that attorney’s fees and expenses of litigation should be recovered,” the Court stressed in Buan, supra, that “the conclusion must be borne out by findings of facts and law. What is just and equitable in a given case is not a mere matter of feeling but of demonstration . . . Hence, the exercise of judicial discretion in the award of attorney’s fees under Article 2208 (11) of the Civil Code demands a factual, legal or equitable justification upon the basis of which the court exercises its discretion. Without such a justification, the award is a conclusion without a premise, its basis being improperly left to speculation and conjecture.” The summary award of counsel’s fees made in the appealed judgment must therefore be set aside.

4.5. DISPOSITION

• Appealed judgment affirmed with modification that the award of attorney’s fees is set aside. Costs against petitioner.

4.6. SEPARATE OPINION

• None.