EN BANC

[G.R. No. 13954. January 17, 1919.]

COMPAGNIE FRANCO-INDOCHINOISE, plaintiff-appellant , vs. DEUTSCH-

AUSTRALISCHE DAMPSCHIFFS GESELLSCHAFT, defendant-appellant .

Crossfield & O' Brien for appellant.

Lawrence & Ross for appellee.

SYLLABUS

1. JUDGMENT; "RES JUDICATA;" LAW OF THE CASE. — When a cause is

remanded by the Supreme Court to the Court of First Instance for the determination of the
damages to which the plaintiff is entitled, the rule of liability enunciated in the decision of
the Supreme Court becomes the law of the case and is not subject to review or reversal either in
the Court of First Instance or the Supreme Court upon subsequent appeal.
2. DAMAGES; VALUE OF COMMODITY IN GIVEN MARKET. — In
ascertaining the value of a commodity in a given market at a certain time, or the price which
such commodity ought to have brought if then offered for sale, it is necessary to assume the
presence of a buyer at the hypothetical sale, able and willing to buy the commodity in
question, at its fair and reasonable valuation, in the quantity and with the qualifies in which it
is supposed to be offered for sale.
3. ID.; ID.; ABNORMAL, TRANSACTIONS NOT CONCLUSIVE ON
QUESTION OF VALUE. — In attempting to fix the market value of any article by
reference either to actual or hypothetical transactions in a given mart of trade, account is to be
taken of ordinary and normal transactions; and no sale which has been effected under accidental
and extraordinary conditions should be accepted as determinative on the question of value.
4. ID.; EVIDENCE AS TO COST. — Proof of the original cost price of a cargo of rice
meal in the port of Saigon, which is an export mart for that commodity, is relevant upon
the question of the value of such cargo in the port of Manila, allowance being made for the
differential of freight between the two ports.
5. CHARTER PARTY; PENALTY FOR NONPERFORMANCE. — Where the
master of a ship unlawfully refuses to deliver cargo to the owner and in effect converts such cargo,
the liability thereby incurred is based upon a positive misfeasance and not a mere nonfeasance
such as is contemplated in a penal clause of the charter party limiting the damages, in
case of nonperformance, to the amount of the freight. Therefore, in case of such
conversion, the recoverable damages are not limited to the amount of the freight but extends to
the full amount of the damage actually incurred and proved.
 DECISION

STREET, J :

This case has heretofore been considered upon appeal by this court; and we refer to the
former decision reported in volume 15 of the Official Gazette, page 942 (36 Phil. Rep., 643), for
a more complete statement of the facts than is necessary for our present purpose. The question
now before the court relates to the liability of the defendant company, as owner of the
steamship Esslingen, for damages resulting from the illegal detention of cargo belonging to
the plaintiff embarked upon that ship at Saigon and brought to the port of Manila at the
outbreak of the European War.
By the former decision of this court the cause was returned to the court of origin with
instructions to grant a new trial wherein the inquiry should be limited to the determination
of the amount which could have been gotten for the cargo taken on board in Saigon, if such cargo
had been offered for sale in an undamaged condition in Manila Bay at the time when the damaged
cargo was sold, judgment to be entered, thereafter, in conformity with the rule of liability
enunciated in said decision.
The case was accordingly reheard in the Court of First Instance upon proof submitted
by the respective parties; and that court found that the 119,831 cavanes of rice meal contained
in said cargo would, if undamaged, have sold for 30 centavos more per cavan than was received
when the cargo was sold on November 6, 1914. Judgment was accordingly rendered against the
defendant and in favor of the plaintiff for the amount of the loss thus determined, to wit,
P35,949.30, with interest from November 6,
1914. From this judgment both parties appealed, the plaintiff insisting that the trial court had
awarded too little and the defendant that the court had awarded too much.
The only question is thus upon the point of damages. Part of the cargo of the
Esslingen consisted of cargo meal, and it is admitted that this portion of the cargo, being by nature
less subject to deterioration than rice meal, was sold by the receiver in an undamaged
condition for its full value, to wit, P4,729.62. The subject-matter of the dispute is therefore
narrowed to the question of the price which the 119,831 cavanes of rice meal ought to have
brought, if it had been offered for sale on November 6, 1914, in an undeteriorated condition.
As preliminary to the consideration of this question of fact, we note that the plaintiff
appellant suggests in its third assignment of error that the proper date to ascertain the value
of the cargo in an undamaged state was not as of November 6,
1914, but as of September fourteenth when the defendant company wrongfully refused to
deliver the cargo to the plaintiff. We are of the opinion, however, that this question was
not open for the consideration of the court below at the second trial, nor is it now open for
review in this court. Whether this court erred in fixing upon November 6, 1914, as the date for the
ascertainment of the selling value of the cargo, is now immaterial, as the judgment rendered at
the former hearing in this court has become the law of the case and is not subject to
review or reversal in any court. (See Westerfield vs. New York L. Ins. Co., 157 Cal., 339.
See also Messinger vs. Anderson, 225 U.S., 436, 56 L. ed., 1152; and, generally, under "Law of
the Case," Words and Phrases, second series, vol. 3, p. 37-39.)
Before proceeding to the concrete question of fact involved in the case, it is
desirable to define with somewhat greater precision the exact problem before the court. In the
former opinion of this court, and in the mandate to the court of origin, the latter court was
directed to ascertain "the amount which could have been gotten for the cargo taken on board in
Saigon, if such cargo had been offered for sale in an undamaged condition in Manila Bay
at the time when the damaged cargo was sold ;" and the court was directed to make its finding
on that point the basis of its award, by subtracting therefrom the amount actually received at
the sale effected on November sixth.
Properly considered, the first step in the solution of the problem is none other than
this, namely, to discover the true market value in Manila on the date mentioned of a cargo of
undamaged rice meal of the same quantity as was actually sold. That this court so viewed
the problem is evident from the fact that the necessity for remanding the case for further
proceedings is stated in the opinion to arise from the fact that no stipulation had been made
or evidence submitted upon which this court could determine "the market value in Manila of a
similar cargo of ricemeal in good condition at the time when the damaged cargo was sold."
Again said the court, in another part of the same opinion:
". . . We would not hesitate, upon the record now before us, to fix the amount
of the damages suffered by the shipper, as a result of the deterioration of the cargo in
Manila Bay, at the difference between the proceeds of the sale of the damaged cargo,
and the amount which could have been gotten for such a cargo of ricemeal in an
undamaged condition in Manila Bay at the time when the damaged cargo was sold, if
this latter amount could be determined from the record. . . ."
It will thus be seen that while this court considered that the damage actually inflicted
on the plaintiff was due to the deterioration of the cargo during the time it was unlawfully
detained, a rule was laid down by which to determine the amount of that damage, namely,
by discovering the price at which an undamaged cargo should have sold and deducting from
it the amount which was received at the sale of November 6,
1914.
The problem thus presented supposes a hypothetical sale upon November 6,
1914, in the Manila market of a cargo equal in amount to the cargo actually sold but
differing in the fact that the cargo should be undamaged: and the first question is to
determine the price which such a cargo should then have brought.
As relevant to this point we find that the following facts were proved in evidence
submitted by the plaintiff: the ricemeal aboard the Esslingen, if in good condition would have
been equivalent to the grade known to the Manila market as the D tiqui-tiqui. The evidence
shows that this grade of ricemeal sold in this market from August to December,
1914, at a price between P2.60 and P2.70, per cavan, according to the testimony of the
witness Pemberton. The witness Clark says that in early October it sold at P2.50 per cavan;
on November 30th at P2.70. The Chinese witness, Co Hoy Tee, stated that in October and
November the same grade sold between P2.45 and P2.70. The witness, Wee Eng Hui, upon
whose testimony on other points the defense places much reliance, says he remembers very
well that in October the grade D tiqui- tiqui sold at P2.65 and P2.70. The witness Clark
also stated that on November nineteenth imported tiqui-tiqui (grade not specified) sold for
P2.34 per cavan. Between September 17th and October 17th, the Manila market took 25,000
bags of damaged ricemeal from the Sambia which were sold from the ship for P1.30 per
bag and 5,000
bags which were sold from the ship at P2 per bag.
From the quotations above noted, all of which have reference to the wholesale price,
it will be seen that during the entire period, including September to December, the D grade of
tiqui-tiqui never sold in Manila below P2.45 per cavan, though one sale is noted at P2.34
per cavan of which the grade was not specified. No evidence was submitted by the defendant
to prove the sale of tiqui-tiqui at a lower figure during this period; but a witness for the
defendant said that, owing to its freshness, tiqui-tiqui from the mills here in Luzon was a little
better, or had more strength, than the imported tiqui- tiqui. He intimated also that the stowage
and keeping of the imported tiqui-tiqui in the hold of the ship during the voyage tends to impair
its value; but this factor he supposed would not reduce its value more than 5 or 10 cents a sack in
the course of a month.
An element that should be taken into account in estimating the value on imported ricemeal
in this market is the customs duty of 5 per cent ad valorem; and where a sale is effected in this port,
as in the case now under consideration, before the customs duty has been paid, the burden of paying
the duty, if the commodity be brought in, falls on the purchaser. The price realizable at the
hypothetical sale is thus of course to be reduced by the estimated amount of such duty.
It follows that if the trial court should have determined the value of the
hypothetical cargo of undamaged ricemeal on the quotations above noted, it could very properly
have found that after making liberal allowances for a difference in the quality of imported rice-
meal and the domestic product, as well as for customs duties, the undamaged cargo
ought to have been worth at least P2 per cavan or more, or at the very least P1.30 per
cavan, which latter figure represents the lowest price per cavan realized from the sale of the
damaged cargo of the Sambia in September and October. It is the contention of the plaintiff-
appellant that the value should be fixed at the higher of these figure and in no event lower than
the price last named.
At the trial below the defendant offered evidence tending to show that the cargo of ricemeal
from the Esslingen was not damaged at all. This contention is in our opinion untenable.
But even if it were true that the cargo had suffered less damage than had been feared, or
none at all, the fact nevertheless remains that it was sold as damaged ricemeal. The witness
Clark says that it was impossible to tell before the cargo was discharged whether it had
heated or not, a process which would have greatly impaired its value. When the cargo of the
Sambia was discharged between September 11 and October 7, it was found to have been
deteriorated in quality and furthermore the cargo had heated to the extent that about 10,000
bags had to be thrown overboard as worthless. The witness Menzi, manager of Behn
Meyer & Co., the agents of the Esslingen, says that the cargo of the Esslingen was at
least as good as that of the Sambia, but does not claim that it was any better. With the
example of the condition of that cargo before prospective purchasers and in view of the conditions
under which the sale of the cargo of the Esslingen was effected, it is obvious that the latter
cargo was disposed of as damaged stuff and prospective purchasers were probably governed
accordingly.
In addition to the factor of deterioration, there was another thing which materially affected
the price of the cargo sold from the Esslingen. This was the quantity which was offered. The
defendant insists that this, and not the bad quality of the ricemeal, caused the cargo to bring such
a low price. Indeed the witness Menzi, testifying for the defense, even went so far as to say that the
actual condition of the Esslingen's cargo had nothing
at all to do with the selling price or its value on the market and that the reason why it sold so
low was simply that the quantity was too big for this market. In this extreme form of
statement the factor of deterioration is ignored; and as already observed, we think the
contention unsustainable.
Assuming, however, that the low price obtained at the receivers sale was due in part to
the large quantity offered, we proceed to consider the bearing of this factor on the solution
of the case. When a court is required to discover what a given commodity should bring under
hypothetical conditions, in a particular market, it is necessary to assume the presence of a
buyer ready and willing to buy the commodity in question, at a fair and reasonable valuation,
in the quantity and with the qualities in which it is supposed to be offered for sale. In
every hypothetical sale it is as necessary to postulate the presence of a buyer able to take the
quantity offered as it is to imagine a buyer desirous of buying any. To imagine a sale without a
buyer would be absurd, for if there is no buyer the commodity would bring nothing. It would
be no less unreasonable to attempt to guess what a large quantity of any commodity would bring
at a sale where purchasers could only be found for a quantity much less than that in which it is
offered for sale. A buyer not able to buy all at its fair market value is, for the purposes of such
inquiry, no buyer at all.
In discussing the term "market value" the author of a well-known treatise on the subject
of Damages observes that to make a market there must be both buying and selling: and
the "market value," says he, is that "reasonable sum which the property would bring on a
fair sale by a man willing but not obliged to sell to a man willing but not obliged to buy."
(Sedgewick on Damages, Sec. 245.) This language has been used so often by the American
courts as to have become a stereotyped formula in discussions relative to the value or market
value of a commodity, when such question is involved in any litigation. As has been well said,
"If at any particular time there be no market demand for an article, it is not, of course,
on that account of no value." (Trout vs. Kennedy, 47 Pa. St., 393.) And it follows that if
the quantity of the commodity of which we are seeking to fix the true market value is so
great that nobody could take it, if actually offered for sale, we are not for that reason to
assume that it must be given away, and that it has little or no value.
It is a rule that in attempting to fix the market value of any article by reference
either to actual or hypothetical transactions in a given mart of trade, account is to be taken
of ordinary and normal transaction; and no sale which has been conditioned upon accidental and
extraordinary events should be accepted as determinative on the question of value.
For instance the temporary inflation of market value, due to manipulations or accident,
cannot be taken as indicative of the true value of a commodity. In Kountz vs. Kirkpatrick
(72 Penn. St., 376, 13 Am. Dec., 687), it appeared that a contract had been made for the
purchase of petroleum to be delivered at the seller's option during the year at a stated
price. The vendee then entered into a combination to raise the price of petroleum in the
market and the market price was thereby artificially enhanced in an abnormal degree. It
was held that in estimating the damages for the nondelivery of the commodity, the fictitious
and temporary value resulting from the cornering of the market by speculators was not the true
market value. In Lovejoy vs. Michels (13 L. R. A., 770), it was held that the price fixed
by a combination of producers with sole reference to their own interests should not govern in
determining what a purchaser from one of them should pay for goods ordered without
any agreement as to price.
In Jonas vs. Noel (36 L. R. A., 862), the defendant had contracted to build a store for the
plaintiff, of such large proportions that it could not have been used to advantage by any other
person in the city than the plaintiff. In an action for breach of the contract to build this store, the
Supreme Court of Tennessee said:
"Where the article or thing in question is so unusual in its character as that there
is little or no demand for it, its value must be ascertained in some other way, and from
such elements as are attainable. In such cases it is evident that to refer to the market as
the sole standard of value may work serious injury to the party complaining."
In this connection Sedgewick observes that in estimating the market value of a
commodity, in case of the breach of contract on the part of the vendor, it is not permissible
to take into consideration the probable fall in the market which would result from offering in the
market the entire quantity which was the subject of the sale. In explanation of this he says:
"The principle on which the rule rests is the indemnification of the injured party
for the injury which he has sustained. A complete indemnity requires that the vendee
should receive the sum which, with the price he had agreed to pay, would enable him
to buy the article which the vendor had failed to deliver." (Sedgewick on Damages,
Sec. 244.)
The suggestion contained in the last part of the words quoted, to the effect that the
disappointed vendee should receive a sum which, with the price he had agreed to pay,
would enable him to buy the article which the vendor had failed to deliver, is frequently
used by the courts in considering the measure of damages in such cases; yet it is obvious that,
where the quantity covered by the contract is large, it would be improper to take into
consideration the enhancement of price which would result from the actual purchase of so
much in a limited market. For instance, if the defendant in this case had obligated itself to deliver
to the plaintiff (on November 6, 1914) 119,821 bags of ricemeal, and in an action for damages
based on the breach of that contract it had been proved that an attempt to buy that much
ricemeal in the Manila market on that date would have driven the price up to P10 per cavan,
supposing the required quantity could have been procured at all, nobody would have contended
that the plaintiff herein would have been entitled to damages calculated on the last named figure.
The actual attempt to make such a purchase would have cornered the supply, and the
resulting market price would have been purely artificial.
It is obvious that abnormal depression in the market, due to oversupply, is just as artificial
and unnatural as abnormal enhancement, due to cornering the supply; and it would be just
as illegitimate to determine the plaintiff's damages in this case with reference to what the
cargo of damaged ricemeal actually brought in a market unduly depressed by the offer of
so large a quantity as it would be in the case last above supposed to determine the damages
by reference to price that would have been registered by buying 119,821 cavans of
ricemeal in the Manila market. As the authorities above cited clearly show, no sale can
afford conclusive proof as to what the real market value of a commodity is if casual,
accidental, or artificial conditions intervene in determining the actual selling price.
"If at any particular time there be no market demand for an article, it is not on
that account of no value. What a thing will bring in the market at a given time is
 perhaps the measure of its value then, but not the only one. The market price, in the
ordinary sense, is generally, but not always, the test of value. For such a tort as a
conversion of goods a plaintiff may be entitled to large damages, though unable
to sell the goods at any price." (Sedgewick, Sec. 250.)
In its practical bearing on the case before us, what has been said comes to this, that the
circumstance that 119,851 bags of damaged ricemeal, sold in the Manila market at 57 centavos
per bag, is of little or no value upon the question of what was then the true market value of
the same quantity of ricemeal in an undamaged state.
If the defendant had wrongfully detained and converted a hundred sacks of ricemeal
instead of more than one hundred thousand no court would have had any hesitancy in
holding that the measure of its value, or market value, would be the price for which ricemeal
was customarily selling in this city. Can it be admitted that, by multiplying the wrong a
thousand fold, and thus creating the necessity of selling a quantity so large that no purchaser
can be found to take it at its reasonable valuation, the wrongdoer will escape from the duty to
make full reparation ? No legal authority can be found to support any such idea.
The judge of the Court of First Instance who sat at the trial of this case at the last hearing
practically ignored the proof introduced by the plaintiff with respect to the ordinary market
price of ricemeal in Manila, on the ground that the ordinary quotations were based upon small
quantities and were therefore of little value in determining the reasonable market value of a
whole shipload. Said he:
"Several witnesses have testified as to the prices of rice-meal in Manila at the
time the cargo in question was sold, but as such prices were for comparatively small
quantities, and as it appears that the Manila market under normal conditions can only
absorb some ten or twelve thousand sacks of ricemeal per month, it is quite clear that
this evidence is of little value for the purpose of this inquiry. Neither can the
prices obtained for the cargo of the steamship Sambia in September and October
of the same year serve as a criterion; the quantity of ricemeal in that cargo was
only about one-fourth of the quantity of the Esslingen cargo."
These observations of the learned trial judge are in our opinion vitiated by the
erroneous assumption that in ascertaining the true market value of a commodity sold in large
quantity it is legitimate to take account of the inability of the market to take that quantity
at the normal price. The authorities cited in the preceding discussion make it clear that this
is not proper. The evidence relative to the normal selling price of ricemeal in the Manila market
during the autumn of 1914 is in our opinion clearly relevant and not to be ignored in any fair attempt
to discover what a cargo of undamaged ricemeal should have brought.
Another important factor bearing on the value of this cargo in Manila is its original cost
price. As appears from the former opinion of this Court, the original cost price of the entire
cargo in Saigon was P145,600.91, and this must be taken to be its commercial value
in that port at the time it was purchased. This circumstance is, we think, relevant upon the
question of its market value about three months later in Manila, for Saigon is an export mart for
ricemeal; and the price of such commodity in Manila is normally controlled in a great measure
by its price in ports like Saigon and Hongkong, allowance being made for the differential of
freight between such ports and Manila.
In addition to the evidence afforded by the amount of the original cost price, we
find in the record an agreed statement relative to its probable value in the port of destination,
if the contract of affreightment had been complied with; for there is a stipulation by the
parties to the effect that "the said cargo if delivered at its destination, Hamburg, . . . would have
been worth at such place at least its value at the time and place of embarkation plus the
freight from Saigon to Hamburg."
The original price being known and it not being claimed that the cargo at the port of
destination would have been worth more than the cost price, plus freight, we think the court is
justified in accepting the cost price as the probable value in Manila, notwithstanding
the proof that ricemeal sold at a higher rate in this city during the autumn of 1914. In its
former decision this court intimated that the amount of damages which the plaintiff had
suffered was represented by some portion of the difference between the price it originally
paid and the amount realized at the receiver's sale. In other words, we then assumed that the
true market value in Manila would not probably be found to have been greater than the original
cost price. This proposition was not, it is true, made peremptory in the dispositive part of the
decision; but the suggestion is just, as applied to the facts of this case, and we think it advisable to
adhere to that idea now.
Upon this aspect of the case the decision in the English Court of Common Pleas in Ewbank
vs. Nutting (7 C. B., 797; 137 English Reprint, 316) is instructive. It there appeared that a
cargo of salt was shipped by the plaintiff at Liverpool, for Calcutta. The ship sustained damage
in quitting the harbor at Liverpool and ultimately became so leaky that the master was
compelled to run for Bahia, where the master sold the cargo of salt at public auction at a low
price. The jury found that under the circumstances the sale was not justified and awarded
damages estimated upon the cost price of the salt, plus the sum which the plaintiff had paid out
for freight. It was held upon appeal that this was correct, there being no other proof of value of the
salt.
Creswell, J., observed:
"The jury were well warranted in giving the damages they did. I do not very well
see how else they could estimate the value of the goods to the shipper, than by taking
the cost price and adding thereto the expense incurred in getting them towards the
merchant. What the cargo fetched by a forced sale at Bahia, clearly was no fair test. The
plaintiff did not want the goods there."
In Eby vs. Schumacher (29 Penn. St., 40), a case was decided which exhibits features
in several respects similar to those involved in the present litigation. It there appeared that
a quantity of tobacco had been purchased by the plaintiff, who resided in Baltimore, Maryland,
from one Hiett, who resided in McConnelleville, Ohio. While the tobacco was in course of
transportation to the plaintiff, it was seized by virtue of an attachment sued out by a creditor
of the vendor. Pending the controversy, the tobacco was sold by order of the court, as it was
deteriorating, or liable to deteriorate, and the proceeds were paid into court to abide the issue of
the lawsuit. At this sale the plaintiff became the purchaser of the tobacco. It was finally held
that the attachment had been improperly sued out; and the measure of damages for seizing the
property in transit was declared to be the value of the tobacco in Baltimore the place to which it
was consigned, less the expense and charges of conveying it there.
It was contended for the defendant in the case last above cited that the measure of damages
was the amount of the proceeds realized at the forced sale of the tobacco, and that the plaintiff's
recovery should be limited to that amount. This contention was rejected by the court; and
it was further observed that the fact that the plaintiff had
himself become purchaser at the forced sale did not affect his right to recover further
damages than the sum paid out by him to recover the property. Said the court:
"The effect of the sale was nothing more than a conversion of the property into
money. This was for the benefit of the creditors of Hiett, who had seized it. Schumacher
(the plaintiff) had as good a right to purchase at the sheriff's sale as any other person. He
paid his money and took the risk of loss, like a stranger to the transaction. He is therefore
justly entitled to all the advantages of his bargain. He was under no obligation to
advance his money to prevent a sacrifice of the property, or to take the tobacco to
Baltimore to make a profitable sale of it for the benefit of a trespasser who had deprived
him of it."
Reference to the decision from which we have just quoted brings before us an aspect
of the case which, although not argued in the briefs, we have nevertheless considered. It is
this: Does the fact that the plaintiff by its agent became the purchaser of the cargo of damaged
ricemeal on November 6, 1914, affect the measure of damages in this case? It is obvious, for
instance, that if, owing to abnormal conditions, the cargo of ricemeal in question sold for a merely
nominal price, or greatly below its value, this purchase might itself conceivably have become
in the hands of the plaintiff a profitable speculation; and it would seem arguable that in such
case the damages to which the plaintiff might be entitled should be more limited in amount
than if somebody else had purchased the ricemeal.
In so far as this suggestion proceeds on the idea that the plaintiff, as purchaser of the
damaged ricemeal at the sale effected on November 6, 1914, may have gotten something
of value in excess of what it paid out to repossess itself of the ricemeal, the argument is not
apposite to the facts; for there is inserted in the agreed statement a stipulation to the effect
that the proceeds of the sale of the cargo represent its true and fair value in the port of Manila.
This stipulation evidently has reference to the cargo in the condition in which it was found at the
time the sale was effected; and it could not be consistently argued in the face of this stipulation
that the plaintiff had obtained any better bargain than he would have gotten by buying under
other conditions in the open market. The stipulation on this point must be considered
controlling. Besides, as suggested in the last quotation from the opinion in Eby vs. Schumacher,
the plaintiff was under no obligation to advance its money to prevent a sacrifice of the
property or to make a profitable sale of it for the benefit of the defendant.
It is suggested that inasmuch as the sale was made under judicial authority the ship's
company should be absolved from the consequences and that any loss resulting from the making
of the sale should fall upon the owner of the property. We think this argument fallacious
as applied to the present case. It is true that where property, the subject of an action, is in
custody of the law and is sold in usual course pursuant to an order of the court, the person
interested in the proceeds must be content with what the property actually brings at the sale. For
instance, where property is sold in the course of a mortgage foreclosure, or in insolvency
proceedings, no right of action arises in favor of the original owner from the fact that the
property may have been sold at a sacrifice. So, in the present case, if the captain of the
steamship Esslingen had, by timely application after entering the port of Manila, petitioned the
court to sell the cargo for the protection of the parties concerned, the ship's owner would have
been absolved of responsibility, as happened in the case of the Sambia. But instead of
taking steps to protect the owner of the cargo, or surrendering it to the owner, the captain
denied the
right of the owner to have possession; and it was irrevocably adjudicated upon the prior appeal
that, by so doing, the defendant company became liable in damages. The effect of the sale
was nothing more than a conversion of the property into money; and this step was taken
for the protection of the defendant company. It in no wise altered the responsibility of that
company for such damages as accrued prior to the sale. No one questions the right of a
court to order the sale of perishable property under the conditions which arose in this case;
but the appointment of a receiver and the making of the sale by him could not alter the liability
resulting from the unlawful detention of the property by the defendant.
From what has been said it is manifest that the true measure of damages in this case is
to be found in the value of the cargo of ricemeal, in an undamaged state, estimated at the
normal price per cavan in Manila upon the date mentioned, less the proceeds of the receiver's
sale; provided, however, that the said estimated value should not be in excess of the original cost
price.
If we were to be guided exclusively by the proof contained in the record relative to the
market value of undamaged ricemeal in Manila during the period mentioned, and were to
ignore the cost price and stipulated value in Hamburg, the damages to be assessed would
reach the considerable sum of P183,504.93, accepting the amount of P2 per cavan as a
highly conservance estimate, which makes allowance for all legitimate factors then
operating on the market, but excluding from consideration the factor of depression which
might have resulted from marking so large a quantity at once. But as already stated we think
the estimated value of the cargo in an undamaged state should be limited to P145,600.91.
Deducting from the latter sum the net amount realized at the receiver's sale, or P57,823.75,
we have a result of P87,777.50, as the amount of damages to be awarded.
We discover no legitimate deduction to be made from that amount; though there is a
provision contained in paragraph 29 of the charter party which requires attention. It is as follows:
"Penalty.— Penalty for non-performance of this agreement, proved
damages, not exceeding the estimated amount of freight."
The estimated amount of freight under the charted party is P68,376.04, and it is insisted
in behalf of the defendant that damages in this action are in no event recoverable
in excess of that amount. Assuming that the limitation expressed in the clause above quoted
is valid, it should be noted that this provision was apparently intended to apply to cases of
nonperformance, that is, to cases where the ship is found liable in damages for failure to perform
the obligation to carry as expressed in the contract. It would be inaccurate to call the conduct
of the master of the Esslingen, which is the basis of the claim for damages in this case, a
nonperformance. It was, in effect, a conversion of the cargo, and liability arises from, an act of
positive misfeasance.
If this cargo had consisted of foodstuffs and had been consumed by the crew, would
anybody suppose that the damages would be restricted to the amount of the freight? To put
another illustration taken from the opinion of the English Court of Appeal in a case turning upon
the effect of a similar clause in the charter party: "Suppose, for instance, an action were brought
on the charter party against the shipowner for breach of the implied condition to supply a
seaworthy ship, it might be that the loss would be very great. The action could be brought
on the charter party, although it is usually brought on the bills of lading, and if it were
brought effectively on the charter party, it
could not be contended that in such a case the damages were so limited." (Language of
Eady, L. J. in [1916] 2 K. B., 826, quoted in 250 Fed. Rep., 937.)
It is well-settled that provisions limiting the liability of carriers are to be strictly
construed— a rule frequently applied in cases where such a stipulation is urged against the liability
of a carrier arising from negligence. (Bryan vs. Eastern & Australian S. S. Co., 28 Phil.
Rep., 310.) Probably a stipulation intended to protect the carrier from the consequences of an
act of wilful misconduct on the part of the master should be held void as against public
policy. Certainly, when a choice of interpretations is possible, that construction should be favored
which holds the carrier liable. If it were otherwise, there would be no adequate protection against
the conversion of the cargo by the carrier in any case where the value of the cargo exceeds the
amount of estimated freight.
In Watts vs. Camors (115 U.S., 353; 29 L. ed., 406), the Supreme Court of the
United States had under consideration a charter party wherein the parties bound themselves
"in the penal sum of estimated amount of freight." The opinion of the court quoted with
approval a passage from Abbott on Shipping to the effect that:
"Such a clause is not the absolute limit of damages on either side. The party
may, if he thinks fit, ground his action upon the other clauses or covenants, and may, in
such action, recover damages beyond the amount of the penalty, if, in justice, they shall
be found to exceed it."
The opinion continues:
"In such cases, accordingly, the courts of the United States, sitting in
admiralty, award the damages actually suffered, whether they exceed or fall short of the
amount of the penalty."
A clause of this character has been commonly inserted in charter parties for a long
period of time in the past; and an examination of the cases fully bears out the truth of an
observation made in Scrutton on Charter Parties (4th ed., 1899), p. 322, to the effect that
"this clause is worthless and unenforceable." Its history is traced by Justice Bailhache in Wall
vs. Rederiaktiebolaget Luggude ( [1915] 3 K. B., (66). In that case it was held that such a
provision does not prevent the party complaining from recovering the actual damages, though
exceeding the estimated amount of freight.
The construction there placed on this clause of the contract has been approved by
the Court of Appeal, and by the House of Lords, in decisions which seem not to be available
in Manila in the original reports, but which are cited, quoted, and approved by the United States
Circuit Court of Appeals for the Second Circuit in the case of Aktieselskabet Korn-Og
Foderstof Kompagniet vs. Rederiaktiebolaget Atlanten (250
Fed. Rep., 935).
The facts involved in the cases cited were much more favorable to the defendant than in
the case at bar, for there the shipowners had merely refused to enter upon performance of
the contract by supplying the ship for the voyage. It was therefore simply a case of
nonperformance, and apparently squarely within the intention of the penal clause. Nevertheless,
the court in both cases allowed damages largely in excess of the stipulated freight, evading the
effect of the provision in question on the ground that inasmuch as it was a provision for an
independent penalty the party injured was at liberty to ignore, or waive, the penal clause and
sue for general damages.
The law in force in these Islands is more favorable to penalties than the law of
England and the United States; and it is unnecessary here to adopt the exact reasoning
followed in the cases above cited. It is perhaps enough for present purposes merely to say
that the clause under consideration is not applicable to the situation before us. Nevertheless,
it must not be forgotten that this charter party is not to be construed exclusively by the law
of the Philippine Islands, nor even by the local law of the country in which it was executed. It
must be considered as governed by the general maritime law (Watts vs. Camors, supra). In
this connection it is well to be reminded that, as was said by Lord Mansfield, in Luke vs. Lyde
([1759], 2 Burr, 887), the maritime law "is not the law of a particular country, but the general
law of nation." Again, said he, quoting the eloquent words of Cicero: "Non erit alia lex Romae,
alia Athenis; alia nunc, alia posthac; sed et apud omnes gentes et omne tempore una eademque
lex obtinebit."' (There shall not be one law at Rome, another at Athens; one now, another
hereafter; but among all nations one and the same law shall prevail.)
We conclude these observations by quoting with approval a passage found in a
decision already referred to. The United States Circuit Court of Appeals, there speaking through
Ward, Circuit Judge, said:
"It is of the utmost importance that commercial documents of familiar form going
into all parts of the world should as far as possible be understood everywhere in
the same way, which makes us the more content to follow the English decisions."
(Aktieselskabet Korn-Og Foderstof Kompagniet vs. Rederiaktiebolaget Atlanten,
250 Fed. Rep., 935, 938.)
As already stated, we are of the opinion that the damages assessable in this case should not
be limited to the amount contracted to be paid for freight, and the damages must stand at the
higher amount of the proven damages, or P87,777.56. When the case was before us at the prior
hearing, we were not satisfied, in the absence of all proof as to the market value of rice meal in
Manila, to allow the finding of the trial court on the question of the amount of the damages
to stand, but now that further proof has been taken and the fact established that the cargo of
rice meal in Manila, if undamaged, was reasonably worth as much, or more, than its original
cost, we have no hesitation in sustaining the damages as proved on the basis of the cost price.
Our conclusion is that the judgment appealed from must be modified in respect to the
amount of damages awarded to the plaintiff, and it is hereby ordered that the plaintiff recover of
the defendant the sum of P87,777.56 instead of P35,949.30, with interest from November
6, 1914. So much of the judgment appealed from as awards to the plaintiff the sum of
P57,823.35, less the commission of the clerk, the same being the proceeds of the receiver's
sale, is hereby vacated, it appearing that this part of the judgment has already been satisfied.
As thus modified, the judgment is affirmed, without express finding as to costs of either instance.
Arellano, C. J., Torres, Araullo, Malcolm, Avanceña and Moir, JJ., concur.
Johnson, J., reserves his vote.