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PHILIPPINE SUPREME COURT DECISIONS

SECOND DIVISION

[G.R. No. 134873. September 17, 2002.]

ADR SHIPPING SERVICES, INC., Petitioner, v. MARCELINO GALLARDO and THE HONORABLE COURT OF APPEALS, Respondents.

D E C I S I O N


QUISUMBING, J.:


Petitioner ADR Shipping Services, Inc., seeks to reverse and set aside the decision 1 of the Court of Appeals in CA-G.R. CV No. 47556 dated October 9, 1996, which affirmed in toto the judgment of the Regional Trial Court of Manila, Branch 50, in Civil Case No. 88-43931, for sum of money and damages.chanrob1es virtua1 1aw 1ibrary

Culled from the records, the following are the antecedent facts:chanrob1es virtual 1aw library

Marcelino Gallardo, a timber concessionaire and log dealer doing business under the name "Mar Gallardo Trading", entered into a charter agreement with ADR Shipping Services, Inc., through its president Abraham Rodriguez, for the use of the MV Pacific Breeze to transport 60,000 cubic meters of logs to Kaoshung, Taiwan. These logs were the subject of a sales agreement 2 between Gallardo as seller and Stywood Philippines, Inc., as buyer. Gallardo paid an advance charter fee of P242,000 representing ten percent of the agreed charter fee, evidenced by two official receipts 3 issued by ADR to Mar Gallardo Trading. Under the charter agreement, the boat should be ready to load by February 5, 1988.

MV Pacific Breeze failed to arrive on time. Consequently, Gallardo sent a letter dated February 5, 1988 to ADR stating:chanrob1es virtual 1aw library

Kindly be informed that we are cancelling the charter contract we signed in view of the failure of STYWOOD to fulfill its commitment with us. Since the vessel would be arriving on February 19 or 20 certainly you can still have sufficient time to notify the owner.

As a consequence of this cancellation, we are constrained to withdraw the amount we deposited on January 28 and 29 of this year in the total amount of P242,000.00

Thank you very much. 4

Due to ADR’s refusal to return the P242,000 already advanced by Gallardo, the latter filed a case for sum of money and damages, docketed as Civil Case No. 88-43931 in the RTC of Manila, Branch 50. After trial, the trial court rendered its decision, thus:chanrob1es virtual 1aw library

WHEREFORE, judgment is hereby rendered ordering defendant ADR Shipping Services, Inc. to pay plaintiff the sum of P242,000.00 with 6% interest per annum from date of filing of the complaint, plus, P20,000.00 as attorney’s fees and the costs of suit.

SO ORDERED. 5

On appeal, the Court of Appeals affirmed the decision of the trial court in a decision dated October 9, 1996. ADR’s motion for reconsideration was denied by the appellate court on July 29, 1998.

Hence, this petition for review anchored on the following assignment of errors:chanrob1es virtual 1aw library

I


THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING PRIVATE RESPONDENT MARCELINO GALLARDO IS (SIC) ENTITLED TO THE REFUND OF THE P210,000.00 AND THE P32,000.00 PAID TO ADR SHIPPING SERVICES INC. AS 10% ADVANCE FREIGHT OF MV PACIFIC BREEZE.

II


THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN FINDING THAT PRIVATE RESPONDENT MARCELINO GALLARDO HAS NO KNOWLEDGE NOR HAVE (SIC) CONSENTED TO THE AGREEMENT THAT STYWOOD PHILIPPINE INDUSTRIES INC. FORMALLY TAKE OVER THE CHARTER PARTY ON THE MV PACIFIC BREEZE.

III


THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED IN NOT FINDING NOVATION WITH THE TAKE OVER OF STYWOOD PHILIPPINE INDUSTRIES INC. OF THE CHARTER PARTY ON THE MV PACIFIC BREEZE.

IV


GRANTING, ARGUENDO, THAT THERE WAS NO NOVATION OR SUBSTITUTION OF THE VESSEL TO PERFORM THE CARGO TRANSPORT REQUIREMENTS OF GALLARDO AND/OR STYWOOD PHIL INDUSTRIES, INC., THE HONORABLE COURT OF APPEALS SERIOUSLY ERRED THAT BASED ON THE EVIDENCE AND CHARTER CONTRACT OF MV PACIFIC BREEZE, GALLARDO IS NOT ENTITLED TO ANY REFUND AFTER HE FILED A NOTICE OF CANCELLATION BEFORE THE CANCELLING DATE OF 16 FEBRUARY 1988. 6

The issue for resolution is whether or not private respondent Gallardo is entitled to the refund in the sum of P242,000 representing his deposit for the charter of the ship provided by petitioner ADR.chanrob1es virtua1 1aw 1ibrary

Petitioner asserts that under the terms of the Charter Party for MV Pacific Breeze, Gallardo as the charterer had the option to cancel the Charter Party only when the vessel failed to arrive or was not ready to load after February 16, 1988, citing paragraph 10 thereof, which provides:chanrob1es virtual 1aw library

10. CANCELLING CLAUSE

Should the vessel not be ready to load (whether in berth or not) on or before the date indicated in Box 19 [16 February, 1988], Charterers have the option of cancelling this contract, such option to be declared, if demanded, at least 48 hours before vessel’s expected arrival at port of loading. Should the vessel be delayed on account of average or otherwise. Charterers to be informed as soon as possible, and if the vessel is delayed for more than 10 days after the day she is stated to be expected ready to load, Charterers have the option of cancelling this contract, unless a cancelling date has been agreed upon. 7 (Emphasis ours.)

Petitioner argues, on one hand, that the date "5 February 1988", written in Box No. 9 of the charter party, merely indicates a "reference commencing date" from which the chartered vessel is expected and ready to load, and not the exact date when the vessel has to arrive as indicated in paragraph 10 of the charter party as quoted above. On the other hand, private respondent contends that the charter party, in Box No. 9 thereof, has unequivocally fixed February 5, 1998 as the date when MV Pacific Breeze is expected ready to load. In this regard, we are not persuaded by petitioner’s argument, and we find in favor of private Respondent.

Paragraph 10 of the "Gencon" Charter Party, in our view, contains a typographical error where "Box 19" was erroneously written instead of "Box 9." But more importantly, paragraph 10 presents an ambiguity. Ambiguities in a contract are interpreted strictly, albeit not unreasonably, against the drafter thereof when justified in light of the operative facts and surrounding circumstances. 8 In this case, such ambiguity must be construed strictly against ADR, the party that drafted and caused the inclusion of the subject clause.

More decisive is the stipulation in Box No. 9 of the Charter Party which explicitly states that February 5, 1988 is the date when the vessel is "expected ready to load." 9 February 16, 1988 is merely the "cancelling date" as specified in Box 19 of the said contract. 10 That February 5, 1988 is the intended date when the ship is expected ready to load, is buttressed by the provision of paragraph 1 of the "Gencon" Charter which states:chanrob1es virtua1 1aw 1ibrary

1. It is agreed between the party mentioned in Box 3 as Owners of the steamer or motor-vessel named in Box 5, of the gross/net Register tons indicated in Box 6 and carrying about the number of tons of deadweight cargo stated in Box 7, now in position as stated in Box 8 and expected ready to load under this Charter about the date indicated in Box 9, [February 5, 1988] and the party mentioned as Charterers in Box 4 that:chanrob1es virtual 1aw library

The said vessel shall proceed to the loading port or place stated in Box 10 or so near thereto as she may safely get and lie always afloat, and there load a full and complete cargo . . . 11 (Emphasis supplied.)

Considering that the subject contract contains the foregoing express provision that February 5, 1988 is the date when the vessel is expected ready to load, that provision leaves the parties with no other recourse but to apply the literal meaning of such stipulation. The cardinal rule is that where the terms of the contract are clear, leaving no doubt as to the intention of the contracting parties, the literal meaning of its stipulations is controlling. 12

ADR asserts further that a subsequent agreement was forged among ADR, Gallardo and Stywood for Stywood to take over the charter contract from Gallardo. 13 In support of its claim, petitioner produced in court a copy of the document embodying the alleged agreement, to wit:chanrob1es virtual 1aw library

AGREEMENT

TO : ADR SHIPPING SERVICES

Room 304 Ermita Center Building

Roxas Blvd., Manila

This is to certify that I have appointed STYWOOD PHILIPPINE INDUSTRIES with office address of 7 D Vernida 1, 120 Amorsolo St. Legaspi Village Makati Metro Manila, to have full authority to use the Charter Vessel "MV PACIFIC BREEZE" Singaporean Flag in case that I cannot push through with my shipment of FALCATA Logs that is expected to be loaded by February 5, 14 1988.

This agreement is valid upon if I cannot meet the requirements given to me as stated above and other previous contracts.

MAR GALLARDO TRADING

(SGD.) Marcelino C. Gallardo

PRESIDENT 15

On the strength of the above-mentioned agreement, says petitioner, ADR and Stywood entered into a Charter Party on February 11, 1988, 16 for the loading of the same falcata logs for which the MV Pacific Breeze was initially engaged, this time on board the MV Adhiguna Dharma. Hence, the P242,000 advanced by Gallardo for the freight of MV Pacific Breeze was applied to MV Adhiguna Dharma, which is the substitute, vessel for MV Pacific Breeze. 17 Accordingly, ADR now claims that Gallardo lost his legal personality to file the instant case.

On this point, both the RTC and the CA found no evidence, testimonial or otherwise, to prove the genuineness and due execution of Exhibit 3, the so-called take-over agreement. Factual findings of the trial court, especially when affirmed by the appellate court, are binding upon us 18 and entitled to utmost respect. 19 Moreover, nothing on record has been shown to us by petitioner to warrant a reversal of the CA’s conclusion negating the genuineness and due execution of the disputed document. Such conclusion is supported by the evidence on record.

First, the purported take-over agreement was not notarized. Thus, it is not a public document and, by law, not entitled to full faith and credit upon its face. Second, said document is undated, creating grave doubt as to its authenticity. Third, we agree with the appellate court’s finding that the alleged signature of respondent Gallardo in Exhibit 3 is different from his signature appearing in the records of this case, particularly in the Falcata Sales Agreement, 20 Charter Party, 21 Additional Clauses to Charter Party, 22 and in Gallardo’s letter of cancellation dated February 5, 1988. 23 We note that the agreement was purportedly entered into in the presence of a certain Stanley Ho. Curiously though, petitioner ADR did not present Mr. Ho in court to corroborate its claim. Lastly, Exhibit 3, though captioned as an "agreement," appears to be only a unilateral statement of Mar Gallardo, without the conforme of Stywood and ADR.

It bears emphasizing also that if indeed the purpose of the February 11, 1988 Charter Parry between ADR and Stywood was to implement the aborted February 5, 1988 Charter Parry between ADR and Gallardo, why was the volume of the cargo reduced? The subject cargo in the earlier (Feb. 5) Charter Party was described as:chanrob1es virtua1 1aw 1ibrary

6,500 CBM FALCATTA (minimum) 7,000 (maximum) at Owner’s Option 24

The subject cargo in the later (Feb. 11) Charter Party was described to be:chanrob1es virtual 1aw library

5,000 CBM FALCATTA (minimum) UP TO VESSEL MAXIMUM CAPACITY AT CHARTERER’S OPTION25cralaw:red

The discrepancy creates serious doubt as to the veracity of petitioner’s assertion that the subject cargoes in the two contracts are one and the same. Rather, such discrepancy does not strengthen his credibility.

Petitioner makes capital of the admission by respondent Gallardo that Stywood, as the buyer of the falcata logs, is the beneficiary of the charter agreement for the MV Pacific Breeze, 26 to boost its claim that Stywood and not Gallardo is the real party-in-interest. Petitioner’s inference is clearly non sequitur. The Charter Parry shows that there are only two parties to it, namely, petitioner ADR and respondent Gallardo, without any mention of Stywood as the third-party beneficiary. The fact that Stywood, as buyer of the falcata logs, stands to benefit from the Charter Party does not, by itself, vest Stywood with the personality to take over the charter agreement. That Stywood is a stranger to the Charter Party becomes clear in view of the consistent findings of both courts below that there is no evidence to support the claim concerning the alleged take-over agreement between Stywood and Gallardo.

A final note. The CA took notice of the fact that Stywood chartered a different vessel, 27 the MV Adhiguna Dharma, in its February 11, 1988 Charter Party with ADR. Assuming that the alleged agreement is authentic, Stywood’s authority, as therein provided, is limited to the use of the Charter Vessel MV Pacific Breeze. It is, therefore, beyond. Stywood’s authority to use a vessel other than the MV Pacific Breeze. Further, the ostensible agreement only empowers Stywood to take over the February 5, 1988 Charter Party and not to enter into a new one.

The ineluctable conclusion derived from these factual antecedents is that the February 11, 1988 Charter Party between Stywood and ADR and the February 5, 1988 Charter Party between petitioner and respondent Gallardo are not in any way linked. To our mind, the alleged take over by Stywood was a mere rationalization if not a ruse used by petitioner to avoid refunding the P242,000 advanced by private Respondent.

Absent clear proof, other than the naked assertion of petitioner, that Gallardo authorized Stywood to take over its February 5, 1988 charter party with ADR, we need not tarry to delve into the issues as to who is the real party-in-interest in this case and whether or not there was novation of said charter party. Those issues are now academic.chanrob1es virtua1 1aw 1ibrary

To summarize, we find that no reversible error was committed by the Court of Appeals. For failure of petitioner to perform its obligation on time, respondent Gallardo is entitled to cancel the Charter Party and to demand damages. This is pursuant to Article 1191 of the New Civil Code, 28 which provides that the power to rescind obligations is implied in reciprocal ones in case one of the obligors should not comply with what is incumbent upon him, and the injured party may rescind the obligation, with payment of damages. As to actual damages, we agree with the trial court’s decision that petitioner is entitled to recover the amount of P242,000 representing the advance freight to petitioner, as shown in the records. 29 Because the amount due in this case arises from a contract of affreightment and not from a loan or forbearance of money, the legal interest of six percent (6%) per annum should be applied. 30

Finally, the complaint for damages was instituted by Gallardo on March 10, 1988, following the unjustified refusal of ADR to settle his claim. Considering the fact that respondent was compelled to hire an attorney to protect and defend his interest, the award of attorney’s fees to private respondent in the amount of P20,000 is justified. 31

WHEREFORE, the petition is hereby DENIED for lack of merit. The appealed decision of the Court of Appeals in CA-G.R. CV No. 47556 is AFFIRMED. Petitioner ADR Shipping Services, Inc. is hereby ordered to pay respondent Marcelino Gallardo P242,000.00 with interest at six percent (6%) per annum, from the date of filing the complaint until fully paid, plus P20,000.00 as attorney’s fees. Costs against petitioner.

SO ORDERED.

Bellosillo, Mendoza, Austria-Martinez and Callejo, Sr., JJ., concur.

Endnotes:



1. Rollo, pp. 19-24.

2. Records, pp. 7-8.

3. Id. at 13.

4. Id. at 14.

5. Id. at 303-304.

6. Rollo, pp. 8-9.

7. Records, p. 189.

8. See Nacu v. Court of Appeals, 231 SCRA 237, 248 (1994).

9. Supra, note 7 at 188.

10. Ibid.

11. Id. at 11.

12. National Food Authority, Et. Al. v. CA, Et Al., 311 SCRA 700, 713 (1999).

13. Rollo, p. 12.

14. The typewritten date was February 5, 1988 but the "5" was crossed out and replaced by a handwritten "12" .

15. Records, p. 226.

16. Id. at 72.

17. CA Rollo, p. 26.

18. Lorenzana v. People, 353 SCRA 396, 403 (2001).

19. Ong v. CA, 272 SCRA 725, 730 (1997).

20. Records, p. 8.

21. Id. at 9.

22. Id. at 12.

23. Id. at 14.

24. Id. at 9.

25. Id. at 72.

26. Id. at 153.

27. Rollo, p. 27.

28. Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with the payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.

x       x       x


29. Records, p. 13.

30. See Crismina Garments, Inc. v. CA, 304 SCRA 356, 364 (1999).

31. CIVIL CODE, Art. 2208. In the absence of stipulation, attorney’s fees and expenses of litigation, other than judicial costs, cannot be recovered, except: (1) When exemplary damages are awarded; (2) When the defendant’s act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest; (3) In criminal cases of malicious prosecution against the plaintiff; (4) In case of a clearly unfounded civil action or proceeding against the plaintiff; (5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiff’s valid, just and demandable claim; . . . In all cases, the attorney’s fees and expenses of litigation must be reasonable. (Emphasis supplied.) See Lagon v. Hooven Comalco Industries, Inc., 349 SCRA 363, 383 (2001).

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