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[ GR No. 25954, Dec 18, 1926 ]



49 Phil. 779

[ G. R. No. 25954, December 18, 1926 ]





The complaint alleges that at all the times hereinafter stated, the plaintiff was the owner of the  American steamship Lake Farmingdale; that on June 16,  1924, it entered into a contract with the defendant Juan  Gisbert for the charter of the steamship for a period of six months, a copy of which is attached to the complaint, marked Exhibit A; that in accord with the terms of the charter-party,  and on June 16,  1924, the  defendant Juan  Gisbert secured  and delivered  to  plaintiff a bond of the  Philippine  Guaranty Company, in the sum of P20,000 for his faithful performance of the charter-party contract;  that pursuant thereto, and on June 16, 1924, the plaintiff delivered to the defendant Juan Gisbert the  steamship in question  at  Olongapo "in seaworthy  condition and good repair;" that  upon its delivery, Juan Gisbert paid the plaintiff P6,232.50 as charter hire  for one month, and the sum of P1,000 as partial payment of the insurance premiums on the vessel, as provided for in paragraph 18  of the  charter-party contract; that no  other payments have ever been made under the contract; that the vessel in question was sold October 27, 1924; and that at the time of  the sale, the  charter hire had then accrued in the sum of P27,267.18, together with the insurance in the sum of P4,375; that on July 28, 1924, the defendant  Ricardo Caballero deposited  with  the plaintiff the sum  of P20,000 in cash as a guaranty of the performance of the contract by the defendant Juan Gisbert;  and that by reason  thereof, plaintiff surrendered and cancelled the bond of the Philippine  Guaranty Company for  a  like amount; "that the said sum of P20,000 is  now in the possession and control of plaintiff;" that on August 13,1924, due to the failure of the defendant Gisbert to pay the char- ter hire and insurance premiums then due, plaintiff notified him  that the contract  of the charter-party was rescinded, "and thereupon took possession of the said  steamship;" that plaintiff, at the instance of Gisbert, caused repairs to be made on the steamship at a  cost, of P8,978.33, no part of which has been paid; that in the return of the steamship from Manila  to  Olongapo, plaintiff  incurred  expenses amounting to P910.72, and has  paid outstanding charges against the ship,  incurred by the  defendant, in  the sum of P44 for rent of signal apparatus for the month of July, 1924, and  P79.76 for customs  charges; that during the period of Gisbert's possession, equipment of the ship  of the value of P200  was used by the defendant; that  while in his possession,  the defendant Gisbert used fuel oil,  which was the property of the plaintiff, of the value of P2,491.44, no part  of which has been paid,  and payment thereof refused.

Plaintiff prays for judgment against Gisbert in the sum of P34,944.19, with interest and costs, and that the  cash bond of P20,000 deposited by the defendant Caballero  with plaintiff be  applied  "in  partial satisfaction  of the  said judgment," and that it have such further relief as to the court may seem just and  equitable.

For answer the defendant Gisbert admits the allegations of paragraphs 1, 2, 3, 4,  5, 6 and 8  of the amended complaint, and specifically denies all other allegations, and as a  special  defense alleges  that any interest which  he had as charterer of the steamship was transferred to his co-defendant Ricardo Caballero, as evidenced by a public document executed July 22, 1924, a  copy of which is attached to, and made a part of, the pleadings; that in and thereby, the defendant Caballero assumed all the rights and obligations of this defendant, of which the plaintiff had knowledge, and as a counterclaim, he alleges that he acted merely as a captain of the chartered steamer for three months, and  that his services were reasonably worth the  sum of P500 a month.  Wherefore,  he prays that, as to him, the complaint be dismissed, and that he have judgment  against the plaintiff and the defendant Caballero  for P1,500, with interest and costs.

For answer the  defendant Caballero makes a  specific denial, and as a first special defense  alleges that, notwithstanding the provisions in article 18 of the charter-party, there was an agreement that such provisions could not and would  not be enforced;  that about August  6, 1924,  the plaintiff  advised the  defendant Gisbert  to immediately deposit $40,000 in lieu of a membership  by which  the plaintiff might be secured, and in accord with the  regulations of the American Steamship Owners' Mutual  Protection  and Indemnity Association; that as  a result thereof, this defendant was relieved from all liability as the supposed surety of Gisbert.   As a second special defense, it is alleged that the supposed delay in the payment of the freight by the defendant Gisbert was due not only to the requirement made by the United States Shipping Board in connection with the additional security in cash in the sum of $40,000, but also to  a prior agreement had  between plaintiff and the defendant Gisbert, pending  the  arrangement  with regard  to the controversies between them  on account of the $40,000 in the nature of  a bond.   As a third special defense, it is alleged that the expenses in connection with the repairs  of the ship in the sum  of P8,978.33 is not a legal  claim  and ought not to be charged  against either Gisbert or this defendant.  As a cross-complaint, the defendant alleges that about July 28, 1924, he deposited with the plaintiff the sum of P20,000, which was then and  is now his property, which was  the subject of a letter dated September 3,  1924, in  which he demanded the  return of the money, which  was refused, and he prays for  judgment absolving him from all liability as surety,  and that he is entitled to the possession and  return of the  P20,000.

In October, 1925, Ruiz,  Rementeria & Co., Ltd., filed a bill of  intervention in which it is  alleged that  in June, 1924, the defendant, now  the plaintiff, was the  owner of the ship in question, and that the defendant Gisbert was the captain, and  that  this plaintiff was the owner of a grocery store  in the City of Manila; that on June 27, 1924, the defendant Gisbert, as  captain and master of the vessel, bought on credit  from the intervenor provisions for the vessel of the  value of  P316.10, the amount of which has never been paid, and it prays for corresponding judgment, with costs.

After the  evidence  was taken  upon  such issues, the lower court rendered judgment against the defendant Juan Gisbert, as principal, and the  defendant Ricardo  Caballero, as  surety, and in favor  of the plaintiff for the sum  of P7,232.50, with legal interest from  October 29,  1924, and against the defendant Gisbert, and in favor of Ruiz, Rementeria  & Co. for the sum of P316.10, and that the plaintiff should return to  the  defendant Caballero  the ?20,000 in question, after deducting  therefrom  the  P7,232.50 and interest.

From that judgment, all parties appeal, and in it's appeal, the  plaintiff assigns the following errors:
"The trial court erred:

"1.  In rendering judgment  in  favor of the  plaintiff- appellant for charter hire  and insurance premiums upon the  vessel Lake Farmingdale,  in the sum of P7,232.50 covering one month only, instead of P22,339.94, P19,264.93 for charter hire and P3,075.01 for insurance premiums for three  months and  two days covering the period  July 16, 1924,  to  October  27,  1924, the date  of the sale of  the vessel, three months and eleven  days, less nine days allowance for the period the vessel was undergoing repair.

"2.  In  not rendering judgment in  favor of  plaintiff- appellant for the  sum of P8,978,33, the costs of repairs made to the vessel by the owner.

"3.  In  not rendering judgment in  favor of   plaintiff-appellant for the  sum of P910.72 expenses of returning the vessel to Olongapo; P44 for rent of signal apparatus; P79.76 for customs charges; P200 for equipment used by defendants; P2,491.44 for fuel oil  used by  defendants, all of which items the court erroneously found were  not covered by the stipulation of facts although the same were fully set forth in the statement of account Exhibit C which was admitted by  the parties in  open court to be corrected as appears on page 5 of the transcript  of the stenographic notes of the  trial.

"4. In rendering judgment in  favor of  the  defendant Ricardo Caballero  for  the return of a portion of the cash deposit made by him to guarantee the performance of the terms of said charter party.

"5. In not  rendering judgment in  favor  of  plaintiff-appellant for the sum of P34,944.19 and the application of the entire amount  of  said  deposit of P20,000 in partial satisfaction thereof.

"6. In denying plaintiff-appellant's motion  for a  new trial.
The defendant Gisbert assigns the following errors:
"I. The court below erred in not admitting the special defense and counter-claim of  the  defendant Juan Gisbert against the defendant Ricardo  Caballero for the sum of P1,500, the value of his salaries as  captain of the steamship Lake Farmingdale, corresponding to the months of July and August, and a monthly pay for the month of September, 1924.

"II. The lower court erred  in not finding that the  real charter of the steamship Lake Farmngdale was the defendant Ricardo Caballero."
The defendant Caballero assigns the following  errors:
"1. The lower court erred in admitting over the objection of appellant Ricardo Caballero Exhibit B  of  the United States of America.

"2. The lower court erred in admitting over the objection of Ricardo  Caballero the testimony of Juan  Gisbert in relation to the existence of a bond or undertaking which had deference to Ricardo Caballero.

"3. The lower court erred in finding that the undertaking for the sum of $10,000 subscribed  by the Philippine Guaranty Company  on June 26, 1924, to guarantee the faithful performance by Juan Gisbert  of his obligations under the terms  of the charter party was substituted by  the cash deposit made by Ricardo Caballero.

"4. The lower court erred in finding that Ricardo Caballero assumed the obligations of a surety to  the full extent of his  cash deposit from the moment the said Ricardo Caballero made said cash deposit of P20,000, and in holding him  liable as surety for  Juan Gisbert.

"5. The lower court erred in  not finding  Ricardo  Caballero  entitled to the  full amount of P20,000  instead of adjudicating the said sum of  P20,000 less  the. amount awarded to the plaintiff entity.

"6. The lower court erred in sentencing Ricardo  Caballero, as surety, to pay the sum of P7,232.50 with legal interest thereon from October 29,1924, to the United  States of America.

"7. The lower court erred in not finding that there had been a novation of the contract of charter party between the United States  of America and  Juan Gisbert sufficient under  the  law  to release Ricardo Caballero as alleged bondsman even granting  but not conceding that he had assumed responsibility as surety for the charterer.

"8. The lower court  erred in not finding that the alleged delay on the part  of Juan Gisbert  in the payment of the monthly rental was due to a previous arrangement between the owner of the vessel and the charterer thereof, in  consequence of which Caballero was relieved from responsibility under a contract of suretyship which we shall assume to have existed.

"9. The lower court erred in not finding that at the time of the  alleged violation of the terms of the charter-party by Juan Gisbert, Ricardo  Caballero had not yet made the cash deposit of P20,000 and  consequently should not  be held answerable for Gisbert's default even were we to grant for the sake  of argument  that Caballero actually assumed the obligations of  a surety."
The  intervenor-appellant contends that the lower court erred in not sentencing the plaintiff as owner of the  vessel Lake Farmingdale and the defendant Juan Gisbert to pay jointly and severally the sum of P316.10, the value  of the merchandise  furnished the vessel.


The  Bareboat Charter, known in the  record as Exhibit A, was duly executed  by  the  plaintiff and  the defendant Juan Gisbert.

Among other  things, it  provides that the steamer shall be delivered at the port of Olongapo, fully equipped in every respect, and in good running order; that it shall be surveyed before delivery,  and  on its redelivery to determine its condition, and  that the cost of such survey  on delivery shall be paid for by Gisbert, and that such cost of redelivery shall be paid by the plaintiff; that Gisbert shall pay all port charges, pilotages, and all other costs and expenses incident to the  use  and operation of the vessel, and at his own expense shall keep the vessel in  good running  order and in the same condition as when received, less reasonable wear and tear;  that  Gisbert shall pay  the  plaintiff for the use of the steamer at  the  rate of P1.50 deadweight per ton per month, commencing from the date of its  delivery.   The defendants shall pay for all  fuel and consumable stores  on board the ship at the time of the delivery, and the plaintiff shall accept and pay for such fuel and stores left on board at  the time of redelivery at current market prices  at the ports of delivery and redelivery.   The defendant shall have the use of all outfit, equipment and appliances now on board without extra cost, with the exception of the submarine signal apparatus, blinker lights, and radio equipment, which shall be returned to the plaintiff on redelivery in as good  a condition as when received, ordinary  wear and  tear excepted.  A complete inventory of the steamer's  equipment shall be taken and mutually  agreed  upon at the time of delivery, and a like inventory at the  time of redelivery.

Clause 13 specifically provides that neither the defendant nor the master of the vessel "shall have any right, power, or authority to create, incur, or  permit to be imposed upon the steamer any  liens  whatsoever except for crew's wages and salvage;" that the charterer shall carry a certified copy of this contract in the ship or vessel, subject  to inspection by any person having business with the steamer, and further that a notice that the steamer is the property of the Government and is not subject to liens, shall  be  posted in a conspicuous place.

Among other things, clause 18 provides:
"The charterer shall, at its own expense, fully insure the steamer  for owners'  account  with the Marine Insurance Department,  United  States  Shipping  Board  Emergency Fleet Corporation, under the form of policy attached hereto and made a part hereof.   The owner and/or insurer shall not have any right  of recovery or subrogation  against the charterer on account of loss of or any damage to the vessel or her machinery or appurtenances covered by  such insurance, or  on account of payments made to discharge claims against or liabilities of the vessel or owner covered by such insurance. Charterer to  pay owner premium at rate of four per  cent for six  months.

"The charterer  shall,  at its  own expenses, enter  the steamer  in the American  Steamship Owner's Mutual Protection & Indemnity Association, Inc., and the cover under this association shall  be made available to the  owner,  and the charterer  shall  furnish to the owner  proper evidence of such  entries immediately upon the signing  of this charter."
It is also provided  that at  the expiration  of  the charter period, the vessel shall be redelivered to the owner at Olongapo where it was  received,  or at Manila at the  owner's option, in as good order and  condition as when  received, ordinary wear and  tear excepted.

Clause 24 provides  that the submarine signal apparatus, blinker lights  and radio equipment, if any,  shall  be kept and maintained by the defendant Gisbert who assumes all the obligations of the plaintiff under any of its contracts in connection  therewith.

Clause 26 provides:
"The charterer shall furnish, before  delivery  of steamer, a bond in the sum of  ten thousand dollars ($10,000) guaranteeing  full  performance of its  obligations  under  this Charter."
Clause 30, among other things, provides that:
  "If at any time after the delivery of the said  steamer to the  charterer  hereunder, the  charterer  shall  fail to perform any  of its duties  or  obligations or shall violate any of the. prohibitions imposed upon it under this charter," that the owner may, without prejudice to any  of its legal rights,  "withdraw and retake  the  said steamer, wherever the same may be  found."
The vessel  was delivered to Gisbert on  June 16, 1924, at 6 a. m., and plaintiff seeks to recover rental  for  the period  of four  months and eleven and one-fourth days at P1,50 per deadweight ton per month.

June 28,  1924,  the defendant  Gisbert  notified R.  C. Morton, the local agent of the U. S.  Shipping Board, that he was going to take the vessel to Saigon, and that "I am sorry that I depart without having terminated the P. & I. Insurance, but I  believe that before my return the P. & I, Insurance will be fully settled."  That letter refers to clause 18 of the charter-party contract.

The evidence shows that Gisbert never complied with that clause of the contract, and that after  some negotiations in which he failed to satisfy the authorities as to the insurance, on August 6, the U. S. Shipping Board at Washington cabled its local agent Morton  that, in. view of the failure of the charterer to meet the charter condition with respect to P, &. I. Insurance, the contract is cancelled, and that redelivery of the vessel should  be  taken.  On the strength of that cable, cancelling the contract,  redelivery of the vessel was  taken on August 16, 1924.

The plaintiff having elected to cancel  the contract  and to take the  redelivery of the  vessel, it is  now estopped to claim or assert that the contract  was thereafter in force, or to collect rental from the date of redelivery.

In plaintiff's  Exhibit C, there  is an  item  of P44  for submarine rental.   Also a claim  for P8,978.33 for repairs made on the vessel at Cavite.  For 1,078.3 barrels of fuel oil at P4.20 per barrel amounting to P4,528.86.   For equipment found missing after rechecking P200.  For inspector and guard service and pier charges P79.76.  For expense of  returning the ship to  Olongapo after its redelivery amounting to P910.72.

We are clearly of the opinion that the amount of P8,978.33 claimed for repairs ought not to be allowed.  Such repairs were made on and between June 16 and 24, inclusive.  That is to say,  immediately after the vessel was delivered  to Gisbert,  and  that he never made any actual use of the vessel  until after the repairs  were made, and under the terms of the contract, it was to be seaworthy and in good condition.  All of the above-mentioned items are covered by, and included in, the contract, and are  a  valid claim against Gisbert.   That is to say, Gisbert should be charged with the rental of the vessel from June 16,  1924, to August 16, 1924, at  the  agreed  price  amounting to P12,465, and the  items  of P44, P4,528.86,  P200, P79.76, P910.72,  to which should be added P2,000 for insurance during the life of the contract,  making  the total amount for which he is liable of  P19,958.34.  It further appears from Exhibit C that defendant is given and should have  credit for the following items:  Cash  paid on  account of charter  hire, June 14, P6,232.50; insurance paid to the plaintiff P1,000; time allowance for repairs made on the vessel from June 16  to June 24,  inclusive,  P1,869.75;  corresponding rate on insurance during the period of  repairs  P299.99; credit for fuel  oil  returned 485.1  barrels at P4.20  per barrel, P2,037.42, making a total credit to be allowed the defendant from plaintiff's own Exhibit C of P11,439.66.  Thus leaving a balance due and owing the plaintiff from Gisbert at the time of the redelivery of the vessel on August 16, of P8,518.66.

The defendant  Cabailero claims that he is exempt from all liability.  That he never signed any bond or any writing in and by which he assumed or agreed to pay any amount found due or owing the plaintiff from the defendant Gisbert under the charter contract.  As  stated, at the time it was signed,  a surety bond for $10,000 was given under section 26 of the contract,  which provides that the charterer shall furnish  before  delivery of  the  steamer a  bond  in that amount  "guaranteeing full performance of its obligations under this  charter."

It appears that the surety bond was given and  surrendered on July 28, at which time Caballero turned over and delivered-to the plaintiff P20,000  in  cash "to take the place of bond dated June 16,  1924, issued by the Philippine Guaranty Company to cover the faithful  performance of all terms and conditions of  charter party dated June 16, 1924," and  for which a  corresponding receipt was issued and delivered to Caballero, known in the record as Exhibit B, which is as follows:
"Received from Mr. Ricardo Caballero the sum of twenty thousand pesos (P20,000)  to take the place of bond dated June 16, 1924, issued by the Philippine Guaranty Company to cover the faithful performance of all terms and conditions of charter  party dated June  16,  1924, between the United States Shipping  Board and Capt.  Juan Gisbert for the bareboat charter of the S. S.  Lake Farmingdale  for six months  from date of  charter."
It will be noted that in the instant case, plaintiff is not seeking to enforce liability on any bond against the defendant Caballero.  What it asks for is to apply from and out of the P20,000, which was  delivered to it  by  Caballero, and which is now  in its  possession, to the  payment and satisfaction of the  amount  found  due and  owing from Gisbert to  the plaintiff.   It  is not claimed that Caballero ever signed any bond, or that he is liable on a bond.  The sole purpose and intent of the delivery of the P20,000 in cash to  the plaintiff was to dispense with, and to take the place of, the bond, and in legal effect that is what it did.

It appears from Morton's receipt, which was delivered to, and accepted by, Caballero, that the P20,000 was to take the place of the bond, and that it was "to cover the faithful performance of all terms and conditions of charter party dated June 16, 1924."

Plaintiff now seeks to apply the money in its actual possession in payment of the damages which it has sustained by reason  of  a  breach and the failure  to  keep and perform those conditions.  Having paid over and parted with his money  for that specific purpose, and having accepted the receipt for the money, specifying that purpose, the defendant  Caballero is  now  estopped to claim or assert that he paid over the money for that specific purpose.

We are clearly of the opinion that the  plaintiff is entitled to take and  apply from the money now in its  possession the full amount of its  claim against the  defendant Gisbert.

As to the intervenor, we also agree with the trial court.

The vessel in question was a Government owned vessel, and it was operated under a lease which specifically provides that it shall be kept free and clear of all charges or liens, except for crew's wages and salvage, and that a notice of that fact should be  kept posted in a conspicuous place on the vessel, and that at all times the charterer should keep a  copy  of  the charter-party among the ship's papers  for the  inspection of  any one dealing with the ship.  Under such conditions, the vessel being owned by the U. S. Government, neither the plaintiff nor the ship is liable for supplies in the nature of groceries purchased by the captain for the use of the ship.

There is no merit  in the appeal of the defendant Gisbert.

The judgment of the lower court will be modified, and  one will be entered here in favor  of the plaintiff and against. the defendants Juan Gisbert  and  Ricardo  Caballero,  the former as principal obligor, and the latter as surety, for the sum of P8,518.66, with legal interest from October 29,1924, and  after the satisfaction of such  judgment, the plaintiff is ordered to  return to the defendant Caballero any amount which may be left remaining of the P20,000, as  evidenced by its receipt of  July 28,  1924.  In all  other respects, the judgment of the lower court is affirmed,  without costs to either party on this appeal.  So ordered.

Avanceña, C. J., Street,  Malcolm, Ostrand, Romualdez, and Villa-Real, JJ., concur.