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102. Manila Railroad Co. v.

La Compañia Trasatlantica
G.R. No. 11318 | 26 October | Street, J.
Aggy | Topic: Relativity of Contract – Art. 1311

Doctrine:
When there is lack or no privity of contract, there is no obligation or liability to speak of, thus, there is no
cause of action.

Facts:
• Manila Railroad Company – plaintiff and owner of the 2 locomotive boilers
• Compania Trasatlantica de Barcelona (will be called Steamship Company in the digest, kasi
this is how SC called it din)– defendant and owner of the steamship which carried the boilers.
• The Atlantic, Gulf, and Pacific Company – defendant; transferred the boilers from the
steamship to a barge.

1. There exists a contract of carrier between Manila Railroad and Compania Trasatlantica
(steamship company) where the latter was to transport Manila Railroad’s 2 boilers from England
to Manila.
a. The equipment of the ship was not strong enough to handle the boilers, so it had to procure
assistance in transferring the boilers to a barge in the port of Manila.
2. The Steamship Company employed The Atlantic in lifting the boilers out of the ship’s hold, and
transferring them to a barge.
3. Upon arrival of the Alicante (the ship carrying the boilers), The Atlantic sent out its crane in charge
of a person named Leyden.
a. In preparing to hoist the first boiler, the sling was incorrectly adjusted near the middle of
the boiler, causing it to be raised in a horizontal position. They found it difficult to pass the
boiler to the hatch of the ship (opening/entrance, I think). But they still continued to hoist it.
b. One of the rivet near the head of the boiler got caught in the hatch, thus, the weight on the
crane was increased. As a result, the cable of the sling parted and the boiler fell to the bottom
of the ship’s hold.
c. In the second attempt, the sling was now properly adjusted near one of the ends. The boiler
was lifted but while that was happening, the bolt at the end of the derrick boom (lifting device,
I think it’s the part of the crane which lifts the object) broke and the boiler fell again.
d. (So basically during the first attempt, mali yung adjustment nung sling sa boiler. Instead na
sa ends nung boiler ikabit, sa middle part kinabit so naging pahiga yung position ng boiler,
which made it difficult to pass through the hatch. One of the bolts of the boiler got stuck in
the hatch so nabigatan yung crane and hindi kinaya so the boiler fell. During the second
attempt naman, properly adjusted na ‘yung sling but then by that time the crane already
incurred damage because of the impact during the first attempt when the boiler fell, kaya the
derrick boom broke which caused the boiler to fall again.)
e. The boiler was found to be so badly damaged that it had to be reshipped to England and
afterwards return to Manila.
f. Manila Railroad incurred damages in the amount of P22,343.29
4. Manila Railroad filed a suit to recover damages against the Steamship Company.
a. The Steamship Company caused The Atlantic to be added as co-defendant, insisting
that the latter is the one responsible for the damages.
b. CFI rendered judgment holding The Atlantic liable for damages, and absolving the
Steamship Company.
5. Atlantic disclaims liability with its defense that it made reservation as regard its liability to any
damage that may be caused from the lifting of the boiler, and that nonetheless, it exercised due
diligence when it employed Leyden (who had control of the whole operation and was grossly
negligent).

Issue/Holding:

1. [MAIN] W/N The Atlantic is directly liable to the Manila Railroad? – NO.
a. Firstly, SC discussed that The Atlantic could have been liable to Manila Railroad
because of the principle of an implied contract (quasi-contract). Since it had control
over the latter’s property, it had also taken upon itself the duty to refrain from damaging it.
b. HOWEVER, in the case at bar, The Atlantic was essentially an employee of the
Steamship Company.
i. It appears from the evidence that even before the contract between the Steamship
Company and Manila Railroad was entered into, the latter was informed that the
former had to procure assistance in transferring the boilers to a barge in Manila.
Thus, it assented to the employment of The Atlantic as contractor to perform
the lifting.
ii. Thus, there can’t be double responsibility from Atlantic, since there can be no implied
contract when there’s an express one.
c. The contract between Atlantic & the Steamship Company determines the character and
extent of liability of The Atlantic, and to whom it was liable.
i. There was lack of privity in the contract of carrier as between Atlantic & Manila
Railroad, thus, Manila Railroad can have no right of action to recover damages
directly from The Atlantic.
d. Okay, so the topic is about relativity of contracts where the contract can only take effect
between the parties of the contract, their heirs and/or assignees. In this case, the contract
of Manila Railroad and Steamship only involves the 2 of them, and NOT the Atlantic.
e. From what I understand Atlantic could’ve been liable kasi it could have been a quasi-contract
when it took control of the boilers, however, there was a contract between Atlantic & the
Steamship Co, where Atlantic basically did the service as an employee of the Steamship
Co., which Manila Railroad assented to. Manila Railroad, then, do not have any right of
action against The Atlantic, there being a lack of privity (relation) between them. (I hope I’m
making sense)
f. The Steamship Company, then, is entitled to recover what he will pay Manila Railroad
from The Atlantic since they have a contract.

OTHER STUFF:
(Brief explanation lang of the other 2 issues in case ma’am asks since the bulk of the case focused on
this.)
2. W/N Steamship Company is liable to the plaintiff? – YES.
a. A contractual relation exists between Manila Railroad and the Steamship Company. The
latter’s duty to carry the boilers included the duty to convey and deliver it in a proper condition
according to its nature and conformably with good faith, custom, and the law.

3. W/N The Atlantic is liable to the Steamship Company? – YES.


a. Atlantic’s defense is that it reserved liability and responsibility for any damage that may be
caused upon the lifting of the boilers. It even presented letters which show its custom of
exempting itself from assuming risk incidents, and instead required its clients to assume
these possible risks.
i. SC held that from the pieces of evidence presented it can be shown that its
exemption from liability only covers those disasters which arise from some defect in
the lifting apparatus which are not attributable to any negligence from the company.
ii. Stipulations as to liability arising from negligence must be strictly construed against
exemption.
b. Atlantic’s defense of exercising due diligence in employing Leyden.
i. SC held that such defense is not applicable in contractual relations. It is only
applicable to quasi-delicts where there is no pre-existing agreement between the
parties.
ii. SC then explained difference between culpa aquiliana & culpa contractual. BASTA:
in contractual obligations, no defense of due diligence for the employers, they WILL
be liable even though it was their employees who were negligent.

Ruling:
1. Judgment of CFI is reversed.
2. The Atlantic Company is absolved, as Railroad Company does not have any right of action
against it.
3. The Compania Trasatlantica de Barcelona is adjudged to pay Manila Railroad Company
damages in the amount of P22,343.29
4. Compania Trasatlantica is declared to be entitled to recover the same amount from the
Atlantic Company.

Relevant Provisions: