G.R. No. 31222 , October 29, 1929
O’FARREL Y CIA. (MALAYSIAN NAVIGATION COMPANY), plaintiff-appellant, vs. THE MANILA ELECTRIC COMPANY, defendant-appellee.

FACTS

O’Farrel y Cia., operating as Malaysian Navigation Company, entered into a contract with Manila Electric Company (Meralco) to transport 75,000 tons of coal from Hongay, Tonkin, to Manila. The coal was supplied by Societe Francaise des Charbonnages du Tonkin (coal company), with which Meralco had a separate purchase contract. The shipping contract stipulated: (1) freight rate of P4.50 per ton; (2) loading “for account and risk of shippers according to customary quick despatch subject to turn of mines”; and (3) demurrage terms for delays in Manila. Delays occurred in Hongay due to defective cranes and machinery of the coal company, causing vessels to wait 123 days. O’Farrel y Cia. also incurred debt to the coal company for coal advances to its ships. By June 1924, only 41,375 tons had been delivered, short of the contractual amount. Meralco terminated its contract with the coal company, and O’Farrel y Cia. acquiesced to ending the shipping contract. O’Farrel y Cia. sued Meralco for breach of contract, claiming damages for the delays. The trial court absolved Meralco, prompting this appeal.

ISSUE

Whether Meralco, as the shipper, is liable for delays in loading caused by the coal company’s defective equipment under the contract clause stating loading is “for account and risk of shippers according to customary quick despatch subject to turn of mines.”

RULING

No. The Supreme Court, in a majority opinion, affirmed the trial court’s decision, absolving Meralco from liability. The Court interpreted the contract to mean that delays due to the coal company’s inability to supply coal promptlyincluding those caused by defective equipmentfell under “subject to turn of mines,” a risk allocated to the carrier (O’Farrel y Cia.). The clause “for account and risk of shippers” referred to the shipper’s responsibility for loading operations but did not extend to delays attributable to the coal company’s production issues. Since the coal company was the supplier and its equipment failures affected coal availability, such delays were inherent to the “turn of mines” provision, excusing Meralco. The dissent argued that defective cranes violated “customary quick despatch,” making Meralco liable, but the majority held otherwise, noting O’Farrel y Cia.’s acquiescence to the contract’s termination and failure to prove Meralco’s breach.