G.R. No. L-11169; March 31, 1917
COMPAGNIE FRANCO-INDOCHINOISE, plaintiff-appellant, vs. DEUTSCH AUSTRALISCHE DAMPSCHIFFS GESELLSCHAFT, defendant-appellant.

FACTS:
The plaintiff, Compagnie Franco-Indochinoise (a French corporation), and the defendant, Deutsch-Australische Dampschiffs Gesellschaft (a German corporation), entered into a charter party on June 9, 1914. Under this contract, the defendant’s German steamship Esslingen was to proceed to Saigon, French Indo-China, and load a cargo of rice-meal belonging to the plaintiff for transport to Dunkirk or Hamburg.

On August 1, 1914, due to the threatening war between Germany and France, the defendant instructed the master of the Esslingen to proceed to Manila, a neutral port, and await further orders. The plaintiff was informed of this change. War between France and Germany commenced on August 3, 1914. The Esslingen completed loading in Saigon and sailed for Manila on August 4, 1914, arriving there shortly after.

The plaintiff demanded delivery of the cargo in Manila, but the defendant refused unless the plaintiff deposited the full freight charges (approximately ₱70,000). The plaintiff declined to make the deposit. Subsequently, the court appointed receivers who took possession and sold the perishable cargo for ₱61,154.58. The defendant claimed a lien on the proceeds for expenses incurred in seeking refuge in Manila and sought adjustment under general average principles per the York-Antwerp Rules as stipulated in the charter party.

The trial court awarded the plaintiff the net proceeds of the cargo sale (₱57,823.35) and additional damages for breach of contract. Both parties appealed.

ISSUE:
1. Whether the defendant is liable for breach of the charter party by deviating to Manila and failing to deliver the cargo to the agreed destination.

3. What is the proper measure of damages for any breach committed by the defendant?

RULING:
1. No liability for deviation due to war. The Court held that the master’s decision to divert the vessel to Manila, a neutral port, was justified by the outbreak of war between the nations of the contracting parties. This constituted a force majeure or “restraint of princes,” excusing performance of the original voyage. Thus, the defendant is not liable for losses resulting from the diversion itself.

2. No general average contribution. The defendant’s claim for expenses in Manila under general average was denied. General average applies only when sacrifices or expenditures are made for the common safety of the adventure. Here, the voyage was already effectively terminated upon arrival in Manila due to the war, so no common maritime adventure persisted to justify general average.

3. Liability for failure to preserve the cargo after arrival. While the deviation was excused, the defendant became liable as an involuntary depositary (custodian) of the cargo once in Manila. The master failed to take prudent steps to preserve the perishable cargo and unjustifiably refused to deliver it to the plaintiff upon demand unless freight was prepaid. This refusal constituted a breach of duty, making the defendant liable for any deterioration in the cargo’s value after a reasonable time for delivery had passed.

4. Remand for determination of damages. The trial court’s award of damages for breach of the charter party (failure to transport to the original destination) was reversed. However, the award of the net proceeds of the cargo sale to the plaintiff was affirmed, free of any lien by the defendant. The case was remanded for a new trial limited to determining the extent of deterioration damagesspecifically, the difference between the sale price of the deteriorated cargo and the value it would have commanded in Manila if undamaged at the time of sale.

Disposition:
The judgment was modified. The award of the cargo sale proceeds to the plaintiff was affirmed. The award of damages for breach of charter party was reversed. The case was remanded for a new trial solely on the issue of damages due to cargo deterioration. No costs were awarded.

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