G.R. No. 18636 ; September 28, 1922
M. TAGAWA, plaintiff-appellee, vs. V. ALDANESE, Insular Collector of Customs, and THE UNION GUARANTEE COMPANY, LTD., defendant-appellants.

FACTS

M. Tagawa (succeeded by Nanyo Shioji Kaisha) sold potatoes and onions to Jap Hoo and Co. in Manila. Tagawa arranged the purchase and shipment from Japan. The shippers, Otogosha and Yoshida, issued bills of lading making the goods deliverable “unto order, notify Jap Hoo Co.,” endorsed them in blank, and delivered them to Tagawa’s agent. Tagawa attached these bills of lading to drafts drawn on Jap Hoo and Co., with “D/P” (documents against payment) instructions. Upon arrival in Manila, the Insular Collector of Customs, Vicente Aldanese, delivered the merchandise to Jap Hoo and Co. without requiring the surrender of the bills of lading, after Jap Hoo and Co. posted indemnity bonds with Union Guarantee Company, Ltd. as surety. The bonds guaranteed the production of the bills of lading within four months or payment of P17,950. Jap Hoo and Co. dishonored the drafts. Tagawa, as the rightful holder of the bills of lading, sued the Collector of Customs to recover the value of the merchandise (P16,700). The Collector had the Union Guarantee Company joined as a party defendant. The trial court held the Collector liable to Tagawa and the surety company liable to the Government.

ISSUE

1. Whether the Collector of Customs was liable for wrongfully delivering the goods without the bills of lading.
2. Whether the Union Guarantee Company was liable on its indemnity bonds.
3. Whether the surety’s liability was limited to the penal sum of the bonds (P17,950) or included interest and costs.

RULING

1. Yes. The Collector of Customs, by delivering the goods to Jap Hoo and Co. without the surrender of the bills of lading, acted contrary to law and made himself liable to the rightful holder of the bills, M. Tagawa. Section 1316 of the Administrative Code authorizes such delivery only upon execution of a sufficient bond to protect the rightful holder.
2. Yes. The Union Guarantee Company, as surety on the bonds, was liable because the principal (Jap Hoo and Co.) failed to produce the bills of lading as conditioned in the bonds. The evidence sufficiently established the value of the merchandise and Tagawa’s right as holder of the bills.
3. The surety’s liability is not strictly limited to the penal sum. Following the modern rule, the surety is liable for interest and costs as part of the damages for delay in payment, even if the total exceeds the bond’s penalty. Interest should run from the date the surety was made a party defendant (May 22, 1920), not from the date of the bonds. The trial court’s judgment was affirmed with this modification.