GR 5963; (September, 1910) (Digest)
G.R. No. 5963
FAUSTINO LICHAUCO, plaintiff-appellee, vs. GEORGE ARMSTRONG and JOHN A. MACKAY, defendants-appellants.
September 13, 1910
FACTS:
In January 1908, Faustino Lichauco, who had chartered the steamer Solstad, engaged George Armstrong and John A. Mackay, brokers, to find a subcharterer. Through their agent, George Grimble, two subcharter contracts (Exhibits C and D) were secured for the Hongkong-Saigon trade. These contracts, dated February 6 and 10, 1908, specified freight rates for rice and related products. Subsequently, Armstrong and Mackay entered into two contracts (Exhibits A and B) with Lichauco, dated February 12 and 15, 1908, which were substantially similar to C and D but included a 2.5% commission for the brokers.
A crucial provision in all contracts (Paragraph 17 in C & D; Paragraph 14 in A & B) stipulated: “If a mixed cargo be shipped, freight to be paid at the above rate (14/16 cents per picul) on the estimated capacity of the vessel, say on thirty thousand piculs.”
The subcharterers carried a cargo consisting of “rice, broken rice, rice flour, and paddy.” Lichauco contended that this composition constituted a “mixed cargo” and, therefore, he was entitled to freight payment based on the vessel’s estimated capacity of 30,000 piculs, rather than the actual weight carried. Lichauco had already received payment based on the actual freight.
Armstrong and Mackay argued that, based on the custom of the Saigon-Hongkong trade, such a cargo was not considered “mixed.” They cited a decision by Chief Justice Piggott of Hongkong, which defined a “mixed cargo” in that specific trade as one that includes goods not mentioned in the charter party, such as “matches, piece goods, machinery, or fish,” shipped alongside rice, paddy, and flour.
ISSUE:
Whether a cargo comprised of “rice, broken rice, rice flour, and paddy” constitutes a “mixed cargo” under the terms of the charter party contracts, thus obligating payment of freight based on the estimated capacity of the vessel.
RULING:
The Supreme Court ruled in favor of Armstrong and Mackay. The Court held that the cargo in question was not a “mixed cargo” within the meaning of the contracts. It emphasized that contracts should be interpreted in accordance with the customs of the trade to which they relate. Adopting the interpretation prevalent in the Saigon-Hongkong trade, as established by Chief Justice Piggott, a cargo is considered “mixed” only when it includes goods other than those explicitly mentioned in the charter party (e.g., matches, piece goods, machinery, or fish), alongside rice and its derivatives. Since the cargo in this case consisted solely of various forms of rice products, it did not meet the definition of a “mixed cargo” that would trigger freight payment based on the vessel’s estimated capacity. The lower court’s decision was reversed, and Armstrong and Mackay were absolved from liability.