G.R. No. L-11318; October 26, 1918
THE MANILA RAILROAD CO., plaintiff-appellant, vs. LA COMPAÑIA TRANSATLANTICA, defendant-appellee, and THE ATLANTIC GULF & PACIFIC CO., defendant-appellant.

FACTS:
In March 1914, the steamship Alicante, owned by La Compañia Transatlantica, arrived in Manila carrying two locomotive boilers belonging to The Manila Railroad Company. As the ship’s equipment was insufficient to discharge the heavy boilers, the Steamship Company contracted the services of The Atlantic Gulf & Pacific Company (Atlantic Company) to perform the unloading using its floating crane. During the operation, the Atlantic Company’s foreman, Leyden, was grossly negligent. First, he improperly adjusted the sling, causing the boiler to catch on the hatch and fall when the sling cable parted. Second, after re-slinging the boiler, he attempted to lift it again without properly checking the crane, which had been weakened by the first accident, causing the derrick hook bolt to break and the boiler to fall a second time. The boiler was severely damaged, requiring costly repairs and reshipment to England. The Manila Railroad Company sued the Steamship Company for damages. The Steamship Company impleaded the Atlantic Company as a co-defendant, arguing the Atlantic Company, as an independent contractor, was solely liable. The trial court held the Atlantic Company directly liable to the Railroad Company and absolved the Steamship Company. Both the Railroad Company and the Atlantic Company appealed.

ISSUE:
1. Is the Steamship Company (Transatlantica) liable to the Railroad Company for the damaged boiler?
2. Is the Atlantic Company liable to the Steamship Company for indemnity?
3. Is the Atlantic Company directly liable to the Railroad Company?

RULING:
1. Yes, the Steamship Company is liable to the Railroad Company. The contract of carriage from England to Manila imposed upon the carrier the obligation to deliver the cargo safely at the port of destination. This duty is indivisible and includes the act of discharge. The Steamship Company cannot evade this contractual liability by delegating the task to an independent contractor. Its failure to deliver the boiler in proper condition constitutes a breach of its contract under Articles 1103 and 1104 of the Civil Code.
2. No, the Atlantic Company is not liable to indemnify the Steamship Company. The contract between the Steamship Company and the Atlantic Company contained a stipulation whereby the Atlantic Company was relieved of “all liability whatsoever” for any damages occurring during the discharge operation. The Steamship Company’s representative agreed to this condition after a casual inspection of the equipment and with knowledge of the Atlantic Company’s prior successful operations. This valid contractual stipulation absolves the Atlantic Company from liability to the Steamship Company for the negligence of its employees in the performance of that contract.
3. No, the Atlantic Company is not directly liable to the Railroad Company. There was no privity of contract between the Railroad Company and the Atlantic Company. The Railroad Company’s cause of action lies solely in contract against the Steamship Company as the carrier. The trial court’s finding of direct liability was erroneous.

DISPOSITIVE: The judgment of the lower court was modified. The Steamship Company (La Compañia Transatlantica) was held liable to The Manila Railroad Company for damages. The Atlantic Gulf & Pacific Company was absolved from all liability under the complaint.