Citadel Lines, Inc. v. Court of Appeals
REITERATIONFacts
The Antecedents: Manila Wine Merchants, Inc. (Consignee) imported 180 cartons of Dunhill cigarettes from England. The shipment arrived at the Port of Manila on April 18, 1979, in container van No. BENU 204850-9, which was received by E. Razon, Inc. (Arrastre). On April 30, 1979, due to lack of space, the cigarettes were palletized and placed in two containers, with two pallets in the original container and four pallets in container No. BENU 201009-9. Both containers were padlocked and sealed by the representative of Citadel Lines, Inc. (Carrier). Procedural History: On the morning of May 1, 1979, it was discovered that container van No. BENU 201009-9 had a tampered seal, and 90 cases of cigarettes were missing. The Consignee filed a claim with the Carrier, which admitted the loss but alleged it occurred within the Arrastre's control. The Consignee then filed a claim with the Arrastre, which was denied. The Regional Trial Court (RTC) exonerated the Arrastre, finding the cargo was not formally turned over to it, and held the Carrier liable for P312,480.00. The Court of Appeals (CA) affirmed the RTC decision but deleted the award of attorney's fees and costs. The Petition: The Carrier sought review of the CA decision, raising issues regarding custody of the cargo at the time of loss and the binding effect of the limited liability stipulation in the bill of lading.
Issue(s)
Whether the loss occurred while the cargo was in the custody of E. Razon, Inc. or Citadel Lines, Inc. Whether the stipulation limiting the liability of the carrier contained in the bill of lading is binding on the consignee.
Ruling
The Supreme Court modified the decision of the Court of Appeals. Citadel Lines, Inc. was ordered to pay Manila Wine Merchants, Inc. the sum of US$4,465.60, or its equivalent in Philippine currency at the exchange rate obtaining at the time of payment. In all other respects, the CA judgment was affirmed.
Ratio Decidendi
On the issue of custody: The Court affirmed the findings of the lower courts that the loss occurred while the cargo was still in the custody and control of the Carrier. Evidence showed that the container van was padlocked and sealed by the Carrier's representative and was not formally turned over to the Arrastre operator. Admissions by the Carrier's own witnesses corroborated this fact. The Court reiterated the principle that common carriers are bound to observe extraordinary diligence in the vigilance over goods transported. If goods are lost, carriers are presumed negligent unless they prove they exercised extraordinary diligence. The burden shifts to the carrier to prove it exercised such diligence once the loss is established by the consignee. The carrier's responsibility extends from the time the goods are unconditionally placed in its possession until delivered to the consignee. Since the Carrier failed to prove the loss was occasioned by an excepted cause and did not prove it exercised extraordinary diligence, it was held negligent and liable. On the issue of limited liability: The Court found the award of damages based on the market value of the goods to be erroneous. It held that Clause 6 of the bill of lading, which limited the Carrier's liability to $2.00 per kilo, was binding on the Consignee. The Court cited Articles 1749 and 1750 of the Civil Code, which allow stipulations limiting a carrier's liability if reasonable, just, and freely agreed upon, especially when the shipper does not declare a greater value. The Consignee admitted that the value of the goods did not appear in the bills of lading, thus triggering the limited liability clause. The Court found the stipulation to be just and reasonable, echoing the statutory provision and giving the shipper the option to declare a higher value. Based on the weight of the lost cartons (2,233.80 kilos), the Carrier's liability was calculated at US$4,467.60, which was rounded down to US$4,465.60 in the dispositive portion.
Main Doctrine
A common carrier is presumed to have been at fault or negligent if goods are lost, and must prove it exercised extraordinary diligence. A stipulation limiting the carrier's liability to a specified amount per kilo, as stated in the bill of lading, is binding if reasonable and freely agreed upon, especially when the shipper does not declare a greater value.