Everett Steamship Corporation v. Court of Appeals and Hernandez Trading Co. Inc.
REITERATIONFacts
The Antecedents: Private respondent Hernandez Trading Co., Inc. imported three crates of bus spare parts from its supplier, Maruman Trading Company, Ltd. in Japan, shipped on board a vessel owned by petitioner Everett Steamship Corporation. Upon arrival in Manila, one crate (MARCO C/No. 14) was discovered missing. Petitioner admitted the loss in a letter. Procedural History: Private respondent claimed Y1,552,500.00, the value stated in the invoice. Petitioner offered to pay only Y100,000.00, citing Clause 18 of the bill of lading which limits liability. Private respondent rejected the offer and filed a collection suit. The Regional Trial Court (RTC) ruled in favor of private respondent, holding petitioner liable for the full value, finding the limited liability clause invalid due to fine print and lack of fair agreement. The Court of Appeals (CA) affirmed the RTC's findings on liability but deleted the award for attorney's fees, stating private respondent was not privy to the contract of carriage and thus not bound by the bill of lading's terms. The CA based its ruling on Article 1735 of the Civil Code, citing the presumption of negligence. The Petition: Petitioner seeks reversal of the CA decision, arguing that the CA erred in ruling that the consignee's consent to the bill of lading terms is necessary, that the limited package liability does not apply, and that private respondent can recover the full value of the lost cargo.
Issue(s)
Whether the consignee, who is not a signatory to the bill of lading but formally claimed reimbursement and filed a case based on it, is bound by the stipulations therein, specifically the limitation of liability clause. Whether the limited liability clause in the bill of lading is valid and enforceable, considering it is a contract of adhesion. Whether petitioner is liable for the full value of the lost cargo or only up to the limited amount stipulated in the bill of lading, given the shipper's failure to declare a higher valuation in writing and pay extra freight.
Ruling
The Supreme Court reversed and set aside the decision of the Court of Appeals. It held that the petitioner's liability for the loss of the cargo is limited to One Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of lading.
Ratio Decidendi
On the binding effect of the bill of lading on the consignee: The Court held that even if the consignee was not a signatory to the contract of carriage between the shipper and the carrier, the consignee can still be bound by the contract. When the private respondent formally claimed reimbursement and filed a case based on the bill of lading, it accepted the provisions of the contract and made itself a party thereto, or at least sought to enforce it. Therefore, the private respondent cannot reject or disregard the carrier's limited liability stipulation. The Court cited Sea-Land Service, Inc. vs. Intermediate Appellate Court where it was held that a consignee's right to recover springs from agency or as a stranger in whose favor a stipulation is made, and in neither capacity can the consignee assert the alleged vitiation of fair and free agreement due to fine print. The Court emphasized that the consignee is bound by the stipulations in the bill of lading. On the validity and enforceability of the limited liability clause: The Court reiterated that a stipulation in a bill of lading limiting the common carrier's liability is sanctioned by law, specifically Articles 1749 and 1750 of the Civil Code, provided it is reasonable, just, and freely agreed upon. The Court found the stipulations in Clause 18 of the bill of lading to be reasonable and just, giving the shipper the option to declare a higher valuation by paying extra freight. The Court rejected the trial court's reasoning that the fine print invalidated the contract, citing PAL, Inc. vs. Court of Appeals and Philippine American General Insurance Co., Inc. vs. Sweet Lines, Inc., which held that contracts of adhesion are not invalid per se and that the responsibility for comprehension lies with the shipper or consignee. The Court noted that the shipper, Maruman Trading, was presumed to be knowledgeable in business and had the opportunity to declare a higher value. On the extent of the carrier's liability: The Court found that to defeat the carrier's limited liability, Clause 18 of the bill of lading required the shipper to declare in writing a higher valuation before receipt of the goods and insert it in the bill of lading, with extra freight paid. These requirements were not complied with by the shipper. The commercial invoice, while showing the value, did not sufficiently prove that the petitioner had knowledge of this value. Therefore, the petitioner should not be held liable for the full value of the lost cargo, but only up to the limited amount stipulated in the bill of lading.
Main Doctrine
A stipulation in a bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is valid and binding if it is reasonable and just under the circumstances and has been fairly and freely agreed upon. The consignee, even if not a signatory to the bill of lading, is bound by such stipulations when they seek to enforce the contract of carriage.