SECOND DIVISION

[G.R. No. 16598. October 3, 1921.]

H. E. HEACOCK COMPANY , plaintiff-appellant, vs . MACONDRAY &

COMPANY, INC. , defendant-appellant.

Fisher & DeWitt for plaintiff and appellant.

Wolfson, Wolfson & Schwarzkopf for defendant and appellant.

SYLLABUS

1. COMMON CARRIER; BILL OF LADING; STIPULATIONS REGARDING

LIABILITY OF CARRIER FOR LOSS OF OR DAMAGE TO CARGO; VALIDITY OF SUCH
STIPULATIONS. — Three kinds of stipulation have often been made in a bill of lading.
The first is one exempting the carrier from any and all liability for loss or damage
occasioned by its own negligence. The second is one providing for an unqualified
limitation of such liability to an agreed valuation. And the third is one limiting the liability
of the carrier to an agreed valuation unless the shipper declare a higher value and pays
a higher rate of freight. According to an almost uniform weight of authority, the first and
second kinds of stipulations are invalid as being contrary to public policy, but the third
is valid and enforceable.
2. ID.; ID. — A stipulation in a bill of lading which either exempts the carrier
from liability for loss or damage occasioned by its negligences or provides for an
unqualified limitation of such liability to an agreed valuation, is invalid as being contrary
to public policy.
3. ID.; ID.; ID. — But a stipulation in such bill of lading which limits the liability
of the carrier to a specified amount unless the shipper declares a higher value and pays
a higher rate of freight, is valid and enforceable. Thus, if a common carrier gives to a
shipper the choice of two rates, the lower of them conditioned upon his agreeing to a
stipulated valuation of his property in case of loss, even by the carrier's negligence, if
the shipper makes the choice understandingly and freely, and names his valuation, he
cannot thereafter recover more than the value which he thus places upon his property.
4. CONTRACT; CONSTRUCTION OF, IN CASE OF DOUBT. — A written contract,
in case of doubt, should be interpreted against the party who has drawn the contract. It
is a well-known principle of construction that ambiguity or uncertainty in an agreement
must be construed most strongly against the party causing it. There rules are
applicable to contracts contained in bills of lading. In construing a bill of lading given by
the carrier for the safe transportation and delivery of goods shipped by a consignor, the
contract will be construed most strongly against the carrier, and favorably to the
consignor, in case of doubt in and matter of construction.

DECISION
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 JOHNSON , J : p

This action was commenced in the Court of First Instance of the City of Manila to
recover the sum of P420 together with interest thereon. The facts are stipulated by the
Parties, and are, briefly, as follows:
(1) On or about the 5th day of June, 1919, the plaintiff caused to be delivered
on board the steamship Bolton Castle, then in the harbor of New York, four cases of
merchandise one of which contained twelve (12) 8-day Edmond clocks, properly boxed
and marked for transportation to Manila, and paid freight on said clocks from New York
to Manila in advance. The said steamship arrived in the port of Manila on or about the
10th day of September, 1919, consigned to the defendant herein as agent and
representative of said vessel in said port. Neither the master of said vessel nor the
defendant herein, as its agent, delivered to the plaintiff the aforesaid twelve 8-day
Edmond clocks, although demand was made upon them for their delivery.
(2) The invoice value of the said twelve 8-day Edmond clocks in the city of
New York was P22 and the market value of the same in the City of Manila at the time
when they should have been delivered to the plaintiff was P420.
(3) The bill of lading issued and delivered to the plaintiff by the master of the
said steamship Bolton Castle contained, among others, the following clauses:
"1. It is mutually agreed that the value of the goods receipted for above
does not exceed $500 per freight ton, or, in proportion for any part of a ton, unless
the value be expressly stated herein and ad valorem freight paid thereon."
"9. Also, that in the event of claims for short delivery of, or damage to,
cargo being made, the carrier shall not be liable for more than the net invoice price
plus freight and insurance less all charges saved, and any loss or damage for
which the carrier may be liable shall be adjusted pro rata on the said basis."
(4) The case containing the aforesaid twelve 8-day Edmond clocks measured
3 cubic feet, and the freight ton value thereof was $1,480, U. S. currency.
(5) No greater value than $500, U. S. currency, per freight ton was declared by
the plaintiff on the aforesaid clocks, and no ad valorem freight was paid thereon.
(6) On or about October 9, 1919, the defendant tendered to the plaintiff
P76.36, the proportionate freight ton value of the aforesaid twelve 8-day Edmond
clocks, in payment of plaintiff's claim, which tender plaintiff rejected.
The lower court, in accordance with clause 9 or the bill of lading above quoted,
rendered judgment in favor of the plaintiff against the defendant for the sum of
P226.02, this being the invoice value of the clocks in question plus the freight and
insurance thereon, with legal interest thereon from November 20, 1919, the date of the
complaint, together with costs. From that judgment both parties appealed to this court.
The plaintiff-appellant insists that it is entitled to recover from the defendant the
market value of the clocks in question to wit: the sum of P420. The defendant-
appellant, on he other hand, contends that, in accordance with clause 1 a the bill of
lading, the plaintiff is entitled to recover only the sum of P76.36, the proportionate
freight ton value of the said clocks. The claim of the plaintiff is based upon the
argument that the two clauses in the bill of lading above quoted, limiting the liability of
the carrier, are contrary to public order and, therefore, null and void. The defendant, on
the other hand, contends that both of said clauses are valid, and that clause 1 should
have been applied by the lower court instead of clause 9.
I. The appeal of the plaintiff presents this question: May a common carrier, by
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 stipulations inserted in the bill of lading, limit its liability for the loss of or damage to the
cargo to an agreed valuation of the latter?
Three kinds of stipulations have often been made in a bill of lading. The rst is
one exempting the carrier from any and all liability for loss or damage occasioned by its
own negligence. The second is one providing for an unquali ed limitation of such
liability to an agreed valuation. And the third is one limiting the liability of the carrier to
an agreed valuation unless the shipper declares a higher vale and pays a higher rate of
freight. According to an almost uniform weight of authority, the rst and second kinds
of stipulations are invalid as being contrary to public policy, but the third is valid and
enforceable.
The authorities relied upon by the plaintiff-appellant (the Harter Act [Act of
Congress of February 13, 1893]; Louisville Ry. Co. vs. Wynn, 88 Tenn., 320; and Galt vs.
Adams Express Co., 4 McAr., 124; 48 Am. Rep., 742) support the proposition that the
rst and second stipulations in a bill of lading are invalid which either exempt the carrier
from liability for loss or damage occasioned by its negligences or provide for an
unqualified limitation of such liability to an agreed valuation.
A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly
shows that the present case falls within the third stipulation, to wit: That a clause in a
bill of lading limiting the liability of the carrier to a certain amount unless the shipper
declares a higher value and pays a higher rate of freight, is valid and enforceable. This
proposition is supported by a uniform lien of decisions of the Supreme Court of the
United States rendered both prior and subsequent to the passage of the Harter Act,
from the case of Hart vs. Pennsylvania R. R. Co. (decided Nov. 24, 1884; 112 U. S., 331),
to the case of the Union Paci c Ry. Co. vs. Burke (decided Feb. 28, 1921, Advance
Opinions, 1920-1921, p. 318).
In the case of Hart vs. Pennsylvania R. R. Co., supra, it was held that "where a
contract of carriage, signed by the shipper, is fairly made with a railroad company,
agreeing on a valuation of the property carried, with the rate of freight based on the
condition that the carrier assumes liability only to the extent of the agreed valuation,
even in case of loss or damage by the negligence of the carrier, the contract will be
upheld as proper and lawful mode of recurring a due proportion between the amount
for which the carrier may be responsible and the freight he receives, and protecting
himself against extravagant and fanciful valuations."
In the case of Union Paci c Railway Co. vs. Burke, supra, the court said: "In many
cases, from the decision in Hart vs. Pennsylvania R. R. Co. (112 U. S., 331; 28 L. ed., 717;
5 Sup. Ct. Rep., 151, decided in 1884), to Boston & M. R. Co. vs. Piper (246 U. S., 439; 62
L. ed., 820; 38 Sup. Ct. Rep., 354; Ann. Cas. 1918 E, 469, decided in 1918), it has been
declared to be the settled Federal law that if a common carrier gives to a shipper the
choice of two rates, the lower of them conditioned upon his agreeing to a stipulated
valuation of his property in case of loss, even by the carrier's negligence, if the shipper
makes such a choice, understandingly and freely, and names his valuation, he cannot
thereafter recover more than the value which he thus places upon his property As a
matter of legal distinction, estoppel is made the basis of this ruling, — that, having
accepted the bene t of the lower rate, in common honesty the shipper may not
repudiate the conditions on which it was obtained, — but the rule and the effect of it are
clearly established."

The syllabus of the same case reads as follows: "A carrier may not, by a valuation
agreement with a shipper, limit its liability in case of the loss by negligence of an
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 interstate shipment to less than the real value thereof, unless the shipper is given a
choice of rates, based on valuation."
"A limitation of liability based upon an agreed value to obtain a lower rate
does not conflict with any sound principle of public policy; and it is not
conformable to plain principle of justice that a shipper may understate value in
order to reduce the rate and then recover a larger value in case of loss." (Adams
Express Co. vs. Croninger, 226 U. S, 491, 492.) See also Reid vs. Fargo (130 C. C.
A., 285); Jennings vs. Smith (45 C. C. A., 249); George N. Pierce Co. vs. Wells,
Fargo & Co. (236 U. S., 278); Wells, Fargo & Co. vs. Neiman-Marcus Co. (227 U. S.,
469).
It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill
of lading here in question are not contrary to public order. Article 1255 of the Civil Code
provides that "the contracting parties may establish any agreements, terms and
conditions they may deem advisable, provided they are not contrary to law, morals or
public order." Said clauses of the bill of lading are, therefore, valid and binding upon the
parties thereto.
II. The question presented by the appeal of the defendant is whether clause 1
or clause 9 of the bill of lading here in question is to be adopted as the measure of
defendant's liability. Clause 1 provides as follows:
"1. It is mutually agreed that the value of the goods receipted for above
does not exceed $500 per freight ton, or, in proportion for any part of a ton, unless
the value be expressly stated herein and ad valorem freight paid thereon." Clause
9 provides:
"9. Also, that in the event of claims for short delivery of, or damage to,
cargo being made, the carrier shall not be liable for more than the net invoice price
plus freight and insurance less all charges saved, and any loss or damage for
which the carrier may be liable shall be adjusted pro rata on the said basis."
The defendant-appellant contends that these two clauses, if construed together,
mean that the shipper and the carrier stipulate and agree that the value of the goods
receipted for does not exceed $500 per freight ton, but should the invoice value of the
goods be less than $500 per freight ton, then the invoice value governs; that since in
this case the invoice value is more than $500 per freight ton, the latter valuation should
be adopted and that according to that valuation, the proportionate value of the clocks
in question is only P76.36, which the defendant is ready and willing to pay to the
plaintiff.
It will be noted, however, that whereas clause 1 contains only an implied
undertaking to settle in case of 1085 on the basis of not exceeding $500 per freight
ton, clause 9 contains an express undertaking to settle on the basis of the net invoice
price plus freight and insurance less all charges saved. "Any loss or damage for which
the carrier may be liable shall be adjusted pro rata on the said basis," clause 9 expressly
provides. It seems to us that there is an irreconcilable con ict between the two clauses
with regard to the measure of defendant's liability. It is dif cult to reconcile them
without doing violence to the language used and reading exceptions and conditions
into the undertaking contained in clause 9 that are not there. This being the case, the bill
of lading in question should be interpreted against the defendant carrier, which drew
said contract. "A written contract should, in case of doubt, be interpreted against the
party who has drawn the contract." (6 R. C. L., 854.) It is a well-known principle of
construction that ambiguity or uncertainty in an agreement must be construed most
strongly against the party causing it. (6 R. C. L., 855.) These rules are applicable to
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 contracts contained in bills of lading. "In construing a bill of lading given by the carrier
for the safe transportation and delivery of goods shipped by a consignor, the contract
will be construed most strongly against the carrier, and favorably to the consignor, in
case of doubt in any matter of construction." (Alabama, etc. R. R. Co. vs. Thomas, 89
Ala., 294; 18 Am. St. Rep., 119.)
It follows from all of the foregoing that the judgment appealed from should be
affirmed, without any finding as to costs. So ordered.
Araullo, Street, Avanceña, and Villamor, JJ., concur.

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