237 Phil.

531

FIRST DIVISION
[ G.R. No. 75118, August 31, 1987 ]
SEA-LAND SERVICE INC., PETITIONER, VS.
INTERMEDIATE
APPELLATE COURT AND PAULINO CUE, DOING BUSINESS UNDER
THE NAME AND
STYLE OF "SEN HIAP HING", RESPONDENTS.

DECISION

NARVASA, J.:

The main issue here is whether or not the consignee of seaborne

freight is bound by stipulations
in the
covering bill of lading limiting to a fixed amount the liability of the carrier
for loss or
damage to the cargo where its value is not declared in the bill.

The factual antecedents, for the most part, are not in dispute.

On or about January 8,
1981, Sea-Land Service, Inc. (Sea-Land, for brevity), a foreign shipping
and
forwarding company licensed to do business in the Philippines, received from
Seaborne
Trading Company in Oakland, California a shipment consigned to Sen Hiap Hing,
the business
name used by Paulino Cue in the
wholesale and retail trade which he operated out of an
establishment located on
Borromeo and Plaridel
Streets, Cebu City.

The shipper not having

declared the value of the shipment, no value was indicated in the bill of
lading.  The bill described the shipment
only as "8 CTNS on 2 SKIDS-FILES.”[1]  Based
on
volume measurements Sea-Land charged the shipper the total amount of
US$209.28[2] for
freightage and other charges.  The shipment was loaded on board the MS
Patriot, a vessel
owned and operated by Sea-Land for discharge at the Port of Cebu.

The shipment arrived in Manila on February 12, 1981, and there discharged in Container No.
310996 into the custody of the arrastre contractor
and the customs and port authorities.[3]
Sometime between February 13 and 16, 1981,
after the shipment had been transferred, along
with other cargoes, to Container
No. 40158 near Warehouse 3 at Pier 3 in South
Harbor, Manila,
awaiting trans-shipment to Cebu,
it was stolen by pilferers and has never been recovered.[4]

On March
10, 1981, Paulino Cue, the consignee, made formal claim upon Sea-Land
for the
value of the lost shipment allegedly amounting to P179,643.48.[5] Sea-Land offered to settle for
US$4,000.00,
or its then Philippine peso equivalent of P30,600.00, asserting that said
amount
represented its maximum liability for the loss of the shipment under the
package limitation
clause in the covering bill of lading.[6]
Cue rejected the offer and thereafter brought suit for
damages against Sea-Land
in the then Court of First Instance of Cebu, Branch
X.[7]
Said Court,
after trial, rendered judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00
representing the Philippine currency value of the lost cargo, P55,814.00 for
unrealized profit
with one (1%) percent monthly interest from the filing of the
complaint until fully paid,
P25,000.00 for attorney's fees and P2,000.00 as
litigation expenses.[8]

Sea-Land appealed to the

Intermediate Appellate Court.[9] That Court however affirmed the
decision of
the Trial Court "*** in all its parts ***"[10] Sea-Land
thereupon filed the present
petition for review which, as already stated, poses
the question of whether, upon the facts above
set forth, it can be held liable
for the loss of the shipment in any amount beyond the limit of
US$500.00 per
package stipulated in the bill of lading.

To begin with, there is

no question of the right, in principle, of a consignee in a bill of lading to
recover from the carrier or shipper for loss of, or damage to, goods being transported under said
bill, although
that document may have been -- as in practice it oftentimes is -- drawn up only by
the consignor and the carrier without the intervention of the
consignee.  In Mendoza vs.
Philippine Air Lines, Inc.[11] the Court delved at some length into the
reasons behind this when,
upon a claim made by the consignee of a motion
picture film shipped by air that he was never a
party to the contract of
transportation and was a complete stranger thereto, it said:

"But appellant now contends that he is not suing on a breach

of contract but on a tort
as provided for in Art. 1902 of the Civil Code.  We are a little perplexed as to this
new
theory of the appellant.  First, he
insists that the articles of the Code of
Commerce should be applied; that he
invokes the provisions of said
Code governing
the obligations of a common
carrier to make prompt delivery of goods given to it
under a contract of
transportation.  Later, as already said,
he says that he was never a
party to the contract of transportation and was a complete stranger to it, and that he
is now suing on a tort or a violation
of his rights as a stranger (culpa aquiliana).  If
he does not invoke the contract of carriage
entered into with the defendant company,
then he would hardly have any leg to
stand on.  His right to prompt delivery
of the
can of film at the Phil Air
Port stems and is derived from the
contract of carriage
under which contract, the PAL undertook to carry the can
of film safely and to
deliver it to him
promptly.  Take away or ignore that contract and the
obligation to
carry and to deliver and right to prompt delivery disappear.  Common carriers are not
obligated by law to
carry and to deliver merchandise, and persons are not vested
with the right to
prompt delivery, unless such common carriers previously assume
the
obligation.  Said rights and obligations
are created by a specific contract entered
into by the parties.  In the present case, the findings of the
trial court which as
already stated, are accepted by the parties and which we
must accept are to the effect
that the LVN Pictures Inc. and Jose Mendoza on
one side, and the defendant
company on the other, entered into a contract of
transportation (p.29, Rec. on
Appeal). 
One interpretation of said finding is that the LVN Pictures Inc. through
previous agreement with Mendoza
acted as the latter's
agent.  When he negotiated
with the LVN
Pictures Inc. to rent the film ‘Himala ng Birhen’ and show it during
the
Naga town fiesta, he most probably authorized and
enjoined the Picture
Company to ship the film for him on the PAL on September
17th.  Another
interpretation is that
even if the LVN Pictures Inc. as consignor of its own initiative,
and acting
independently of Mendoza for the time being, made Mendoza as
consignee, a
stranger to the contract if that is possible, nevertheless when he,
Mendoza
appeared at the Phil Air Port armed with the copy of the Air Way Bill
(Exh. 1) demanding the delivery of the shipment to him, he
thereby made himself a
 party to the contract of transportation.  The very citation made by appellant in his
memorandum supports this view.  Speaking
of the possibility of a conflict between
the order of the shipper on the one
hand and the order of the consignee on the other,
as when the shipper orders
the shipping company to return or retain the goods
shipped while the consignee
demands their delivery, Malagarriga in his book Codigo
de Comercio Comentado, Vol. 1, p. 400, citing a decision of the
Argentina Court of
Appeals on commercial matters, cited by Tolentino
in Vol. II of his book entitled
'Commentaries and Jurisprudence on the
Commercial Laws of the Philippines' p.
209, says that the right of the shipper
to countermand the shipment terminates when
the consignee or legitimate holder
of the bill of lading appears with such bill of
lading before the carrier and
makes himself a party to the contract. 
Prior to that time
he is a stranger
to the contract.

Still another view of this phase of the case is that contemplated

in Art. 1257,
paragraph 2, of the old Civil Code (now Art. 1311, second
paragraph) which reads
thus:

Should the contract contain any stipulation in favor of a third

person, he may demand its fulfill‐­
ment provided he has given notice of his
acceptance to the person bound before the stipulation
has been revoked.'

Here, the contract of carriage between the LVN Pictures Inc. and
the defendant
carrier contains the stipulations of delivery to Mendoza
as consignee.  His demand
for the
delivery of the can of film to him at the Phil
Air Port
may be regarded as a
notice of his acceptance of the stipulation of the
delivery in his favor contained in
the contract of carriage and delivery.  In this case he also made himself a party to
the
contract, or at least has come to court to enforce it.  His cause of action must
necessarily be
founded on its breach."

Since the liability of a

common carrier for loss of or damage to goods transported by it under a
contract of carriage is governed by the laws of the country of destination[12] and the goods in
question were shipped from
the United States to the Philippines, the liability of petitioner Sea-
Land to
the respondent consignee is governed primarily by the Civil Code, and as
ordained by
the said Code, suppletorily, in all
matters not determined thereby, by the Code of Commerce
and special laws.[13] One of these suppletory
special laws is the Carriage of Goods by Sea Act,
U.S. Public Act No. 521 which was made applicable to all
contracts for the carriage of goods by
sea to and from Philippine ports in
foreign trade by Commonwealth Act No. 65, approved on
October
22, 1936.  Sec. 4(5) of said Act in part reads:

"(5)    Neither the

carrier nor the ship shall in any event be or become liable for any
loss or
damage to or in connection with the transportation of goods in an amount
exceeding $500 per package lawful money of the United States, or in case of
goods
not shipped in packages, per customary freight unit, or the equivalent of
that sum in
other currency, unless the nature and value of such goods have been
declared by the
shipper before shipment and inserted in the bill of
lading.  This declaration, if
embodied in
the bill of lading, shall be prima facie evidence, but shall not be
conclusive
on the carrier.
 By agreement between the carrier, master, or agent of the carrier,
and the shipper
another maximum amount than that mentioned in this paragraph
may be fixed: 
Provided, That such
maximum shall not be less than the figure above named.  In no
event shall the carrier be liable for
more than the amount of damage actually
sustained.

* * *’.”

Clause 22, first

paragraph, of the long-form bill of lading customarily issued by Sea-Land to
its
shipping clients[14] is a virtual copy of the the
first paragraph of the foregoing provision. 
It says:

"22.   VALUATION.  In the event of any loss, damage or delay to

or in connection
with goods exceeding in actual value $500 per package, lawful
money of the United
States, or in case of goods not shipped in packages, per
customary freight unit, the
value of the goods shall be deemed to be $500 per
package or per customary freight
unit, as the case may be, and the carrier's
liability, if any, shall be determined on the
basis of a value of $500 per
package or customary freight unit, unless the nature and
a higher value shall
be declared by the shipper in writing before shipment and
inserted in this Bill
of Lading."

And
in its second paragraph, the bill states:

"If a value higher than $500 shall have been declared in

writing by the shipper upon
delivery to the carrier and inserted in this bill
of lading and extra freight paid, if
required and in such case if the actual
value of the goods per package or per
customary freight unit shall exceed such
declared value, the value shall nevertheless
be deemed to be declared value and the carrier's liability, if any, shall not exceed the
declared value and any partial loss or damage shall be
adjusted pro rata on the basis
of such declared value."

Since, as already pointed

out, Article 1766 of the Civil Code expressly subjects the rights and
obligations of common carriers to the provisions of the Code of Commerce and of
special laws
in matters not
regulated by said (Civil) Code, the
Court fails to fathom the reason or justification
for the Appellate Court's
pronouncement in its appealed Decision that the Carriage of Goods by
Sea Act "*
* * has no application whatsoever in
this case."[15] Not only is there nothing in the
Civil Code
which absolutely prohibits agreements between shipper and carrier limiting the
latter's liability for loss of or
damage to cargo shipped under
contracts of carriage; it is also quite
clear that said Code in fact has
agreements of such character in contemplation in providing, in
its Articles
1749 and 1750, that:

"ART. 1749.  A stipulation that the common

carrier's liability is limited to the value
of the goods appearing in the bill
of lading, unless the shipper or owner declares a
greater value, is
binding."

"ART. 1750.  A contract fixing

the sum that may be recovered by the owner or
shipper for the loss,
destruction, or deterioration of the goods is valid, if it is
reasonable and
just under the circumstances, and has been fairly and freely agreed
upon."
Nothing
contained in section 4(5) of the Carriage of Goods by Sea Act already quoted is
repugnant to or inconsistent with any of the just-cited provisions of the Civil
Code.  Said section
merely gives more
flesh and greater specificity to the rather general terms of Article 1749
(without
doing any violence to the plain intent thereof) and of Article
1750, to give effect to
just
agreements limiting carriers' liability for loss or damage which are
freely and fairly entered into.

It seems clear that even

if said section 4(5) of the Carriage of Goods by Sea Act did not exist,
the
validity and binding effect of the liability limitation clause in the bill of
lading here are
nevertheless fully sustainable on the basis alone of the
cited Civil Code provisions.  That said
stipulation is just and reasonable is arguable from the fact that it echoes
Art. 1750 itself in
providing a limit to liability only if a greater value is
not declared for the shipment in the bill of
lading.  To hold otherwise would amount to questioning
the justice and fairness of that law
itself, and this the private respondent
does not pretend to do.  But over and
above that
consideration, the just and reasonable character of such stipulation
is implicit in its giving the
shipper or owner the option of avoiding accrual
of liability limitation by the simple and surely
far from onerous expedient of
declaring the nature and value of the shipment in the bill of
lading.  And since the shipper here has not been heard
to complain of having been
"rushed,"
imposed upon or deceived in any significant way into
agreeing to ship the cargo under a bill of
lading carrying such
a stipulation -- in fact, it does not appear that said party has been heard
from at all insofar as this dispute is concerned -- there is simply no
ground for assuming that its
agreement
thereto was not, as the laws
would require, freely and fairly sought and given.

The private respondent

had no direct part or intervention in the execution of the contract of
carriage
between the shipper and the carrier as set forth in the bill of lading in
question.  As
pointed out in Mendoza vs.
PAL, supra, the right of a party in the same situation as respondent
here, to recover for loss of a shipment consigned to him under a bill of lading drawn up only by
and between the shipper and the carrier, springs from either a relation of agency
that may exist
between him and the shipper or consignor, or his status as a stranger in whose favor some
stipulation is made in said contract,
and who becomes a party thereto when he demands
fulfillment of that
stipulation, in this case the delivery of the goods or cargo shipped.  In neither
capacity can he assert personally,
in bar to any provision of the bill of lading, the alleged
circumstance that
fair and free agreement to such provision was vitiated by its being in such
fine
print as to be hardly readable.  Parenthetically,
it may be observed that in one comparatively
recent case[16]
where this Court found that similar package limitation clause was "(p)rinted in the
smallest type on the back of the bill of lading," it nonetheless ruled that the consignee was
bound
thereby on the strength of authority holding that such provisions on liability limitation
are as much a part of a bill of lading  as though physically in it and as though
placed therein by
agreement of the parties.

There can, therefore, be

no doubt or equivocation about the validity and enforceability of
freely-
agreed-upon stipulations in a contract of carriage or bill of lading
limiting the liability of the
carrier to an agreed valuation unless the shipper
declares a higher value and inserts it into said
contract or bill.  This proposition,
moreover, rests upon an almost uniform weight of authority.[17]

The issue of alleged

deviation is also settled by Clause 13 of the bill of lading which expressly
authorizes transshipment of the goods at any point in the voyage in these
terms:

"13.   THROUGH CARGO AND TRANSSHIPMENT.  The carrier or master, in the

exercise of its
or his discretion and although transshipment or forwarding of the
 goods may not
have been contemplated or provided for herein, may at port of
discharge or any
other place whatsoever transship or forward the goods or any part
thereof by
any means at the risk and expense of the goods and at any time, whether
before
or after loading on the ship named herein and by any route, whether within or
outside the scope of the voyage or beyond the port of discharge or destination
of the
goods and without notice to the shipper or consignee.  The carrier or master may
delay such
transshipping or forwarding for any reason, including but not limited to
awaiting a vessel or other means of transportation whether by the carrier or
others."

Said provision obviates the necessity to offer any other justification

for offloading the shipment
in question in Manila
for transshipment to Cebu
City, the port of destination
stipulated in the
bill of lading. 
Nonetheless, the Court takes note of Sea-Land's explanation that it only
directly
serves the Port of Manila from abroad in the usual course of voyage of
its carriers, hence its
maintenance of arrangements with a local forwarder, Aboitiz and Company, for delivery of its
imported cargo to
the agreed final point of destination
within the Philippines, such arrangements
not being prohibited, but in fact
recognized, by law.[18]

Furthermore, this Court

has also ruled[19] that the Carriage of Goods by Sea Act is
applicable up
to the final port of destination and that the fact that
transshipment was made on an inter-island
vessel did not remove the contract of
carriage of goods from the operation of said Act.

Private respondent also contends that the aforecited

Clauses 22 and 13 of the bill of lading
relied upon by petitioner Sea-Land form
no part of the short-form bill of lading
attached to his
complaint before the Trial Court and appear only in the long
form of that document which, he
claims. 
Sea-Land offered (as its Exhibit 2) as an unused blank form with no
entries or
signatures therein.  He,
however, admitted in the Trial Court that several times in the past
shipments
had been delivered to him through Sea-Land[20], from which the assumption may
fairly follow
that by the time of the consignment now in question, he was already reasonably
apprised of the usual terms covering contracts of carriage with said
petitioner.

At any rate, as observed

earlier, it has already been held that the provisions of the Carriage of
Goods
by Sea Act on package limitation [sec. 4(5) of the Act hereinabove referred to]
are as
much a part of a bill of lading as though actually placed therein by
agreement of the parties.[21]

Private respondent, by
making claim for loss on the basis of the bill of lading, to all intents and
purposes accepted said bill.  Having done
so, he –

"* * * becomes
bound by all stipulations contained therein whether on the front or
the back
thereof.  Respondent cannot elude its
provisions simply because they
prejudice him and take advantage of those that are beneficial.  Secondly, the fact that
respondent shipped
his goods on board the ship of petitioner and paid the
corresponding freight
thereon shows that he impliedly accepted the bill of lading
which was issued in
connection with the shipment in question, and so it may be said
that the same
is binding upon him as if it had been actually signed by him or by any
other
person in his behalf. * * *"[22]

There is one final

consideration.  The private respondent
admits[23] that as early as on April
22,
1981, Sea-Land
had offered to settle his claim for US$4,000.00, the limit of said carrier's
liability for loss of the shipment under the bill of lading.  This Court having reached the
conclusion that
said sum is all that is justly due said respondent, it does not appear just or
equitable that Sea-Land, which offered that amount in good faith as early as
six years ago,
should, by being made to pay at the current conversion rate of
the dollar to the peso, bear for its
own account all of the increase in said
rate since the time of the offer of settlement. 
The
decision of the Regional Trial Court awarding the private respondent
P186,048.00 as the peso
value of the lost shipment is clearly based on a
conversion rate of P8.00 to
US$1.00, said
respondent having claimed a dollar value of
$23,256.00 for said shipment.[24] All circumstances
considered, it is just and
fair that Sea-Land's dollar obligation be convertible at the same rate.

WHEREFORE, the
Decision of the Intermediate Appellate Court complained of is reversed
and set aside.  The
stipulation in the questioned bill of lading limiting Sea-Land's liability for
loss of or damage to the shipment covered by said bill to US$500.00 per package
is held valid
and binding on private respondent.  There being no question of the fact that said
shipment
consisted of eight (8) cartons or
packages, for the loss of which Sea-Land is therefore liable in
the aggregate
amount of US$4,000.00, it is the judgment of the Court that said petitioner
discharge that obligation by
paying private respondent the sum of P32,000.00, the equivalent in
Philippine
currency of US$4,000.00 at the conversion rate of P8.00 to $1.00.  Costs against
private respondent.

SO ORDERED.

Teehankee, C.J., Cruz, Paras, and Gancayco, JJ., concur.

Exhibits 1, 1-B:  TSN Dec. 14, 1982, pp. 19-20
[1]

Petition, p. 2; Rollo, p. 11
[2]

Exhibits 6, 6-A:  TSN Jan. 26, 1983, pp. 18-20
[3]

Exhibits E, 3-A, 4, 8 and 9; TSN id.
[4]

Exhibit F
[5]

Exhibits 2, 2-A
[6]

Civil Case No. 20810
[7]

Rollo, p. 21
[8]

AC-G.R. CV No. 06150
[9]

[10]
Rollo, p. 12, 21-32

90 Phil. 836, 845-846; see also American Co. vs. Natividad,
46 Phil. 207 and Phoenix
[11]

Assurance Co., Ltd. vs. United States Lines, 22

SCRA 675
[12]
Art. 1753, Civil Code

Art. 1766, Civil Code; Samar Mining Co., Inc. vs.
Nordeutscher Lloyd, 132 SCRA 529;
[13]

Eastern Shipping
Lines, Inc. vs. The Nisshin Fire & Marine Insurance Co., et al., G. R. Nos.
69044 and 71478, May 29, 1987

Exhibit 2
[14]

Rollo pp. 26-27
[15]

Phoenix Assurance Company vs.
Macondray & Co. Inc., 64 SCRA 15, May 15, 1973
[16]

Freixas and Co. vs. Pacific Mail Steamship
Co., 42 Phil. 198; H.E. Heacock Co. vs.
[17]

Macondray & Co., 43 Phil. 205; American President Lines

vs. Klepper, infra; Phoenix
Assurance Co. vs. Macondray Co., supra

Art. 373, Code of Commerce
[18]

American Insurance Company vs. Compania Maritima, 21 SCRA 998
[19]

Reply to Comment, p.11, Rollo, p.87, citing
TSN Sept. 1, 1982
[20]

Phoenix
Assurance Company vs. Macondray & Company,
supra, citing Shackman vs. Cunard
[21]

White Star, D.C.N.Y. 1940; see also Eastern Shipping

Lines, Inc. vs. IAC, supra, which cites the
same American case.

American President Lines vs. Klepper, supra
[22]

Appellee's brief, p. 6; Rollo,
p. 53
[23]

Appellee’s brief, p. 5; Rollo,
p. 53
[24]

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