SEA-LAND SERVICE INC., PETITIONER, VS. INTERMEDIATE APPELLATE COURT AND PAULINO CUE, DOING BUSINESS UNDER THE NAME AND STYLE OF “SEN HIAP HING”, RESPONDENTS.

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 fulfill­ment 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.

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

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

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

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

^[5]
Exhibit F

^[6]
Exhibits 2, 2-A

^[7]
Civil Case No. 20810

^[8]
Rollo, p. 21

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

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

^[11]
90 Phil. 836, 845-846; see also American Co. vs. Natividad,
46 Phil. 207 and Phoenix Assurance Co., Ltd. vs. United States Lines, 22
SCRA 675

^[12]
Art. 1753, Civil Code

^[13]
Art. 1766, Civil Code; Samar Mining Co., Inc. vs.
Nordeutscher Lloyd, 132 SCRA 529; Eastern Shipping
Lines, Inc. vs. The Nisshin Fire & Marine Insurance Co., et al., G. R. Nos. 69044 and 71478, May 29, 1987

^[14]
Exhibit 2

^[15]
Rollo pp. 26-27

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

^[17]
Freixas and Co. vs. Pacific Mail Steamship
Co., 42 Phil. 198; H.E. Heacock Co. vs. Macondray & Co., 43 Phil. 205; American President Lines
vs. Klepper, infra; Phoenix Assurance Co. vs. Macondray Co., supra

^[18]
Art. 373, Code of Commerce

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

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

^[21]Phoenix
Assurance Company vs. Macondray & Company,
supra, citing Shackman vs. Cunard White Star, D.C.N.Y. 1940; see also Eastern Shipping
Lines, Inc. vs. IAC, supra, which cites the same American case.

^[22]
American President Lines vs. Klepper, supra

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

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