EASTERN AND AUSTRALIAN STEAMSHIP CO., LTD. AND F.E. ZUELLIG, INC., PETITIONERS, VS. GREAT AMERICAN INSURANCE CO. AND COURT OF FIRST INSTANCE OF MANILA, BRANCH XIII, RESPONDENTS.

This is a petition for review on certiorari of the
decision of the Court of First Instance of Manila, Branch XIII, dated July 25,
1973, in Civil Case No. 88985, entitled “Great American Insurance Co.,
plaintiff, vs. Eastern & Australian Steamship Co., Ltd. and/or F.E. Zuellig, Inc.,
defendants,” the dispositive portion of which
reads:

“WHEREFORE, judgment is hereby rendered, finding the
defendants liable to the plaintiff in the amount of $500.00, or its peso
equivalent of P3,217.50, with legal interest thereon from November 20, 1972;
and to further pay to the plaintiff an amount equivalent to twenty-five per
centum (25%) thereof by way of damages as and for attorney’s fees.”

The facts of the case are as follows:

On December 10, 1971, the Jackson and Spring (Sydney) Pty. Ltd.
shipped from Sydney, Australia, one (1) case of impellers for warman pump on board the SS “Chitral,”
a vessel owned and operated in
the Philippines by Eastern & Australian Steamship Co., Ltd., thru its agent
F.E. Zuellig, Inc. under
Bill of Lading No. 31, for delivery to Manila, Philippines in favor of
consignee Benguet Consolidated, Inc.  The shipment was insured with Great American
Insurance, Co. for P35,921.81 against all risks.  On December
22, 1971 the SS “Chitral” arrived
in Manila but failed to discharge
the shipment or any part thereof.  Demand
was made on herein petitioners for the delivery of said shipment, but having
failed to make delivery, a claim was presented against them for the value of
the ship­ment.  Petitioners, likewise,
failed to make good the claim.  As a consequence of the loss of the shipment,
private respon­dent Great American Insurance Co. was compelled to pay the
consignee P35,921.81.  As subrogee, said private respondent filed a complaint dated Nov.
20, 1972 against
herein peti­tioners for recovery of the said amount with legal interest and
attorney’s fees.

In the answer dated Nov. 27, 1972 petitioners alleged that their
liability for the loss of the shipment is only limited to £100 Sterling or its
peso equivalent of P1,544.40 as per stipulation in the Bill of Lading and that
even before the filing of the complaint, petitioners have signified their
willingness to pay the claim up to their limit of liability as stipulated in
the Bill of Lading.

During the pre-trial on May 28, 1973, the loss of the subject
shipment was admitted, and the parties submitted the case for decision on one
issue:  whether petitioners’ liabi­lity
is limited to £100 Sterling or its peso equivalent of P1,544.40 as stipulated
in Clause 17 of the Bill of Lading^[1]
or whether petitioners’ liability should be $500 or its peso equivalent in the
sum of P3, 217.50 pursuant to
Sec. 4 (5) of the Carriage of Goods by Sea Act.^[2]

The court a quo found that under
Section 4 (5) of the Carriage of Goods by Sea Act, the carrier and the shipper
may, in the absence of a declaration in the Bill of Lading of the value of the
goods shipped, fix a maximum liability of the shipper for the cargo lost or
damaged, but such maximum shall not be less than $500.00 per package.  Consequently, the agree­ment for a maximum
liability of only £100 Sterling contained in Clause 17 of the Bill of Lading was declared void for
being contrary to law and as adverted to above, petitioners were held liable.

From the decision of the
lower court the present petition for review was instituted by petitioners
assigning the following errors:

I

THAT RESPONDENT CFI ERRED
IN DECIDING THAT THE LIMIT OF LIABILITY IN THE SUM OF £100 STERLING OR
ITS PESO EQUIVALENT OF THE VESSEL/CARRIER, PER PACKAGE, AS STIPULATED
IN CLAUSE 17 OF THE BILL OF LADING, IS
CONTRARY TO LAW, AND,
THEREFORE, VOID; and

II

THAT RESPONDENT COURT ERRED
IN AWARDING ATTORNEY’S FEES AND COSTS IN FAVOR OF PRIVATE RESPONDENT AND
AGAINST THE HEREIN PETITIONERS.

Petitioners contend that
the first paragraph of Section 4 (5) of the Carriage of Goods by Sea Act
prescribes a maximum liability of the vessel/carrier in the amount of $500.00
per package; that said maximum liability, however, is not applicable in a
shipment wherein the nature and a higher valuation of the goods are indicated
in the Bill of Lading; that the second paragraph refers to an agreement of the
shipper and the carrier which provides for another maximum necessarily higher
than $500.00 and that said proviso should not be read in con­nection with
stipulations in Bills of Lading limiting the vessel’s liability to less than $500.00 per package,
otherwise, the very intent of the law setting the sum of $500.00 as the maximum
liability of the carrier, per package, in the absence of a higher valuation of
the goods as indicated in the Bill of Lading would be nullified, for it would thereby become not
the maximum, but the minimum liability of the carrier.

Petitioners also contend
that the New Civil Code, particularly Articles 1749^[3] and 1750,^[4] expressly allow the limitation of the carrier’s liability, provided it is just and reasonable.  Hence, the limitation of petitioners’
liability to £100 Sterling or its peso equivalent as stipulated in the Bill of Lading is
perfectly legal and binding to the parties.

Private respondent alleges that Article 1749 imposes certain
conditions for the validity of a stipulation limiting the carrier’s
liability.  These conditions are:  (1) it must be in writing, signed by the
shipper or owner; (2) it must be supported by a valuable consideration other
than the service rendered by the carrier; and (3) it must be reasonable, just
and not contrary to public policy.

Respondent believes that an agreement limiting the carrier’s
liability does not per se give validity thereto but it must be
shown, among others, that the amount agreed upon is just and reasonable under
the circumstances.

There is no inconsistency between Section 4 (5) of the Carriage
of Goods by Sea Act and Clause 17 of the Bill of Lading.  The first part of the provision of Section 4
(5) of the Carriage of Goods by Sea Act limits the maximum amount that may be
recovered by the shipper in the absence of an agreement as to the nature and
value of goods shipped.  Said provision
does not prescribe the minimum and hence, it could be any amount which is below $500.00.  Clause 17 of the questioned Bill of Lading
also provides the maximum for which the carrier is liable.  It prescribes that the carrier may only be held
liable for an amount not more than £100 Sterling which is below the maximum limit required in
the Carriage of Goods by Sea Act.

It should be noted that both the Carriage of Goods by Sea Act and
Clause 17 of the Bill of Lading allow the payment beyond the respective maximum
limit imposed therein, provided that the value of the goods have been declared
in the Bill of Lading.

The second paragraph of Section 4 (5) of the Carriage of Goods by
Sea Act prescribing the maximum amount shall not be less than $500.00 refers to
a situation where there is an agree­ment other than set forth in the Bill of
Lading providing for a maximum higher than $500.00 per package.  In the case at bar, it is apparent that there
had been no agreement between the parties, and hence, Clause 17 of the Bill of
Lading shall prevail.

Petitioners’ stand that
the condition imposed in Clause 17 of the Bill of Lading should not be read in
the light of second paragraph of Section 4 (5) of the Carriage of Goods by Sea
Act, is well taken.  Indeed, it would be
to render ineffective the very intent of the law setting the sum of $500.00 as
the maximum liability of the vessel/carrier, per package, in the absence of a
higher valuation of the goods as indicated in the Bill of Lading.  By providing that $500.00 is the maximum lia­bility,
the law does not disallow an agreement for liability at a lesser amount.

 Significantly, Article
1749 of the New Civil Code expressly allows the limitation of the carrier’s
liability:

“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.”

Thus, in the case of
Northern Motors, Inc. vs. Prince Line,^[5] We said:

“This Court has held as valid and binding a similar provision
in a bill of lading limiting the carrier’s liability to a specific amount
unless the shipper expressly declares a higher valuation and pays the
corresponding rate thereon.”

Again,
in Phoenix Assurance Company vs. Macondray & Co.,
Inc.,^[6] We reiterated the validity of a stipulation
limiting the carrier’s liability.

The right of the carrier
to limit its liability has been recognized not only in Our jurisdiction but
also in American jurisprudence:

“A stipulation in a contract of carriage that the carrier will
not be liable beyond a specified amount unless the shipper declares the goods
to have a greater value is generally deemed to be valid and will operate to
limit the carrier’s liability, even if the loss or damage results from the
carrier’s negligence.  Pursuant to such
provision, where the shipper is silent as to the value of his goods, the
carrier’s liability for loss or damage thereto is limited to the amount
specified in the contract of carriage and where the shipper states the value of
his goods, the carrier’s liability for loss or damage thereto is limited to
that amount.  Under a stipulation such as
this, it is the duty of the shipper to disclose, rather than the carrier’s to
demand the true value of the goods and silence on the part of the shipper will
be sufficient to limit recovery in case of loss to the amount stated in the
contract of carriage.”^[7]

In view of the above
findings, it is no longer necessary to discuss the second assignment of error.

WHEREFORE, the
decision of the court a quo is
hereby reversed and another one is entered finding petitioners liable to
private respondent in the amount of £100 Sterling or its peso equivalent of P1,544.40.  Without pronouncement as to costs.

SO ORDERED.

Makasiar, Fernandez, Guerrero, and Melencio-Herrera,
JJ., concur.

Teehankee, J., (Chairman), in the result.

* Mr. Justice de Castro, was
designated to sit with the First Division under Special Order No. 225.

^[1]
Clause 17. – The carrier will not be accountable for goods of any description
beyond 100 Sterling in respect of any one package or unit unless the value thereof
shall have been stated in writing both on the broker’s order, which must be
obtained before shipment, and on the shipping note presented on shipment, and
extra freight agreed upon and paid, and bill of lading signed with a
declaration of the nature and value of the goods appearing thereon.  When the value is declared and extra freight
agreed as aforesaid, the carrier’s liability shall not exceed such value or pro
rata on that basis in the event of partial loss or damage.  Subject to the above, the carrier’s liability
in case of loss or detention of or injury to goods, for which they may be
responsible, shall be calculated on and in no case exceed the net invoice cost
and disbursements.

^[2]
Sec. 4 (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 of 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.

^[3]
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.

^[4]
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 has been fairly and freely
agreed upon.

^[5]
107 Phil. 254.

^[6]
64 SCRA 20.

^[7]
14 Am. Jur. 2d p. 88.