Case Digest: Eastern and Australian Steamship Co., Ltd. v. Great American Insurance Co., G.R. No. L-37604, October 23, 1981

Commercial Laws 2 | Common Carriers

De Castro, J.

Recit Ver:

On December 10, 1971, Jackson and Spring (Sydney) Pty. Ltd. shipped a case of impellers for a Warman pump from Sydney, Australia to Manila, Philippines on the SS "Chitral," a vessel owned by Eastern & Australian Steamship Co., Ltd. and operated through F.E. Zuellig, Inc. The shipment was insured for PHP 35,921.81 by Great American Insurance Co. However, when the vessel arrived in Manila on December 22, 1971, it failed to discharge the shipment. This failure led to a claim by Great American Insurance Co., which paid P35,921.81 to the consignee, Benguet Consolidated, Inc. and subsequently sought recovery from the petitioners.

The petitioners contended that their liability was limited to L100 Sterling (PHP 1,544.40) as per the Bill of Lading, and not $500 (PHP 3,217.50) according to Section 4(5) of the Carriage of Goods by Sea Act. The court found that while the Carriage of Goods by Sea Act establishes a minimum liability of $500 per package in the absence of a declared higher value, it does not disallow a lower limit if agreed upon in the Bill of Lading. Article 1749 of the New Civil Code allows limitations on carrier liability provided they are just and reasonable. Since there was no agreement for a higher valuation and the petitioners had adhered to the Bill of Lading's terms, the court ruled that the petitioners’ liability should be limited to L100 Sterling, reversing the previous decision and finding them liable for this amount.

Facts: 

  • On December 10, 1971, Jackson and Spring (Sydney) Pty. Ltd. shipped one case of impellers for a Warman pump from Sydney, Australia, on the SS "Chitral," owned by Eastern & Australian Steamship Co., Ltd., and operated through F.E. Zuellig, Inc., to Manila, Philippines. 

    • The shipment was insured for P 35,921.81 by Great American Insurance Co.

  • On December 22, 1971, the SS "Chitral" arrived in Manila, but did not discharge the shipment. A demand for delivery was made and was not fulfilled, leading to a claim against the petitioners.

    • Great American Insurance Co., paid P35,921.81 to the consignee, Benguet Consolidated, Inc.

  • Great American Insurance Co. then filed a complaint against the petitioners for recovery of the amount, plus legal interest and attorney's fees.

  • In their answer dated November 27, 1972, petitioners argued their liability was limited to L100 Sterling (P1,544.40) as stipulated in the Bill of Lading. 

    • They had previously expressed willingness to pay up to this limit.

CFI-Manila: Determined that under Section 4 (5) of the Carriage of Goods by Sea Act, the maximum liability for lost or damaged cargo should not be less than $500 per package, regardless of the Bill of Lading stipulation. Consequently, the Bill of Lading's limit of L100 Sterling was deemed void, and the petitioners were held liable for the $500 amount.

Issue: Whether the petitioners' liability was limited to L100 Sterling or $500 (P3,217.50) under the Carriage of Goods by Sea Act. 

Held: 

Petitioners contend that the first paragraphs 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 L100 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 melee, 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 melee, for which the carrier is liable. It prescribes that the carrier may only be held liable for an amount not more than L100 Sterling which is below the melee, 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 melee, 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 melee, 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 melee, 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 Bin 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 melee, liability of the vessel/carrier, per package, in the, absence of a higher valuation of the goods as indicated in the Bail 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 allow 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. Prince Line, 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., We are reiterating 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.  


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 L100 Sterling or its peso equivalent of P1,544.40. Without pronouncement as to costs.


SO ORDERED.

Comments

Post a Comment

Popular posts from this blog

Equality and Human Rights: The United Nations and Human Rights System (September 16, 2023)

Sovereign Equality of States/Principle of sovereign equality UN Charter of 1945 All states are equal before international law no matter the size of their territory, population, economy or military. All states have equal rights and duties under international law, and that no state has the right to interfere in the internal affairs of another state. Positive Consequences: All states have a voice in international affairs .   All states have the opportunity to participate in international organizations and to negotiate and conclude treaties. This helps to ensure that the interests of all states are represented in the development of international law and policy. No state has the right to interfere in the internal affairs of another state.  This helps to protect the sovereignty of all states and to prevent the use of force or coercion to achieve political objectives. States have the right to develop their own political, economic, and social systems without interference from othe...
Read more

Commercial Laws 1: R.A. No. 11057 — Personal Property Security Act

  Commercial Law TITLE XVI Personal Property Security Act Micro, Small and Medium Enterprises are sources of growth and innovation. They contribute to and benefit from future growth. Their increased participation in global trade "can have significant impact in reducing poverty through employment creation, productivity improvements and economies of scale." Congress passed the Personal Property Security Act in order to provide Micro, Small and Medium Enterprises (MSMEs) more access to "credit at the least cost through the establishment of a unified and modern legal framework for securing obligations with personal property ." It was explained:  According to the 2015 Philippine Statistics Authority data, there are 896,839 micro-small and medium enterprises (MSMEs) that established in the Philippines.  These MSMEs generated a total of 4,784,870 jobs in 2015 versus 2,181,819 for the large enterprises.  This indicates that the MSMEs contributed almost 61 % o...
Read more

Land Title and Deeds: Chapter 1 — What Lands are Capable of Being Registered

Chapter I What Lands are Capable of Being Registered All lands in the Philippines are presumed to be lands of the public domain, and therefore, owned by the State. This rule finds support in Section 2, Article XII of the 1987 Constitution:  Section 2 . All lands of the public domain , waters, minerals, coal, petroleum, and other mineral oils, all forces of potential energy, fisheries, forests or timber, wildlife, flora and fauna, and other natural resources are owned by the State . With the exception of agricultural lands, all other natural resources shall not be alienated. The exploration, development, and utilization of natural resources shall be under the full control and supervision of the State. The State may directly undertake such activities, or it may enter into co-production, joint venture, or production-sharing agreements with Filipino citizens, or corporations or associations at least 60 per centum of whose capital is owned by such citizens. Such agreements may be fo...
Read more