Case Digest: St. Paul Fire & Marine Insurance Co. v. Macondray & Co., Inc., G.R. No. L-27796, March 25, 1976

Commercial Laws 2: Common Carriers

Antonio, J.


Recit Ver:

On June 29, 1960, Winthrop Products, Inc. shipped drugs and medicine from New York to Manila aboard the SS "Tai Ping." The shipment, insured by St. Paul Fire & Marine Insurance Co., arrived on August 7, 1960. While most of the goods were intact, some were damaged. The consignee, Winthrop-Stearns Inc., filed claims with the carrier and Manila Port Service, but they were denied. The insurer compensated the consignee for $1,134.46 and then sued to recover the amount. Defendants disputed the claims, arguing they delivered the cargo in the same condition as received and that liability was limited by contract terms. The Court of First Instance (CFI) awarded partial recovery, but the insurer appealed, seeking full reimbursement.


The appeal was dismissed. The court upheld that the carrier's liability was limited to the C.I.F. (Cost, Insurance, and Freight) value stated in the bill of lading. The insurer, as subrogee, could only recover the amount the consignee was entitled to under the bill of lading, and the liability was reasonably and fairly agreed upon. Furthermore, the peso equivalent of the insurer’s claim was correctly based on the exchange rate at the time of the damage, not the date of the judgment.


Facts: 

  • On June 29, 1960, Winthrop Products, Inc. shipped 218 cartons and drums of drugs and medicine from New York, USA to Manila, Philippines aboard the SS "Tai Ping," owned by Wilhelm Wilhelmsen and operated through Barber Steamship Lines, Inc.

    • The shipment was insured by St. Paul Fire & Marine Insurance Co. for the loss and/or damage.

  • On August 7, 1960, the shipment arrived in Manila. 

    • While most of the shipment was in good condition, one drum and several cartons were damaged.

    • The consignee, Winthrop-Stearns Inc., filed claims with the carrier and Manila Port Service, which were refused. 

    • St. Paul Fire & Marine Insurance Co. then paid the consignee $1,134.46 for the damaged goods and related expenses.

  • On August 5, 1961, St. Paul Fire & Marine Insurance Co. sued for recovery of the $1,134.46, as the insurer was subrogated to the consignee’s rights.

  • The defendants, Manila Port Service, Manila Railroad Company, Macondray & Co., Inc., Barber Steamship Lines, Inc., and Wilhelm Wilhelmsen, disputed the claims. 

    • They argued that the cargo was delivered in the same condition as received, and their liability was limited by the Management Contract or by the Bill of Lading.


CFI-Manila: Ruled in favor of the insurer, awarding P300 from the steamship lines and Wilhelm Wilhelmsen, and P809.67 from Manila Port Service and Manila Railroad Company.


  • The insurer appealed, arguing for the full recovery of $1,134.46 based on the exchange rate of P3.90 to $1.00, rather than P2.00 as applied by the lower court.


Issues: 

  1. Whether,in case of loss or damage, the liability of the carrier to the consignee is limited to the C.I.F. (Cost, Insurance, and Freight) value of the goods which were lost or damaged. NO

  2. Whether the insurer who has paid the claim in dollars to the consignee should be reimbursed in its peso equivalent on the date of discharge of the cargo or on the date of the decision. NO


Held:

The appeal is without merit.


The purpose of the bill of lading is to provide for the rights and liabilities of the parties in reference to the contract to carry. The stipulation in the bill of lading limiting the common carrier's liability to the value of the goods appearing in the bill, unless the shipper or owner declares a greater value, is valid and binding. This limitation of the carrier's liability is sanctioned by the freedom of the contracting parties to establish such stipulations, clauses, terms, or conditions as they may deem convenient, provided they are not contrary to law, morals, good customs and public policy.  


A stipulation fixing or limiting the sum that may be recovered from the carrier on the loss or deterioration of the goods is valid, provided it is (a) reasonable and just under the circumstances, and (b) has been fairly and freely agreed upon.


In the case at bar, the liabilities of the defendants-appellees with respect to the lost or damaged shipments are expressly limited to the C.I.F. value of the goods as per contract of sea carriage embodied in the bill of lading, which reads:


Whenever the value of the goods is less than $500 per package or other freight unit, their value in the calculation and adjustment of claims for which the Carrier may be liable shall for the purpose of avoiding uncertainties and difficulties in fixing value be deemed to be the invoice value, plus frieght and insurance if paid, irrespective of whether any other value is greater or less.


The limitation of liability and other provisions herein shall inure not only to the benefit of the carrier, its agents, servants and employees, but also to the benefit of any independent contractor performing services including stevedoring in connection with the goods covered hereunder. 


It is not pretended that those conditions are unreasonable or were not freely and fairly agreed upon. The shipper and consignee are, therefore, bound by such stipulations since it is expressly stated in the bill of lading that in "accepting this Bill of Lading, the shipper, owner and consignee of the goods, and the holder of the Bill of Lading agree to be bound by all its stipulations, exceptions and conditions, whether written, stamped or printed, as fully as if they were all signed by such shipper, owner, consignee or holder. It is obviously for this reason that the consignee filed its claim against the defendants-appellees on the basis of the C.I.F. value of the lost or damaged goods in the aggregate amount of P1,109.67 (Exhibits "G", "H", "I", and "J"). 11


The plaintiff-appellant, as insurer, after paying the claim of the insured for damages under the insurance, is subrogated merely to the rights of the assured. As subrogee, it can recover only the amount that is recoverable by the latter. Since the right of the assured, in case of loss or damage to the goods, is limited or restricted by the provisions in the bill of lading, a suit by the insurer as subrogee necessarily is subject to like limitations and restrictions.


The insurer after paying the claim of the insured for damages under the insurance is subrogated merely to the rights of the insured and therefore can necessarily recover only that to what was recoverable by the insured. 


Upon payment for a total loss of goods insured, the insurance is only subrogated to such rights of action as the assured has against 3rd persons who caused or are responsible for the loss. The right of action against another person, the equitable interest in which passes to the insurer, being only that which the assured has, it follows that if the assured has no such right of action, none passes to the insurer, and if the assured's right of action is limited or restricted by lawful contract between him and the person sought to be made responsible for the loss, a suit by the insurer, in the Tight of the assured, is subject to like limitations or restrictions. 


Equally untenable is the contention of the plaintiff-appellant that because of extraordinary inflation, it should be reimbursed for its dollar payments at the rate of — exchange on the date of the judgment and not on the date of the loss or damage. The obligation of the carrier to pay for the damage commenced on the date it failed to deliver the shipment in good condition to the consignee.


The C.I.F. Manila value of the goods which were lost or damaged, according to the claim of the consignee dated September 26, 1960 is $226.37 (for the pilferage, Exhibit "G") and $324.33 (shortlanded, Exhibit "H") or P456.14 and P653.53, respectively, in Philippine Currency. The peso equivalent was based by the consignee on the exchange rate of P2.015 to $1.00 which was the rate existing at that time. We find, therefore, that the trial court committed no error in adopting the aforesaid rate of exchange.


WHEREFORE, the appealed decision is hereby affirmed, with costs against the plaintiff-appellant.

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