9 Everett Steamship Corp vs CA _ 122494

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  9/3/2017Everett Steamship Corp vs CA : 122494http://sc.judiciary.gov.ph/jurisprudence/1998/oct1998/122494.htm1/5 SECOND DIVISION [G.R. No. 122494. October 8, 1998] EVERETT STEAMSHIP CORPORATION,  petitioner, vs.  COURT OF APPEALS andHERNANDEZ TRADING CO. INC., respondents. D E C I S I O N MARTINEZ,  J  .: Petitioner Everett Steamship Corporation, through this petition for review, seeks the reversal of thedecision [1]  of the Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093, which affirmed the decisionof the Regional Trial Court of Kalookan City, Branch 126, in Civil Case No. C-15532, finding petitioner liableto private respondent Hernandez Trading Co., Inc. for the value of the lost cargo.Private respondent imported three crates of bus spare parts marked as MARCO C/No. 12, MARCO C/No.13 and MARCO C/No. 14, from its supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreigncorporation based in Inazawa, Aichi, Japan. The crates were shipped from Nagoya, Japan to Manila on boardADELFAEVERETTE, a vessel owned by petitioners principal, Everett Orient Lines. The said crates werecovered by Bill of Lading No. NGO53MN.Upon arrival at the port of Manila, it was discovered that the crate marked MARCO C/No. 14 was missing.This was confirmed and admitted by petitioner in its letter of January 13, 1992 addressed to private respondent,which thereafter made a formal claim upon petitioner for the value of the lost cargo amounting to One MillionFive Hundred Fifty Two Thousand Five Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No.MTM-941, dated November 14, 1991. However, petitioner offered to pay only One Hundred Thousand(Y100,000.00) Yen, the maximum amount stipulated under Clause 18 of the covering bill of lading which limitsthe liability of petitioner.Private respondent rejected the offer and thereafter instituted a suit for collection docketed as Civil Case No.C-15532, against petitioner before the Regional Trial Court of Caloocan City, Branch 126.At the pre-trial conference, both parties manifested that they have no testimonial evidence to offer andagreed instead to file their respective memoranda.On July 16, 1993, the trial court rendered judgment [2]  in favor of private respondent, ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or its peso equivalent representing the actual value of the lost cargo andthe material and packaging cost; (c) 10% of the total amount as an award for and as contingent attorneys fees;and (d) to pay the cost of the suit. The trial court ruled:Considering defendants categorical admission of loss and its failure to overcome the presumption of negligence and fault, the Court conclusively finds defendant liable to the plaintiff. The next point of inquiry the Court wants to resolve is the extent of the liability of the defendant. As stated earlier, plaintiff contends that defendant should be held liable for the whole value for the loss of the goods inthe amount of Y1,552,500.00 because the terms appearing at the back of the bill of lading was sowritten in fine prints and that the same was not signed by plaintiff or shipper thus, they are not bound bythe clause stated in paragraph 18 of the bill of lading. On the other hand, defendant merely admitted thatit lost the shipment but shall be liable only up to the amount of Y100,000.00.The Court subscribes to the provisions of Article 1750 of the New Civil Code -  9/3/2017Everett Steamship Corp vs CA : 122494http://sc.judiciary.gov.ph/jurisprudence/1998/oct1998/122494.htm2/5  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 thecircumstances, and has been fairly and freely agreed upon.It is required, however, that the contract must be reasonable and just under the circumstances and has been fairly and freely agreed upon. The requirements provided in Art. 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport.In the case at bar, the Court is of the view that the requirements of said article have not been met. Thefact that those conditions are printed at the back of the bill of lading in letters so small that they are hardto read would not warrant the presumption that the plaintiff or its supplier was aware of these conditionssuch that he had fairly and freely agreed to these conditions. It can not be said that the plaintiff hadactually entered into a contract with the defendant, embodying the conditions as printed at the back of the bill of lading that was issued by the defendant to plaintiff.On appeal, the Court of Appeals deleted the award of attorneys fees but affirmed the trial courts findingswith the additional observation that private respondent can not be bound by the terms and conditions of the billof lading because it was not privy to the contract of carriage. It said:As to the amount of liability, no evidence appears on record to show that the appellee (HernandezTrading Co.) consented to the terms of the Bill of Lading. The shipper named in the Bill of Lading isMaruman Trading Co., Ltd. whom the appellant (Everett Steamship Corp.) contracted with for thetransportation of the lost goods.Even assuming arguendo that the shipper Maruman Trading Co., Ltd. accepted the terms of the bill of lading when it delivered the cargo to the appellant, still it does not necessarily follow that appelleeHernandez Trading Company as consignee is bound thereby considering that the latter was never privyto the shipping contract.x x x x x x x x x Never having entered into a contract with the appellant, appellee should therefore not be bound by anyof the terms and conditions in the bill of lading.Hence, it follows that the appellee may recover the full value of the shipment lost, the basis of which isnot the breach of contract as appellee was never a privy to the any contract with the appellant, but is based on Article 1735 of the New Civil Code, there being no evidence to prove satisfactorily that theappellant has overcome the presumption of negligence provided for in the law.Petitioner now comes to us arguing that the Court of Appeals erred (1) in ruling that the consent of theconsignee to the terms and conditions of the bill of lading is necessary to make such stipulations binding upon it;(2) in holding that the carriers limited package liability as stipulated in the bill of lading does not apply in theinstant case; and (3) in allowing private respondent to fully recover the full alleged value of its lost cargo.We shall first resolve the validity of the limited liability clause in the bill of lading.A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a cargo to acertain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749and 1750 of the Civil Code which provide:ART. 1749. A stipulation that the common carriers liability is limited to the value of the goodsappearing 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 freely and fairly agreed upon.Such limited-liability clause has also been consistently upheld by this Court in a number of cases. [3]  Thus,in  Sea Land Service, Inc. vs Intermediate Appellate Court  [4] , we ruled:  9/3/2017Everett Steamship Corp vs CA : 122494http://sc.judiciary.gov.ph/jurisprudence/1998/oct1998/122494.htm3/5 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 thefact that it echoes Art. 1750 itself in providing a limit to liability only if a greater value is not declared for theshipment in the bill of lading. To hold otherwise would amount to questioning the justness and fairness of thelaw itself, and this the private respondent does not pretend to do. But over and above that consideration, the justand reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoidingaccrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature andvalue of the shipment in the bill of lading..Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the commoncarriers liability for loss must be reasonable and just under the circumstances, and has been freely and fairlyagreed upon.The bill of lading subject of the present controversy specifically provides, among others:18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of theshippers net invoice cost plus freight and insurance premiums, if paid, and in no event shall the carrier  be liable for any loss of possible profits or any consequential loss.The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in anamount exceeding One Hundred Thousand Yen in Japanese Currency (Y100,000.00) or its equivalent inany other currency per package or customary freight unit (whichever is least) unless the value of the   goods higher than this amount is declared in writing by the shipper before receipt of the goods by thecarrier and inserted in the Bill of Lading and extra freight is paid as required. (Emphasis supplied)The above stipulations are, to our mind, reasonable and just. In the bill of lading, the carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00) Yen. However, the shipper,Maruman Trading, had the option to declare a higher valuation if the value of its cargo was higher than thelimited liability of the carrier. Considering that the shipper did not declare a higher valuation, it had itself to blame for not complying with the stipulations. The trial courts ratiocination that private respondent could not have fairly and freely agreed to the limitedliability clause in the bill of lading because the said conditions were printed in small letters does not make the bill of lading invalid.We ruled in  PAL, Inc. vs. Court of Appeals [5]  that the jurisprudence on the matter reveals the consistentholding of the court that contracts of adhesion are not invalid per se and that it has on numerous occasionsupheld the binding effect thereof. Also, in  Philippine American General Insurance Co., Inc. vs. Sweet Lines , Inc . [6]  this Court , speaking through the learned Justice Florenz D. Regalado, held:x x x Ong Yiu vs. Court of Appeals, et.al. , instructs us that contracts of adhesion wherein one partyimposes a ready-made form of contract on the other x x x are contracts not entirely prohibited. The onewho adheres to the contract is in reality free to reject it entirely; if he adheres he gives his consent. Inthe present case, not even an allegation of ignorance of a party excuses non-compliance with thecontractual stipulations since the responsibility for ensuring full comprehension of the provisions of acontract of carriage devolves not on the carrier but on the owner, shipper, or consignee as the case may be. (Emphasis supplied)It was further explained in Ong Yiu vs Court of Appeals [7]  that stipulations in contracts of adhesion arevalid and binding.While it may be true that petitioner had not signed the plane ticket x x, he is nevertheless bound by the provisions thereof. Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latters lack of knowledge or assent to the regulation. It iswhat is known as a contract of adhesion, in regards which it has been said that contracts of adhesionwherein one party imposes a ready-made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject  9/3/2017Everett Steamship Corp vs CA : 122494http://sc.judiciary.gov.ph/jurisprudence/1998/oct1998/122494.htm4/5 it entirely; if he adheres, he gives his consent. x x x , a contract limiting liability upon an agreedvaluation does not offend against the policy of the law forbidding one from contracting against his ownnegligence. (Emphasis supplied)Greater vigilance, however, is required of the courts when dealing with contracts of adhesion in that the saidcontracts must be carefully scrutinized in order to shield the unwary (or weaker party) from deceptive schemescontained in ready-made covenants, [8]  such as the bill of lading in question. The stringent requirement which thecourts are enjoined to observe is in recognition of Article 24 of the Civil Code which mandates that (i)n allcontractual, property or other relations, when one of the parties is at a disadvantage on account of his moraldependence, ignorance, indigence, mental weakness, tender age or other handicap , the courts must bevigilant for his protection.The shipper, Maruman Trading, we assume, has been extensively engaged in the trading business. It can not be said to be ignorant of the business transactions it entered into involving the shipment of its goods to itscustomers. The shipper could not have known, or should know the stipulations in the bill of lading and there itshould have declared a higher valuation of the goods shipped. Moreover, Maruman Trading has not been heardto complain that it has been deceived or rushed into agreeing to ship the cargo in petitioners vessel. In fact, itwas not even impleaded in this case.The next issue to be resolved is whether or not private respondent, as consignee, who is not a signatory tothe bill of lading is bound by the stipulations thereof.Again, in  Sea-Land Service, Inc. vs. Intermediate Appellate Court   (  supra ), we held that even if theconsignee was not a signatory to the contract of carriage between the shipper and the carrier, the consignee canstill be bound by the contract. Speaking through Mr. Chief Justice Narvasa, we ruled: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, althoughthat 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 . x x x.x x x the right of a party in the same situation as respondent here, to recover for loss of a shipmentconsigned 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 stranger in whose favor some stipulation is made in said contract, and whobecomes a party thereto when he demands fulfillment of that stipulation, in this case the deliveryof the goods or cargo shipped. In neither capacity can he assert personally, in bar to any provisionof the bill of lading, the alleged circumstance that fair and free agreement to such provision wasvitiated by its being in such fine print as to be hardly readable . Parenthetically, it may be observedthat in one comparatively recent case (Phoenix Assurance Company vs. Macondray & Co., Inc., 64SCRA 15) where this Court found that a similar package limitation clause was printed in thesmallest type on the back of the bill of lading, it nonetheless ruled that the consignee was boundthereby on the strength of authority holding that such provisions on liability limitation are asmuch a part of a bill of lading as though physically in it and as though placed therein byagreement 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 anagreed 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. (Underscoring supplied)When private respondent formally claimed reimbursement for the missing goods from petitioner andsubsequently filed a case against the latter based on the very same bill of lading, it (private respondent) acceptedthe provisions of the contract and thereby made itself a party thereto, or at least has come to court to enforce it. [9]  Thus, private respondent cannot now reject or disregard the carriers limited liability stipulation in the bill of lading. In other words, private respondent is bound by the whole stipulations in the bill of lading and mustrespect the same.
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