G.R. No.

125524 August 25, 1999

BENITO MACAM doing business under the name and style BEN-MAC
ENTERPRISES, petitioner,
vs.
COURT OF APPEALS, CHINA OCEAN SHIPPING CO., and/or WALLEM PHILIPPINES
SHIPPING, INC.,respondents.

BELLOSILLO, J.:

On 4 April 1989 petitioner Benito Macam, doing business under the name and style Ben-Mac
Enterprises, shipped on board the vessel Nen Jiang, owned and operated by respondent China
Ocean Shipping Co., through local agent respondent Wallem Philippines Shipping, Inc. (hereinafter
WALLEM), 3,500 boxes of watermelons valued at US$5,950.00 covered by Bill of Lading No. HKG
99012 and exported through Letter of Credit No. HK 1031/30 issued by National Bank of Pakistan,
Hongkong (hereinafter PAKISTAN BANK) and 1,611 boxes of fresh mangoes with a value of
US$14,273.46 covered by Bill of Lading No. HKG 99013 and exported through Letter of Credit No.
HK 1032/30 also issued by PAKISTAN BANK. The Bills of Lading contained the following pertinent
provision: "One of the Bills of Lading must be surrendered duly endorsed in exchange for the goods
or delivery order.1 The shipment was bound for Hongkong with PAKISTAN BANK as consignee and
Great Prospect Company of Kowloon, Hongkong (hereinafter GPC) as notify party.

On 6 April 1989, per letter of credit requirement, copies of the bills of lading and commercial invoices
were submitted to petitioner's depository bank, Consolidated Banking Corporation (hereinafter
SOLIDBANK), which paid petitioner in advance the total value of the shipment of US$20,223.46. 1 âwphi 1.nê t

Upon arrival in Hongkong, the shipment was delivered by respondent WALLEM directly to GPC, not
to PAKISTAN BANK, and without the required bill of lading having been surrendered. Subsequently,
GPC failed to pay PAKISTAN BANK such that the latter, still in possession of the original bills of
lading, refused to pay petitioner through SOLIDBANK. Since SOLIDBANK already pre-paid
petitioner the value of the shipment, it demanded payment from respondent WALLEM through five
(5) letters but was refused. Petitioner was thus allegedly constrained to return the amount involved
to SOLIDBANK, then demanded payment from respondent WALLEM in writing but to no avail.

On 25 September 1991 petitioner sought collection of the value of the shipment of US$20,223.46 or
its equivalent of P546,033.42 from respondents before the Regional Trial Court of Manila, based on
delivery of the shipment to GPC without presentation of the bills of lading and bank guarantee.

Respondents contended that the shipment was delivered to GPC without presentation of the bills of
lading and bank guarantee per request of petitioner himself because the shipment consisted of
perishable goods. The telex dated 5 April 1989 conveying such request read —

AS PER SHPR'S REQUEST KINDLY ARRANGE DELIVERY OF A/M SHIPT TO

RESPECTIVE CNEES WITHOUT PRESENTATION OF OB/L2 and bank guarantee since for
prepaid shipt ofrt charges already fully paid our end . . . .3

Respondents explained that it is a standard maritime practice, when immediate delivery is of the
essence, for the shipper to request or instruct the carrier to deliver the goods to the buyer upon
arrival at the port of destination without requiring presentation of the bill of lading as that usually
takes time. As proof thereof, respondents apprised the trial court that for the duration of their two-
year business relationship with petitioner concerning similar shipments to GPC deliveries were
effected without presentation of the bills of lading. 4 Respondents advanced next that the refusal of
PAKISTAN BANK to pay the letters of credit to SOLIDBANK was due to the latter's failure to submit
a Certificate of Quantity and Quality. Respondents counterclaimed for attorney's fees and costs of
suit.

On 14 May 1993 the trial court ordered respondents to pay, jointly and severally, the following
amounts: (1) P546,033.42 plus legal interest from 6 April 1989 until full payment; (2) P10,000.00 as
attorney's fees; and, (3) the costs. The counterclaims were dismissed for lack of merit. 5 The trial
court opined that respondents breached the provision in the bill of lading requiring that "one of the
Bills of Lading must be surrendered duly endorsed in exchange for the goods or delivery order,"
when they released the shipment to GPC without presentation of the bills of lading and the bank
guarantee that should have been issued by PAKISTAN BANK in lieu of the bills of lading. The trial
court added that the shipment should not have been released to GPC at all since the instruction
contained in the telex was to arrange delivery to the respective consignees and not to any party. The
trial court observed that the only role of GPC in the transaction as notify party was precisely to be
notified of the arrival of the cargoes in Hongkong so it could in turn duly advise the consignee.

Respondent Court of Appeals appreciated the evidence in a different manner. According to it, as
established by previous similar transactions between the parties, shipped cargoes were sometimes
actually delivered not to the consignee but to notify party GPC without need of the bills of lading or
bank guarantee.6 Moreover, the bills of lading were viewed by respondent court to have been
properly superseded by the telex instruction and to implement the instruction, the delivery of the
shipment must be to GPC, the real importer/buyer of the goods as shown by the export
invoices,7 and not to PAKISTAN BANK since the latter could very well present the bills of lading in its
possession; likewise, if it were the PAKISTAN BANK to which the cargoes were to be strictly
delivered it would no longer be proper to require a bank guarantee. Respondent court noted that
besides, GPC was listed as a consignee in the telex. It observed further that the demand letter of
petitioner to respondents never complained of misdelivery of goods. Lastly, respondent court found
that petitioner's claim of having reimbursed the amount involved to SOLIDBANK was
unsubstantiated. Thus, on 13 March 1996 respondent court set aside the decision of the trial court
and dismissed the complaint together with the counterclaims.8 On 5 July 1996 reconsideration was
denied.9

Petitioner submits that the fact that the shipment was not delivered to the consignee as stated in the
bill of lading or to a party designated or named by the consignee constitutes a misdelivery thereof.
Moreover, petitioner argues that from the text of the telex, assuming there was such an instruction,
the delivery of the shipment without the required bill of lading or bank guarantee should be made
only to the designated consignee, referring to PAKISTAN BANK.

We are not persuaded. The submission of petitioner that "the fact that the shipment was not
delivered to the consignee as stated in the Bill of Lading or to a party designated or named by the
consignee constitutes a misdelivery thereof" is a deviation from his cause of action before the trial
court. It is clear from the allegation in his complaint that it does not deal with misdelivery of the
cargoes but of delivery to GPC without the required bills of lading and bank guarantee —

6. The goods arrived in Hongkong and were released by the defendant Wallem directly to the
buyer/notify party, Great Prospect Company and not to the consignee, the National Bank of
Pakistan, Hongkong, without the required bills of lading and bank guarantee for the release
of the shipment issued by the consignee of the goods . . . .10

Even going back to an event that transpired prior to the filing of the present case or when petitioner
wrote respondent WALLEM demanding payment of the value of the cargoes, misdelivery of the
cargoes did not come into the picture —
 We are writing you on behalf of our client, Ben-Mac Enterprises who informed us that Bills of
Lading No. 99012 and 99013 with a total value of US$20,223.46 were released to Great
Prospect, Hongkong without the necessary bank guarantee. We were further informed that
the consignee of the goods, National Bank of Pakistan, Hongkong, did not release or
endorse the original bills of lading. As a result thereof, neither the consignee, National Bank
of Pakistan, Hongkong, nor the importer, Great Prospect Company, Hongkong, paid our
client for the goods . . . .11

At any rate, we shall dwell on petitioner's submission only as a prelude to our discussion on the
imputed liability of respondents concerning the shipped goods. Article 1736 of the Civil Code
provides —

Art. 1736. The extraordinary responsibility of the common carriers lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier to the
consignee, or to the person who has a right to receive them, without prejudice to the
provisions of article 1738.12

We emphasize that the extraordinary responsibility of the common carriers lasts until actual or
constructive delivery of the cargoes to the consignee or to the person who has a right to receive
them. PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the
notify party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner
also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint
before the trial court. This premise draws us to conclude that the delivery of the cargoes to GPC as
buyer/importer which, conformably with Art. 1736 had, other than the consignee, the right to receive
them 14 was proper.

The real issue is whether respondents are liable to petitioner for releasing the goods to GPC without
the bills of lading or bank guarantee.

Respondents submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to
GPC without the bills of lading and bank guarantee. The telex instructed delivery of various
shipments to the respective consignees without need of presenting the bill of lading and bank
guarantee per the respective shipper's request since "for prepaid shipt ofrt charges already fully
paid." Petitioner was named therein as shipper and GPC as consignee with respect to Bill of Lading
Nos. HKG 99012 and HKG 99013. Petitioner disputes the existence of such instruction and claims
that this evidence is self-serving.

From the testimony of petitioner, we gather that he has been transacting with GPC as buyer/importer
for around two (2) or three (3) years already. When mangoes and watermelons are in season, his
shipment to GPC using the facilities of respondents is twice or thrice a week. The goods are
released to GPC. It has been the practice of petitioner to request the shipping lines to immediately
release perishable cargoes such as watermelons and fresh mangoes through telephone calls by
himself or his "people." In transactions covered by a letter of credit, bank guarantee is normally
required by the shipping lines prior to releasing the goods. But for buyers using telegraphic transfers,
petitioner dispenses with the bank guarantee because the goods are already fully paid. In his several
years of business relationship with GPC and respondents, there was not a single instance when the
bill of lading was first presented before the release of the cargoes. He admitted the existence of the
telex of 3 July 1989 containing his request to deliver the shipment to the consignee without
presentation of the bill of lading 15 but not the telex of 5 April 1989 because he could not remember
having made such request.
Consider pertinent portions of petitioner's testimony —

Q: Are you aware of any document which would indicate or show that your request to the
defendant Wallem for the immediate release of your fresh fruits, perishable goods, to Great
Prospect without the presentation of the original Bill of Lading?

A: Yes, by telegraphic transfer, which means that it is fully paid. And I requested immediate
release of the cargo because there was immediate payment.

Q: And you are referring, therefore, to this copy Telex release that you mentioned where
your Company's name appears Ben-Mac?

Atty. Hernandez: Just for the record, Your Honor, the witness is showing a Bill of
Lading referring to SKG (sic) 93023 and 93026 with Great Prospect Company.

Atty. Ventura:

Q: Is that the telegraphic transfer?

A: Yes, actually, all the shippers partially request for the immediate release of the goods
when they are perishable. I thought Wallem Shipping Lines is not neophyte in the business.
As far as LC is concerned, Bank guarantee is needed for the immediate release of the goods
. . . .15

Q: Mr. Witness, you testified that if is the practice of the shipper of the perishable goods to
ask the shipping lines to release immediately the shipment. Is that correct?

A: Yes, sir.

Q: Now, it is also the practice of the shipper to allow the shipping lines to release the
perishable goods to the importer of goods without a Bill of Lading or Bank guarantee?

A: No, it cannot be without the Bank Guarantee.

Atty. Hernandez:

Q: Can you tell us an instance when you will allow the release of the perishable goods by the
shipping lines to the importer without the Bank guarantee and without the Bill of Lading?

A: As far as telegraphic transfer is concerned.

Q: Can you explain (to) this Honorable Court what telegraphic transfer is?

A: Telegraphic transfer, it means advance payment that I am already fully paid . . . .

Q: Mr. Macam, with regard to Wallem and to Great Prospect, would you know and can you
recall that any of your shipment was released to Great Prospect by Wallem through
telegraphic transfer?

A: I could not recall but there were so many instances sir.

 Q: Mr. Witness, do you confirm before this Court that in previous shipments of your goods
through Wallem, you requested Wallem to release immediately your perishable goods to the
buyer?

A: Yes, that is the request of the shippers of the perishable goods . . . . 16

Q: Now, Mr. Macam, if you request the Shipping Lines for the release of your goods
immediately even without the presentation of OBL, how do you course it?

A: Usually, I call up the Shipping Lines, sir . . . .17

Q: You also testified you made this request through phone calls. Who of you talked
whenever you made such phone call?

A: Mostly I let my people to call, sir. (sic)

Q: So everytime you made a shipment on perishable goods you let your people to call? (sic)

A: Not everytime, sir.

Q: You did not make this request in writing?

A: No, sir. I think I have no written request with Wallem . . . .18

Against petitioner's claim of "not remembering" having made a request for delivery of subject
cargoes to GPC without presentation of the bills of lading and bank guarantee as reflected in the
telex of 5 April 1989 are damaging disclosures in his testimony. He declared that it was his practice
to ask the shipping lines to immediately release shipment of perishable goods through telephone
calls by himself or his "people." He no longer required presentation of a bill of lading nor of a bank
guarantee as a condition to releasing the goods in case he was already fully paid. Thus, taking into
account that subject shipment consisted of perishable goods and SOLIDBANK pre-paid the full
amount of the value thereof, it is not hard to believe the claim of respondent WALLEM that petitioner
indeed requested the release of the goods to GPC without presentation of the bills of lading and
bank guarantee.

The instruction in the telex of 5 April 1989 was "to deliver the shipment to respective consignees."
And so petitioner argues that, assuming there was such an instruction, the consignee referred to
was PAKISTAN BANK. We find the argument too simplistic. Respondent court analyzed the telex in
its entirety and correctly arrived at the conclusion that the consignee referred to was not PAKISTAN
BANK but GPC —

There is no mistake that the originals of the two (2) subject Bills of Lading are still in the
possession of the Pakistani Bank. The appealed decision affirms this fact. Conformably, to
implement the said telex instruction, the delivery of the shipment must be to GPC, the notify
party or real importer/buyer of the goods and not the Pakistani Bank since the latter can very
well present the original Bills of Lading in its possession. Likewise, if it were the Pakistani
Bank to whom the cargoes were to be strictly delivered, it will no longer be proper to require
a bank guarantee as a substitute for the Bill of Lading. To construe otherwise will render
meaningless the telex instruction. After all, the cargoes consist of perishable fresh fruits and
immediate delivery thereof to the buyer/importer is essentially a factor to reckon with.
Besides, GPC is listed as one among the several consignees in the telex (Exhibit 5-B) and
 the instruction in the telex was to arrange delivery of A/M shipment (not any party) to
respective consignees without presentation of OB/L and bank guarantee . . . . 20

Apart from the foregoing obstacles to the success of petitioner's cause, petitioner failed to
substantiate his claim that he returned to SOLIDBANK the full amount of the value of the cargoes. It
is not far-fetched to entertain the notion, as did respondent court, that he merely accommodated
SOLIDBANK in order to recover the cost of the shipped cargoes from respondents. We note that it
was SOLIDBANK which initially demanded payment from respondents through five (5) letters.
SOLIDBANK must have realized the absence of privity of contract between itself and respondents.
That is why petitioner conveniently took the cudgels for the bank.

In view of petitioner's utter failure to establish the liability of respondents over the cargoes, no
reversible error was committed by respondent court in ruling against him.

WHEREFORE, the petition is DENIED. The decision of respondent Court of Appeals of 13 March
1996 dismissing the complaint of petitioner Benito Macam and the counterclaims of respondents
China Ocean Shipping Co. and/or Wallem Philippines Shipping, Inc., as well as its resolution of 5
July 1996 denying reconsideration, is AFFIRMED. 1âwphi1. nêt

SO ORDERED.

Mendoza, Quisumbing and Buena, JJ., concur.

Footnotes

1
Exhs. "A" and "B;" Records, pp. 84-85.

2
Original Bill of Lading.

3
Exh. "5-A;" Records, p. 146.

4
Exh. "6;" id., p. 147.

5
Decision penned by Judge Napoleon R. Flojo, RTC-Br. 2, Manila; Rollo, p. 61.

6
See Note 3.

7
Exhs. "N-2" and "O-2;" Records, pp. 108 and 711.

8
Decision penned by Justice Conrado M. Vasquez Jr. with the concurrence of Justices
Gloria C. Paras and Angelina Sandoval Gutierrez; Rollo, p. 45.

9
Rollo, p. 48.
10
Records, p. 3.

11
Exh. "K;" Records, p. 100.

12
Art. 1738. The extraordinary liability of the common carrier continues to be operative even
during the time the goods are stored in warehouse of the carrier at the place of destination,
until the consignee has been advised of the arrival of the goods and has had reasonable
opportunity thereafter to remove them or otherwise dispose of them.

14
Eastern Shipping Lines, Inc. v. Court of Appeals, G.R. No. 80936, 17 October 1990, 190
SCRA 512; Samar Mining Company, Inc. v. Nordeutscher Lloyd, No. L-28673, 23 October
1984, 132 SCRA 529.

15
See Note 3.

15
TSN, 6 November 1992, pp. 24-25.

16
Id., pp. 27-28.

17
Id., p. 31.

18
TSN, 18 November 1992, pp. 8-9.

19
Footnote not available per copy of SC decision.

20
Rollo, pp. 42-43.
G.R. No. L-16598 October 3, 1921

H. E. HEACOCK COMPANY, plaintiff-appellant,

vs.
MACONDRAY & COMPANY, INC., defendant-appellant.

Fisher & DeWitt for plaintiff-appellant.

Wolfson, Wolfson & Schwarzkopf for defendant-appellant.

JOHNSON, J.:

This action was commenced in the Court of First Instance of the City of Manila to recover the sum of
P240 together with interest thereon. The facts are stipulated by the parties, and are, briefly, as
follows:

(1) On or about the 5th day of June, 1919, the plaintiff caused to be delivered on board of
steamship Bolton Castle, then in the harbor of New York, four cases of merchandise one of
which contained twelve (12) 8-day Edmond clocks properly boxed and marked for
transportation to Manila, and paid freight on said clocks from New York to Manila in advance.
The said steampship arrived in the port of Manila on or about the 10th day of September,
1919, consigned to the defendant herein as agent and representative of said vessel in said
port. Neither the master of said vessel nor the defendant herein, as its agent, delivered to the
plaintiff the aforesaid twelve 8-day Edmond clocks, although demand was made upon them
for their delivery.

(2) The invoice value of the said twelve 8-day Edmond clocks in the city of New York was
P22 and the market value of the same in the City of Manila at the time when they should
have been delivered to the plaintiff was P420.

(3) The bill of lading issued and delivered to the plaintiff by the master of the said
steamship Bolton Castle contained, among others, the following clauses:

1. It is mutually agreed that the value of the goods receipted for above does not
exceed $500 per freight ton, or, in proportion for any part of a ton, unless the value
be expressly stated herein and ad valorem freight paid thereon.

9. Also, that in the event of claims for short delivery of, or damage to, cargo being
made, the carrier shall not be liable for more than the net invoice price plus freight
and insurance less all charges saved, and any loss or damage for which the carrier
may be liable shall be adjusted pro rata on the said basis.

(4) The case containing the aforesaid twelve 8-day Edmond clocks measured 3 cubic feet,
and the freight ton value thereof was $1,480, U. S. currency.

(5) No greater value than $500, U. S. currency, per freight ton was declared by the plaintiff
on the aforesaid clocks, and no ad valorem freight was paid thereon.
 (6) On or about October 9, 1919, the defendant tendered to the plaintiff P76.36, the
proportionate freight ton value of the aforesaid twelve 8-day Edmond clocks, in payment of
plaintiff's claim, which tender plaintiff rejected.

The lower court, in accordance with clause 9 of the bill of lading above quoted, rendered judgment in
favor of the plaintiff against the defendant for the sum of P226.02, this being the invoice value of the
clocks in question plus the freight and insurance thereon, with legal interest thereon from November
20, 1919, the date of the complaint, together with costs. From that judgment both parties appealed to
this court.

The plaintiff-appellant insists that it is entitled to recover from the defendant the market value of the
clocks in question, to wit: the sum of P420. The defendant-appellant, on the other hand, contends
that, in accordance with clause 1 of the bill of lading, the plaintiff is entitled to recover only the sum of
P76.36, the proportionate freight ton value of the said clocks. The claim of the plaintiff is based upon
the argument that the two clause in the bill of lading above quoted, limiting the liability of the carrier,
are contrary to public order and, therefore, null and void. The defendant, on the other hand,
contends that both of said clauses are valid, and the clause 1 should have been applied by the lower
court instead of clause 9.

I. The appeal of the plaintiff presents this question; May a common carrier, by stipulations inserted in
the bill of lading, limit its liability for the loss of or damage to the cargo to an agreed valuation of the
latter?1aw ph!l. net

Three kinds of stipulations have often been made in a bill of lading. The first is one exempting the
carrier from any and all liability for loss or damage occasioned by its own negligence. The second is
one providing for an unqualified limitation of such liability to an agreed valuation. And the third is one
limiting the liability of the carrier to an agreed valuation unless the shipper declares a higher value
and pays a higher rate of freight. According to an almost uniform weight of authority, the first and
second kinds of stipulations are invalid as being contrary to public policy, but the third is valid and
enforceable.

The authorities relied upon by the plaintiff-appellant (the Harter Act [Act of Congress of February 13,
1893]: Louisville Ry. Co. vs. Wynn, 88 Tenn., 320; and Galt vs. Adams Express Co., 4 McAr., 124;
48 Am. Rep., 742) support the proposition that the first and second stipulations in a bill of lading are
invalid which either exempt the carrier from liability for loss or damage occasioned by its negligence,
or provide for an unqualified limitation of such liability to an agreed valuation.

A reading of clauses 1 and 9 of the bill of lading here in question, however, clearly shows that the
present case falls within the third stipulation, to wit: That a clause in a bill of lading limiting the liability
of the carrier to a certain amount unless the shipper declares a higher value and pays a higher rate
of freight, is valid and enforceable. This proposition is supported by a uniform lien of decisions of the
Supreme Court of the United States rendered both prior and subsequent to the passage of the
Harter Act, from the case of Hart vs. Pennsylvania R. R. Co. (decided Nov. 24, 1884; 112 U. S.,
331), to the case of the Union Pacific Ry. Co. vs. Burke (decided Feb. 28, 1921, Advance Opinions,
1920-1921, p. 318).

In the case of Hart vs. Pennsylvania R. R. Co., supra, it was held that "where a contract of carriage,
signed by the shipper, is fairly made with a railroad company, agreeing on a valuation of the property
carried, with the rate of freight based on the condition that the carrier assumes liability only to the
extent of the agreed valuation, even in case of loss or damage by the negligence of the carrier, the
contract will be upheld as proper and lawful mode of securing a due proportion between the amount
for which the carrier may be responsible and the freight he receives, and protecting himself against
extravagant and fanciful valuations."

In the case of Union Pacific Railway Co. vs. Burke, supra, the court said: "In many cases, from the
decision in Hart vs. Pennsylvania R. R. Co. (112 U. S. 331; 28 L. ed., 717; 5 Sup. Ct. Rep., 151,
decided in 1884), to Boston and M. R. Co. vs. Piper (246 U. S., 439; 62 L. ed., 820; 38 Sup. Ct.
Rep., 354; Ann. Cas. 1918 E, 469, decided in 1918), it has been declared to be the settled Federal
law that if a common carrier gives to a shipper the choice of two rates, the lower of the conditioned
upon his agreeing to a stipulated valuation of his property in case of loss, even by the carrier's
negligence, if the shipper makes such a choice, understandingly and freely, and names his
valuation, he cannot thereafter recover more than the value which he thus places upon his property.
As a matter of legal distinction, estoppel is made the basis of this ruling, — that, having accepted the
benefit of the lower rate, in common honesty the shipper may not repudiate the conditions on which
it was obtained, — but the rule and the effect of it are clearly established."

The syllabus of the same case reads as follows: "A carrier may not, by a valuation agreement with a
shipper, limit its liability in case of the loss by negligence of an interstate shipment to less than the
real value thereof, unless the shipper is given a choice of rates, based on valuation."

A limitation of liability based upon an agreed value to obtain a lower rate does not conflict
with any sound principle of public policy; and it is not conformable to plain principles of
justice that a shipper may understate value in order to reduce the rate and then recover a
larger value in case of loss. (Adams Express Co. vs.Croninger 226 U. S. 491, 492.) See also
Reid vs. Farbo (130 C. C. A., 285); Jennings vs. Smith (45 C. C. A., 249); George N. Pierce
Co. vs. Wells, Fargo and Co. (227 U. S., 278); Wells, Fargo & Co. vs. Neiman-Marcus Co.
(227 U. S., 469).

It seems clear from the foregoing authorities that the clauses (1 and 9) of the bill of lading here in
question are not contrary to public order. Article 1255 of the Civil Code provides that "the contracting
parties may establish any agreements, terms and conditions they may deem advisable, provided
they are not contrary to law, morals or public order." Said clauses of the bill of lading are, therefore,
valid and binding upon the parties thereto.

II. The question presented by the appeal of the defendant is whether clause 1 or clause 9 of the bill
of lading here in question is to be adopted as the measure of defendant's liability. Clause 1 provides
as follows:

1. It is mutually agreed that the value of the goods receipted for above does not exceed $500
per freight ton, or, in proportion for any part of a ton, unless the value be expressly stated
herein and ad valorem freight paid thereon. Clause 9 provides:

9. Also, that in the even of claims for short delivery of, or damage to, cargo being made, the
carrier shall not be liable for more than the net invoice price plus freight and insurance less
all charges saved, and any loss or damage for which the carrier may be liable shall be
adjusted pro rata on the said basis.

The defendant-appellant contends that these two clauses, if construed together, mean that the
shipper and the carrier stipulate and agree that the value of the goods receipted for does not exceed
$500 per freight ton, but should the invoice value of the goods be less than $500 per freight ton, then
the invoice value governs; that since in this case the invoice value is more than $500 per freight ton,
the latter valuation should be adopted and that according to that valuation, the proportionate value of
the clocks in question is only P76.36 which the defendant is ready and willing to pay to the plaintiff.
It will be noted, however, that whereas clause 1 contains only an implied undertaking to settle in
case of loss on the basis of not exceeding $500 per freight ton, clause 9 contains
an express undertaking to settle on the basis of the net invoice price plus freight and insurance less
all charges saved. "Any loss or damage for which the carrier may be liable shall be adjusted pro
rata on the said basis," clause 9 expressly provides. It seems to us that there is an irreconcilable
conflict between the two clauses with regard to the measure of defendant's liability. It is difficult to
reconcile them without doing violence to the language used and reading exceptions and conditions
into the undertaking contained in clause 9 that are not there. This being the case, the bill of lading in
question should be interpreted against the defendant carrier, which drew said contract. "A written
contract should, in case of doubt, be interpreted against the party who has drawn the contract." (6 R.
C. L. 854.) It is a well-known principle of construction that ambiguity or uncertainty in an agreement
must be construed most strongly against the party causing it. (6 R. C. L., 855.) These rules as
applicable to contracts contained in bills of lading. "In construing a bill of lading given by the carrier
for the safe transportation and delivery of goods shipped by a consignor, the contract will be
construed most strongly against the carrier, and favorably to the consignor, in case of doubt in any
matter of construction." (Alabama, etc. R. R. Co. vs. Thomas, 89 Ala., 294; 18 Am. St. Rep., 119.)

It follows from all of the foregoing that the judgment appealed from should be affirmed, without any
finding as to costs. So ordered.

Araullo, street, Avanceña and Villamor, JJ., concur.

G.R. No. L-29721 March 27, 1929

AMANDO MIRASOL, plaintiff-appellant,

vs.
THE ROBERT DOLLAR CO., defendant-appellant.

Vicente Hilado for plaintiff-appellant.

J.A. Wolfson for defendant-appellant.

STATEMENT

After the promulgation of the decision rendered by the Second Division of February 13, 1929, 1 the
defendant filed a motion to have the case heard and decided in banc, and inasmuch as the legal
questions involved are important to the shipping interests, the court thought it best to do so.

After the formal pleas, plaintiff alleges that he is the owner and consignee of two cases of books,
shipped in good order and condition at New York, U.S.A., on board the defendant's
steamship President Garfield, for transport and delivery to the plaintiff in the City of Manila, all freight
charges paid. That the two cases arrived in Manila on September 1, 1927, in bad order and
damaged condition, resulting in the total loss of one case and a partial loss of the other. That the
loss in one case is P1,630, and the other P700, for which he filed his claims, and defendant has
refused and neglected to pay, giving as its reason that the damage in question "was caused by sea
water." That plaintiff never entered into any contract with the defendant limiting defendant's liability
as a common carrier, and when he wrote the letter of September 3, 1927, he had not then
ascertained the contents of the damaged case, and could not determine their value. That he never
intended to ratify or confirm any agreement to limit the liability of the defendant. That on September
9, 1927, when the other case was found, plaintiff filed a claim for the real damage of the books
therein named in the sum of $375.

Plaintiff prays for corresponding judgment, with legal interest from the filing of the complaint and
costs.

For answer the defendant made a general and specific denial, and as a separate and special
defense alleges that the steamship President Garfield at all the times alleged was in all respects
seaworthy and properly manned, equipped and supplied, and fit for the voyage. That the damage to
plaintiff's merchandise, if any, was not caused through the negligence of the vessel, its master,
agent, officers, crew, tackle or appurtenances, nor by reason of the vessel being unseaworthy or
improperly manned, "but that such damage, if any, resulted from faults or errors in navigation or in
the management of said vessel." As a second separate and special defense, defendant alleges that
in the bill of lading issued by the defendant to plaintiff, it was agreed in writing that defendant should
not be "held liable for any loss of, or damage to, any of said merchandise resulting from any of the
following causes, to wit: Acts of God, perils of the sea or other waters," and that plaintiff's damage, if
any, was caused by "Acts of God" or "perils of the sea." As a third special defense, defendant quoted
clause 13 of the bill of lading, in which it is stated that in no case shall it be held liable "for or in
respect to said merchandise or property beyond the sum of two hundred and fifty dollars for any
piece, package or any article not enclosed in a package, unless a higher value is stated herein and
ad valorem freight paid or assessed thereon," and that there was no other agreement. That no
September 3, 1927 the plaintiff wrote the defendant a letter as follows:

Therefore, I wish to file claim of damage to the meager maximum value that your bills of
lading will indemnify me, that is $250 as per condition 13.
As a fourth special defense, defendant alleges that the damage, if any, was caused by "sea water,"
and that the bill of lading exempts defendant from liability for that cause. That damage by "sea
water" is a shipper's risk, and that defendant is not liable.

As a result of the trial upon such issues, the lower court rendered judgment for the plaintiff for
P2,080, with legal interest thereon from the date of the final judgment, with costs, from which both
parties appealed, and the plaintiff assigns the following errors:

I. The lower court erred in holding that plaintiff's damage on account of the loss of the
damaged books in the partially damaged case can be compensated with an indemnity of
P450 instead of P750 as claimed by plaintiff.

II. The lower court, consequently, also erred in giving judgment for plaintiff for only P2,080
instead of P2,380.

III. The lower court erred in not sentencing defendant to pay legal interest on the amount of
the judgment, at least, from the date of the rendition of said judgment, namely, January 30,
1928.

The defendant assigns the following errors:

I. The lower court erred in failing to recognize the validity of the limited liability clause of the
bill of lading, Exhibit 2.

II. The lower court erred in holding defendant liable in any amount and in failing to hold, after
its finding as a fact that the damage was caused by sea water, that the defendant is not
liable for such damage by sea water.

III. The lower court erred in awarding damages in favor of plaintiff and against defendant for
P2,080 or in any other amount, and in admitting, over objection, Exhibits G, H, I and J.

JOHNS, J.:

Plaintiff's contention that he is entitled to P700 for his Encyclopedia Britannica is not tenable. The
evidence shows that the P400 that the court allowed, he could buy a new set which could contain all
of the material and the subject matter of the one which he lost. Plaintiff's third assignment of error is
well taken, as under all of the authorities, he is entitled to legal interest from the date of his
judgement rendered in the lower court and not the date when it becomes final. The lower court found
that plaintiff's damage was P2,080, and that finding is sustained by that evidence. There was a total
loss of one case and a partial loss of the other, and in the very nature of the things, plaintiff could not
prove his loss in any other way or manner that he did prove it, and the trial court who heard him
testify must have been convinced of the truth of his testimony.

There is no claim or pretense that the plaintiff signed the bill of lading or that he knew of his contents
at the time that it was issued. In that situation he was not legally bound by the clause which purports
to limit defendant's liability. That question was squarely met and decided by this court in banc in
Juan Ysmael and Co., vs. Gabino Baretto and Co., (51 Phil., 90; see numerous authorities there
cited).
Among such authorities in the case of The Kengsington decided by the Supreme Court of the U.S.
January 6, 1902 (46 Law. Ed., 190), in which the opinion was written by the late Chief Justice White,
the syllabus of which is as follows:

1. Restrictions of the liability of a steamship company for its own negligence or failure of duty
toward the passenger, being against the public policy enforced by the courts of the United
States, will not to be upheld, though the ticket was issued and accepted in a foreign country
and contained a condition making it subject to the law thereof, which sustained such
stipulation.

2. The stipulation in a steamship passenger's ticket, which compels him to value his
baggage, at a certain sum, far less than it is worth, or, in order to have a higher value put
upon it, to subject it to the provisions of the Harter Act, by which the carrier would be
exempted from all the liability therefore from errors in navigation or management of the
vessel of other negligence is unreasonable and in conflict with public policy.

3. An arbitrary limitation of 250 francs for the baggage of any steamship passenger
unaccompanied by any right to increase the amount of adequate and reasonable
proportional payment, is void as against public policy.

Both the facts upon which it is based and the legal principles involved are square in point in this
case.

The defendant having received the two boxes in good condition, its legal duty was to deliver them to
the plaintiff in the same condition in which it received them. From the time of their delivery to the
defendant in New York until they are delivered to the plaintiff in Manila, the boxes were under the
control and supervision of the defendant and beyond the control of the plaintiff. The defendant
having admitted that the boxes were damaged while in transit and in its possession, the burden of
proof then shifted, and it devolved upon the defendant to both allege and prove that the damage was
caused by reason of some fact which exempted it from liability. As to how the boxes were damaged,
when or where, was a matter peculiarly and exclusively within the knowledge of the defendant and in
the very nature of things could not be in the knowledge of the plaintiff. To require the plaintiff to
prove as to when and how the damage was caused would force him to call and rely upon the
employees of the defendant's ship, which in legal effect would be to say that he could not recover
any damage for any reason. That is not the law.

Shippers who are forced to ship goods on an ocean liner or any other ship have some legal rights,
and when goods are delivered on board ship in good order and condition, and the shipowner
delivers them to the shipper in bad order and condition, it then devolves upon the shipowner to both
allege and prove that the goods were damaged by the reason of some fact which legally exempts
him from liability; otherwise, the shipper would be left without any redress, no matter what may have
caused the damage.

The lower court in its opinion says:

The defendant has not even attempted to prove that the two cases were wet with sea water
by fictitious event, force majeure or nature and defect of the things themselves.
Consequently, it must be presumed that it was by causes entirely distinct and in no manner
imputable to the plaintiff, and of which the steamer President Garfield or any of its crew could
not have been entirely unaware.
And the evidence for the defendant shows that the damage was largely caused by "sea water," from
which it contends that it is exempt under the provisions of its bill of lading and the provisions of the
article 361 of the Code of Commerce, which is as follows:

Merchandise shall be transported at the risk and venture of the shipper, if the contrary was
not expressly stipulated.

Therefore, all damages and impairment suffered by the goods during the transportation, by
reason of accident, force majeure, or by virtue of the nature or defect of the articles, shall be
for the account and risk of the shipper.

The proof of these accidents is incumbent on the carrier.

In the final analysis, the cases were received by the defendant in New York in good order and
condition, and when they arrived in Manila, they were in bad condition, and one was a total loss. The
fact that the cases were damaged by "sea water," standing alone and within itself, is not evidence
that they were damaged by force majeure or for a cause beyond the defendant's control. The words
"perils of the sea," as stated in defendant's brief apply to "all kinds of marine casualties, such as
shipwreck, foundering, stranding," and among other things, it is said: "Tempest, rocks, shoals,
icebergs and other obstacles are within the expression," and "where the peril is the proximate cause
of the loss, the shipowner is excused." "Something fortuitous and out of the ordinary course is
involved in both words 'peril' or 'accident'."

Defendant also cites and relies on the case of Government of the Philippine Islands vs. Ynchausti &
Company (40 Phil., 219), but it appears from a reading of that case that the facts are very different
and, hence, it is not in point. In the instant case, there is no claim or pretense that the two cases
were not in good order when received on board the ship, and it is admitted that they were in bad
order on their arrival at Manila. Hence, they must have been damaged in transit. In the very nature of
things, if they were damaged by reason of a tempest, rocks, icebergs, foundering, stranding or the
perils of the sea, that would be a matter exclusively within the knowledge of the officers of
defendant's ship, and in the very nature of things would not be within plaintiff's knowledge, and upon
all of such questions, there is a failure of proof.

The judgment of the lower court will be modified, so as to give the plaintiff legal interest on the
amount of his judgment from the date of its rendition in the lower court, and in all respects affirmed,
with costs. So ordered.

Johnson, Malcolm, Ostrand, Romualdez, and Villa-Real, JJ., concur.

Separate Opinions

STREET, J., dissenting in part:

I gave a hesitating adherence to the decision of this case in division, and upon further reflection, I
am now constrained to record my belief that the decision is in part erroneous. I agree with the court
that the defendant is liable to the plaintiff, but I think that its liability is limited, under clause 13,
printed on the back of the bill of lading, to the amount of 250 dollars for each of the two boxes of
books comprising this consignment. While the law does not permit a carrier gratuitously to exempt
itself from liability for the negligence of its servants, it cannot effectually do so for a valuable
consideration; and where freight rates are adjusted upon the basis of a reasonable limited value per
package, where a higher value is not declared by the shipper, the limitation as to the value is
binding. This court in two well considered decisions has heretofore upheld a limitation of exactly the
character of that indicated in clause 13 (H.E. Heacock Co. vs. Macondray & Co., 42 Phil., 205;
Freixas & Co. vs. Pacific Mail Steamship Co., 42 Phil., 198); and I am unable to see any sufficient
reason for ignoring those decisions.