H. E. HEACOCK COMPANY vs.

MACONDRAY & COMPANY, INC.

G.R. No. L-16598, October 3, 1921
JOHNSON, J.:
 PERSONS/ENTITIES INVOLVED
• SHIPPER/CONSIGNOR (PLAINTIFF)
• H. E. HEACOCK COMPANY
• COMMON CARRIER
• BOLTON CASTLE
• CONSIGNEE/AGENT OF CC (DEFENDANT)
• MACONDRAY & COMPANY, INC.
 FACTS
• June 1919 - plaintiff H. E. HEACOCK COMPANY caused to be delivered
four cases of merchandise
• one box contained twelve 8-day Edmond clocks
• for transportation from New York to Manila
• Loaded on board steamship BOLTON CASTLE
• arrived in the port of Manila on or about the 10th day of September
• Consigned to the defendant MACONDRAY & COMPANY, INC.
• agent and representative of said vessel in the port of Manila
• Despite demand, neither the master of Bolton Castle nor Macondray
delivered the Edmond clocks to the H.E.
 FACTS
• The bill of lading contained 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.
• No greater value than $500 U. S. currency, per freight ton was declared
• No ad valorem freight was paid
• 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.
• Macondray tendered to H.E. P76.36, which H.E. rejected (proportionate freight ton value)
 FACTS
• CFI ruling
• rendered judgment in favor of the H.E., in accordance with clause 9 of the bill
of lading
• ordered defendant to pay the sum of P226.02, the invoice value of the clocks
plus the freight and insurance thereon, with legal interest from November 20
(date of the complaint) together with costs.
• Both parties appealed
 FACTS
• H.E.
• two clauses in the bill of lading limits the liability of the carrier, contrary to
public order, therefore, null and void
• entitled to recover the market value of the clocks (P420.00)
• Macondray
• both clauses are valid
• clause 1 should have been applied instead of clause 9
• in accordance with clause 1 of the bill of lading, H.E. is entitled to recover only P76.36
(proportionate freight ton value of clocks)
 ISSUE/s
1. 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?
2. Whether clause 1 or clause 9 of the bill of lading is to be adopted as
the measure of defendant's liability.
 HELD
1. Yes, a common carrier, by stipulations inserted in the bill of lading,
may limit its liability for the loss of or damage to the cargo to an agreed
valuation.
Three kinds of stipulations have often been made in a bill of lading.
x The first is one exempting the carrier from any and all liability for loss or
damage occasioned by its own negligence. (invalid)
x The second is one providing for an unqualified limitation of such liability to
an agreed valuation. (invalid)
✓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.
(valid and enforceable)
 HELD
• present case falls within the third stipulation
• 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.
• Said clauses of the bill of lading are, therefore, valid and binding upon
the parties thereto.
• 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."
 HELD
2. Clause 9 should be made to apply.
Macondray contends 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
• and since in this case the invoice value is more than $500 per freight
ton, the latter valuation should be adopted
• according to that valuation, the proportionate value of the clocks is only
P76.36
 HELD (affirmed CFI)
• irreconcilable conflict between the two clauses with regard to the
measure of defendant's liability
• 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
• This being the case, the bill of lading should be interpreted against the
defendant carrier, which drew said contract.
AUGUSTINO B. ONG YIU v. HONORABLE COURT
OF APPEALS and PHILIPPINE AIR LINES
G.R. No. L-40597, June 29, 1979
MELENCIO-HERRERA, J.:
 PARTIES
• PASSENGER (PETITIONER)
• AUGUSTINO B. ONG YIU
• RESPONDENT COURT
• Court of Appeals
• COMMON CARRIER (RESPONDENT)
• PHILIPPINE AIR LINES
 FACTS
• August 26, 1967 - Ong Yiu was a fare paying passenger of respondent PAL
• from Mactan, Cebu to Butuan City
• scheduled to attend a trial (lawyer)
• checked in one piece of luggage (blue maleta)
• he was issued a claim ticket
• Upon arrival at Bancasi Airport in Butuan City, his luggage could not be found
• PAL Butuan sent a message to PAL Cebu which in turn sent a message to PAL
Manila
• PAL Manila advised PAL Cebu that the luggage has been over carried to Manila; it would be
forwarded to PAL Cebu that same day
• PAL Cebu then advised PAL Butuan that the luggage will be forwarded the following day, on a
scheduled morning flight.
• message was not received by PAL Butuan as all the personnel had already gone for the day.
 FACTS
• Missing luggage contained vital documents Ong Yui needed for the trial the
next day
• he wired PAL Cebu demanding delivery of his luggage before noon the next
day or he would hold PAL liable for damages based on gross negligence
• Next day, he went to the Butuan Airport to inquire but did not wait for the
arrival of the 10:00 AM flight which carried his luggage.
• A certain Dagorro, who used to drive Ong Yui volunteered to deliver the
luggage to him.
• Dagorro delivered the "maleta“, with the information that the lock was open.
• found that a folder containing certain exhibits, transcripts and private documents
related to the cases he was handling were missing, also gift items for his parents-in-
law
 FACTS
• Ong Yui filed a Complaint against PAL for damages for breach of
contract of transportation
• CFI
• PAL acted in bad faith and with malice
• CA:
• PAL guilty only of simple negligence
• reversed the judgment of the trial Court granting petitioner moral and
exemplary damages
• but ordered PAL to pay P100.00 (baggage liability assumed by it under the
condition of carriage printed at the back of the ticket)
 ISSUE/s
1. Whether PAL is guilty of gross negligence/acted with bad faith
2. Whether the stipulation on limited liability applies in the instant
case
 HELD
1. No, PAL is not guilty of gross negligence/did not act in bad faith.
• No dispute that PAL incurred in delay in the delivery of petitioner’s luggage,
but was the negligence of PAL of a gross nature and had it acted fraudulently
or in bad faith as to entitle petitioner to an award of moral and exemplary
damages?
• PAL had not acted in bad faith. Bad faith means a breach of a known duty through some
motive of interest or ill will. It was the duty of PAL to look for petitioner’s luggage which
had been miscarried. PAL exerted due diligence in complying with such duty, it had
exerted diligent effort to locate plaintiff’s baggage.
• In the absence of a wrongful act or omission or of fraud or bad faith, petitioner is not
entitled to moral damages, neither is he entitled to exemplary damages.
 HELD
2. Yes, stipulation on limited liability applies in the instant case.

"As a general proposition, the plaintiff’s maleta having been pilfered while in the
custody of the defendant, it is presumed that the defendant had been negligent.
The liability, however, of PAL for the loss, in accordance with the stipulation written
on the back of the ticket, is limited to P100.00 per baggage, plaintiff not having
declared a greater value, and not having called the attention of the defendant on
its true value and paid the tariff therefor. The validity of this stipulation is not
questioned by the plaintiff. They are printed in reasonably and fairly big letters, and
are easily readable. Moreover, plaintiff had been a frequent passenger of PAL from
Cebu to Butuan City and back, and he, being a lawyer and businessman, must be
fully aware of these conditions."
• Contract of adhesion
SEA-LAND SERVICE, INC. v. INTERMEDIATE APPELLATE
COURT and PAULINO CUE, doing business under the
name and style of "SEN HIAP HING"
G.R. No. 75118, August 31, 1987
NARVASA, J.:
 PERSONS/ENTITIES INVOLVED
• SHIPPER/CONSIGNOR
• SEABORNE TRADING COMPANY
• COMMON CARRIER (PETITIONER)
• MS PATRIOT
• owned and operated by SEA-LAND SERVICE, INC.
• DEFENDANT COURT
• Intermediate Appellate Court
• CONSIGNEE (DEFENDANT)
• PAULINO CUE
• doing business under the name and style of "SEN HIAP HING"
 FACTS
• January 1981 - shipment received from Seaborne Trading Company in Oakland,
California was loaded on board the MS Patriot, a vessel owned and operated by Sea-
Land Service, Inc., a foreign shipping and forwarding company licensed to do
business in the Philippines
• consigned to Sen Hiap Hing, the business name used by Paulino Cue in the
wholesale and retail trade in Cebu City.
• no value was declared or indicated in the bill of lading
• arrived in Manila and discharged into the custody of the arrastre contractor and
the customs and port authorities
• February 1981, shipment had been transferred, along with other cargoes, to
another container in Pier 3 in South Harbor, Manila
• While awaiting trans-shipment to Cebu, it was stolen by pilferers and has
never been recovered
 FACTS
• Paulino Cue, the consignee, made formal claim upon Sea-Land for the
value of the lost shipment (P179,643.48)
• Sea-Land offered to settle for US$4,000.00, or P30,600.00 (peso
equivalent)
• said amount represented its maximum liability for the loss of the shipment
under the package limitation clause in the covering bill of lading
• Cue rejected the offer
• brought suit for damages against Sea-Land in the then Court of First Instance
 FACTS

•CFI
• Judgment in favor of Cue
•IAC
• Affirmed the decision
 ISSUE/S
• Whether Sea-land can be held liable for the loss
of the shipment in any amount beyond the limit
of US$500.00 per package stipulated in the bill of
lading in view of the shipper’s failure to declare
the actual value of the shipment.
 HELD
• No, Sea-land cannot be held liable for the loss of the
shipment in any amount beyond the limit of US$500.00.
• the liability of a common carrier for loss of or damage to
goods transported by it under a contract of carriage is
governed by the laws of the country of destination
• goods were shipped from the United States to the Philippines
• liability of petitioner Sea-Land to the respondent consignee is
governed primarily by the Civil Code, and suppletory, in all
matters not determined thereby, by the Code of Commerce
and special laws.
 HELD
• One of these suppletory special laws is the Carriage of Goods by Sea
Act, U.S. (Public Act No. 521) which was made applicable to all
contracts for the carriage of goods by sea to and from Philippine ports
in foreign trade by Commonwealth Act No. 65, Sec. 4(5) of said Act:
(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 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.
xxx

• long-form bill of lading customarily issued by Sea-Land to its shipping

clients is a virtual copy of the first paragraph of the foregoing provision.
 HELD
• Court fails to fathom the reason or justification for the Appellate
Court’s pronouncement in its appealed Decision that the Carriage of
Goods by Sea Act." . . has no application whatsoever in this case.“
• Article 1766 of the Civil Code expressly subjects the rights and obligations of
common carriers to the provisions of the Code of Commerce and of special
laws in matters not regulated by said Code
• 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
 HELD
• At any rate, as observed earlier, it has already been held that the provisions
of the Carriage of Goods by Sea Act on package limitation [sec. 4(5)] are as
much a part of a bill of lading as though actually placed therein by
agreement of the parties.
• Private respondent, by making claim for loss on the basis of the bill of
lading, to all intents and purposes accepted said bill. Having done so, he —

". . . becomes bound by all stipulations contained therein whether on the

front or the back thereof. Respondent cannot elude its provisions simply
because they prejudice him and take advantage of those that are beneficial.
Secondly, the fact that respondent shipped his goods on board the ship of
petitioner and paid the corresponding freight thereon shows that he
impliedly accepted the bill of lading which was issued in connection with the
shipment in question, and so it may be said that the same is finding upon him
as if it had been actually signed by him or by any other person in his behalf. . .
..
CITADEL LINES, INC. v. COURT OF APPEALS and
MANILA WINE MERCHANTS, INC.
G.R. No. 88092, April 25, 1990
REGALADO, J.:
 PERSONS/ENTITIES INVOLVED
• COMMON CARRIER (PETITIONER)
• CARDIGAN BAY/STRAIT ENTERPRISE
• CITADEL LINES is the general agent of the vessel
• ARRASTRE
• E. Razon, Inc.,
• RESPONDENT COURT
• Court of Appeals
• CONSIGNEE (RESPONDENT)
• MANILA WINE MERCHANTS, INC.
E. RAZON. INC. v. THE HONORABLE SECRETARY OF LABOR AND
EMPLOYMENT (DOLE) and MARINA PORT SERVICES, INC.
(MARINA)
G.R. No. 85867, May 13, 1993
 FACTS
• Petitioner Citadel Lines is the general agent of the vessel “Cardigan
Bay/Strait Enterprise”
• Respondent, Manila Wine Merchants, Inc. is the importer of the
subject shipment of Dunhill cigarettes from England.
• vessel loaded on board the subject shipment
• England to Manila
• evidenced by two (2) Bills of Lading
• in Manila, the container was received by E. Razon, Inc., the arrastre service
 FACTS
• The container van, which contained the shipments, was then stripped –
one shipment was delivered and the other was palletized
• Due to lack of space at the port, the cigarettes were placed in two (2) containers –
separated by denominations of two (2) and (4) pallets each; then sealed and
padlocked by the representative of Citadel Lines.
• The next morning, Citadel Lines’ head checker discovered the seal and
padlock containing the four (4) pallets of cigarettes was tampered with.
• found that 90 containers of cigarettes were missing, including the 4 containers of
Manila Wine Merchants, Inc.
• Citadel Lines reported this to the arrastre operator
• the arrastre operator claimed that the container van was padlocked and sealed by
representatives of Citadel Lines without any participation from the arrastre.
 FACTS
• Upon learning of the lost shipment, Manila Wine Merchants, Inc. filed a
formal claim against Citadel Lines, demanding payment of its loss
representing the market value of the missing cargo.
• Citadel Lines imputed the loss to the arrastre – as the loss occurred at the pier which
was under the control of the arrastre
• Manila Wine Merchants, Inc. filed a formal claim against E. Razon, Inc., the arrastre
service
• RTC
• rendered a decision in favor of the plaintiff Manila Wine Merchants, Inc.
• exonerated the arrastre of any liability on the ground that the subject container van
was not formally turned over to its custody
• CA
• affirmed the RTC decision.
 ISSUE/s
1. Whether the loss occurred while the cargo in question was in the
custody of the arrastre, E. Razon, Inc., or of the carrier, Citadel
Lines, Inc
2. Whether the stipulation limiting the liability of the carrier contained
in the bill of lading is binding on the consignee
 HELD
1. The loss occurred while the cargo in question was in the custody of the carrier, Citadel
Lines, Inc.
The first issue is factual in nature. Court of Appeals declared that, on the basis of the
evidence presented, the subject cargo which was placed in a container van, padlocked and
sealed by the representative of the CARRIER was still in its possession and control when the
loss occurred, there having been no formal turnover of the cargo to the ARRASTRE.
The CARRIER is now estopped from claiming otherwise.
• Article 1733 of the Civil Code
• The duty of the consignee is to prove merely that the goods were lost. Thereafter, the
burden is shifted to the carrier to prove that it has exercised the extraordinary diligence
required by law. And, its extraordinary responsibility 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 the right to receive them.
 HELD
2. We, however, find the award of damages in the amount of P312,800.00 for
the value of the goods lost, based on the alleged market value thereof, to be
erroneous. It is clearly and expressly provided under Clause 6 of the
aforementioned bills of lading issued by the CARRIER that its liability is
limited to $2.00 per kilo.
Basic is the rule, long since enshrined as a statutory provision, that a
stipulation limiting the liability of the carrier to the value of the goods
appearing in the bill of lading, unless the shipper or owner declares a greater
value, is binding.
Further, 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 fairly and freely
agreed upon.