G.R. No. L-26901 May 29, 1970
SOUTH SEA SURETY AND INSURANCE CO., INC., and SUN INSURANCE OFFICE, LTD., petitioners, vs. MANILA PORT SERVICE and/or MANILA RAILROAD COMPANY and the HONORABLE COURT OF APPEALS, respondents.

FACTS

Marinduque Iron Mines, Inc., the consignee, imported one case containing 5,000 pieces of Simonds High Speed Steel Saw Bits aboard the vessel Pioneer Minx. The cargo was discharged at the Port of Manila on July 10, 1961, into the custody of the arrastre operator, Manila Port Service, a subsidiary of Manila Railroad Company. The contents of the case were lost while in the custody of Manila Port Service, which admitted liability for the loss. The consignee’s customs broker, Francisco Barretto, processed the necessary papers, including a delivery permit, and paid arrastre charges of P2.85 to Manila Port Service. Upon opening the case, it was found empty. The consignee had filed a provisional claim with Manila Port Service within the 15-day period required under Section 15 of the Management Contract between the Bureau of Customs and the arrastre operator. The cargo was insured by both Sun Insurance Office, Ltd., in New York and South Sea Surety and Insurance Co., Inc., in Manila. The insurers paid the consignee’s assignee for the loss and were subrogated to its rights. They sued to recover P10,532.31. Manila Port Service refused to pay the full amount, contending that under Section 15 of the Management Contract, its liability was limited to P500.00 because the value of the cargo was not specified or manifested in the bill of lading or ship’s manifest, and the arrastre charges paid were not based on the actual value. The Court of First Instance of Manila ruled the limitation inapplicable and held defendants liable for the full amount. The Court of Appeals reversed, applying the liability limitation and reducing the award to P500.00.

ISSUE

Whether the liability of Manila Port Service for the loss of the cargo is limited to P500.00 under Section 15 of the Management Contract.

RULING

Yes. The Supreme Court affirmed the decision of the Court of Appeals, holding that the liability of Manila Port Service is limited to P500.00 pursuant to Section 15 of the Management Contract. The Court ruled that the consignee, through its broker, made use of the delivery permit, which was stamped with the provisions of Section 15, by presenting it to the arrastre operator, paying the arrastre charges, and thereby accepting the benefits and conditions of the contract. This acceptance was further evidenced by the consignee’s act of filing a provisional claim in accordance with Section 15 and the plaintiffs’ filing of the suit to enforce rights under the same contract. Consequently, the limitation of liability to P500.00, due to the non-specification of the cargo’s value and the payment of arrastre charges not based on such value, was binding on the consignee and its subrogees (the insurers).