GR L 15164; (May, 1961) (Digest)
G.R. No. L-15164; May 31, 1961
FEARNLEY & EGER and MACONDRAY & CO., INC., plaintiff-appellees, vs. MANILA RAILROAD COMPANY and/or MANILA PORT SERVICE, defendants-appellants.
FACTS
The plaintiffs, a foreign shipping company and its local agent, filed an action against the arrastre operator, Manila Port Service, for recovery of sums representing the value of lost cargo. The complaint involved four causes of action. The defendants admitted liability for two smaller claims but contested the primary claim for P1,708.23, the total CIF value of two missing bales of cotton piece goods. Their defense relied on the liability limitation clause in their Management Contract with the Bureau of Customs, which caps liability at P500 per package unless a higher value is declared and corresponding arrastre charges are paid. The parties submitted stipulations of fact, confirming the shipment arrived in good order, the two bales were lost while in the arrastre operator’s custody, and the plaintiffs, having compensated the cargo owner, were subrogated to its rights. The trial court rendered judgment in favor of the plaintiffs for the full invoice value of the lost bales plus attorney’s fees.
ISSUE
Whether the liability of the arrastre operator for the loss of the cargo is limited to P500 per package as stipulated in its Management Contract with the Bureau of Customs, notwithstanding the plaintiffs not being formal parties to that contract.
RULING
Yes. The Supreme Court modified the trial court’s decision, applying the liability limitation. The Court held the stipulation in Section 15 of the Management Contract, executed pursuant to applicable laws, is valid and binding upon the shippers and their agents. This legal principle, consistently upheld in prior jurisprudence, establishes that such contractual limitations are enforceable against third parties like the plaintiffs who utilize the arrastre services. Since the bill of lading for the lost cotton bales did not specify a manifested value for the goods, the arrastre operator’s liability is expressly limited to P500 per package. Consequently, its total liability for the two lost bales is P1,000, not the full invoice value of P1,708.23. Furthermore, with the operator’s liability being validly limited by contract, its refusal to pay the larger sum was not in bad faith; thus, the award of attorney’s fees was deleted. The appellants were ordered to pay the appellees the sum of P1,000.