G.R. No. L-17032; March 31, 1964
INSURANCE COMPANY OF NORTH AMERICA, plaintiff-appellant, vs. UNITED STATES LINES COMPANY and/or MANILA PORT SERVICE and/or MANILA RAILROAD COMPANY, defendants-appellees.

FACTS

Firestone International Company shipped 18 cases of machinery from New York, consigned to Firestone Tire and Rubber Company of the Philippines, aboard the SS “PIONEER MAIN” of United States Lines Company. The shipment arrived at the Port of Manila on September 15, 1957, and was discharged into the custody of the arrastre operator, Manila Port Service. Upon delivery to the consignee through its broker, a shortage of one case valued at P1,852.93 was discovered. The consignee claimed and was paid this amount by its insurer, the Insurance Company of North America (INA). As subrogee, INA filed an action for damages against the carrier (U.S. Lines Company) and the arrastre operators (Manila Port Service and Manila Railroad Company).
The lower court, based on a stipulation of facts, found that while the carrier delivered the shipment complete to the arrastre, one case was indeed missing upon final delivery. It held the arrastre operators liable but limited their liability to P500 per package pursuant to Section 15 of the Management Contract between Manila Port Service and the Bureau of Customs. INA appealed, contesting this limitation.

ISSUE

Whether the Insurance Company of North America, as subrogee of the consignee, is bound by the liability limitation (P500 per package) stipulated in the Management Contract to which it was not a direct party.

RULING

Yes, the appellant is bound by the liability limitation. The Supreme Court affirmed the lower court’s decision, applying established jurisprudence. The Court ruled that while the consignee (and its subrogee insurer) was not a signatory to the Management Contract, it legally became a party thereto by availing itself of the arrastre service under the contract’s terms. The consignee’s broker obtained delivery of the goods using a gate pass and delivery permit issued by the arrastre service. The dorsal portion of these documents contained an “Important Notice” that expressly reproduced the key provisions of Section 15 of the Management Contract, including the P500 per package liability limit and the condition that the value must be otherwise specified or manifested to avoid the limit.
By presenting these documents and accepting delivery of the goods under the conditions stated, the consignee voluntarily acquiesced to the contractual stipulations. Consequently, its subrogee, the Insurance Company of North America, steps into the same legal position and is equally bound. Since there was no showing that the consignee specified or manifested the higher value of the missing package to the arrastre operator, the liability is correctly limited to P500. The Court found no reason to deviate from this settled doctrine, as consistently held in prior cases such as Northern Motors, Inc. v. Prince Line. The appeal was dismissed, and the award of P500 was sustained.