H.E. Heacock Co. v. Macondray - Company, Inc

76.HEACOCK v. MACONDRAY, 42 Phil 90, October 3, 1921 3.
The case containing the aforesaid twelve 8-day Edmond clocks

G.R. No. L-16598 / October 3, 1921 / Johnson, J. measured 3 cubic feet, and the freight ton value thereof was
$1,480, U. S. currency.
Shipper: HE Heacock Co. (plaintiff and appellant)
4. No greater value than $500, U. S. currency, per freight ton was
Common Carrier: Macondray & Co. (defendant and appellant)
Goods: four cases of merchandise, one of which contained twelve (12) 8- declared by the plaintiff on the aforesaid clocks, and no ad valorem
day Edmond Clocks, properly boxed freight was paid thereon.
Destination: New York to Manila
Condition: No delivery of one case which contained twelve (12) 8-day On or about October 9, 1919, the defendant tendered to the plaintiff
Edmond Clock P76.36, the proportionate freight ton value of the aforesaid twelve 8-day
Edmond clocks, in payment of plaintiff's claim, which tender plaintiff
Facts: rejected.
 Plaintiff Heacock caused to deliver the four cases of merchandise on
board in the steamship Bolton Castle. In which one of which contained Issue: May a Common Carrier, by stipulations inserted in the bill of
twelve (12) 8-day Edmond Clocks. lading, limit its liability for the loss of or damage to the cargo to an
 When the vessel arrived in the port of Manila, neither the master of agreed valuation of the latter  Yes.
the vessel nor the defendant, as its agent, delivered to the plaintiff the
one case of merchandise which contained twelve (12) 8-day Edmond Contentions of the parties:
Clocks,
1. The plaintiff-appellant insists that it is entitled to recover from the
 Lower Court: in favor of Plaintiff; Ruled in accordance with clause 9
of the Bill of Lading; defendant is ordered to pay P226.02, this being defendant the market value of the clocks in question, to wit: the sum
the invoice value of the clocks in question plus freight and insurance, of P420. The defendant-appellant, on the other hand, contends that, in
with legal interest accordance with clause 1 of the bill of lading, the plaintiff is entitled
 Both parties appealed to recover only the sum of P76.36, the proportionate freight ton value
 Other important facts of the case: of the said clocks.
1. the market value of the merchandise in city of New York was P22 2. The claim of the plaintiff is based upon the argument that the two
and in the Manila was P420. clause in the bill of lading above quoted, limiting the liability of the
2. The bill of lading issued and delivered to the plaintiff by the master carrier, are contrary to public order and, therefore, null and void. The
defendant, on the other hand, contends that both of said clauses are
of the said steamship Bolton Castle contained, among others, the
valid, and the clause 1 should have been applied by the lower court
following clauses: instead of clause 9.
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
Held:
any part of a ton, unless the value be expressly stated herein and
ad valorem freight paid thereon. 1. Contents of the Bill of Lading (see clause 1 and clause 9)
9. Also, that in the event of claims for short delivery of, or damage 2. Three kinds of stipulations often found in a bill of lading
to, cargo being made, the carrier shall not be liable for more than  Three kinds of stipulations have often been made in a bill of
the net invoice price plus freight and insurance less all charges lading. The first is one exempting the carrier from any and all
saved, and any loss or damage for which the carrier may be liable liability for loss or damage occasioned by its own negligence. The
shall be adjusted pro rata on the said basis. 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 on which it was obtained, — but the rule and the effect of it are clearly
pays a higher rate of freight. established.”
 According to an almost uniform weight of authority, the first 6. Limited Liability of a Carrier, based upon an agreed value, not
and second kinds of stipulations are invalid as being contrary to contrary to public policy
public policy, but the third is valid and enforceable. 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
3. Authorities supporting invalidity of absolute exemption from liability less than the real value thereof, unless the shipper is given a choice
and unqualified limitation to an agreed valuation of rates, based on valuation.
The Harter Act (Act of Congress of 13 February 1893), Louisville Ry. Co.
vs. Wynn (88 Tenn., 320), and Galt vs. Adams Express Co. (4 McAr.,  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
124; 48 Am. Rep., 742) support the proposition that the first and
is not conformable to plain principle of justice that a shipper may
second stipulations in a bill of lading are invalid which either exempt understate value in order to reduce the rate and then recover a larger
the carrier from liability for loss or damage occasioned by its value in case of loss.
negligences or provide for an unqualified limitation of such liability to
an agreed valuation. 7. Clauses 1 and 9 falls within third kind of stipulation; Article 1255,
OCC (article 1306, NCC)
4. Hart vs. Pennsylvania RR Co.
In the case of Hart vs. Pennsylvania R. R. Co., it was held that “where  A reading of clauses 1 and 9 of the bill of lading clearly shows that
a contract of carriage, signed by the shipper, is fairly made with a the present case falls within the third stipulation, to wit: That a
railroad company, agreeing on a valuation of the property carried, with clause in a bill of lading limiting the liability of the carrier to a certain
the rate of freight based on the condition that the carrier assumes amount unless the shipper declares a higher value and pays a higher
liability only to the extent of the agreed valuation, even in case of loss rate of freight, is valid and enforceable.
or damage by the negligence of the carrier, the contract will be upheld
as proper and lawful mode of recurring a due proportion between the Clauses 1 and 9 are not contrary to public order. Article 1255 Old
amount for which the carrier may be responsible and the freight he Civil Code (Art. 1306 NCC) provides that “the contracting parties may
receives, and protecting himself against extravagant and fanciful establish any agreements, terms and conditions they may deem
valuations.” advisable, provided they are not contrary to law, morals or public
5. Union Pacific Railway Co. vs. Burke order.” Said clauses of the bill of lading are, therefore, valid and
In the case of Union Pacific Railway Co. vs. Burke, the court said: it has binding upon the parties thereto.
been declared to be the settled Federal law that if a common carrier
Issue No. 2: WON Clause 1 and clause 9 of the Bill of Lading is to be
gives to a shipper the choice of two rates, the lower of them
adopted as the measure of defendant’s liability.
conditioned upon his agreeing to a stipulated valuation of his property  the Court held that there us irreconcilable conflict between Clauses 1
in case of loss, even by the carrier’s negligence, if the shipper makes and 9 with regard to the measure of Macondray’s liability.
such a choice, understandingly and freely, and names his valuation, he  It is difficult to reconcile them without doing violence to the language
cannot thereafter recover more than the value which he thus places used and reading exceptions and conditions into the undertaking contained
upon his property As a matter of legal distinction, estoppel is made the in clause 9 that are not there.
basis of this ruling, — that, having accepted the benefit of the lower this being the case, the bill of lading in question should be interpreted
rate, in common honesty the shipper may not repudiate the conditions against the defendant carrier, which drew the conytact.
1. Irreconcilable conflict between Clauses 1 and 9 with regard to the
measure of Macondray’s liability
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 that there is an irreconcilable conflict between the two
clauses with regard to the measure of Macondray’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.
2. A contract, in case of doubt, be interpreted against the party who

drew the contract
The bill of lading should be interpreted against the 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 are 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.”
Ruling: The Supreme Court affirmed the judgment appealed from, without
any finding as to costs.

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76.HEACOCK v. MACONDRAY, 42 Phil 90, October 3, 1921 3.

The case containing the aforesaid twelve 8-day Edmond clocks

Whereas clause 1 contains only an implied undertaking to settle in case of

2. A contract, in case of doubt, be interpreted against the party who

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