Republic of the Philippines

SUPREME COURT
Manila

EN BANC

G.R. No. L-6517            November 29, 1954

E. E. ELSER, INC., and ATLANTIC MUTUAL INSURANCE COMPANY,

Gibbs and Chuidian for petitioners.

BAUTISTA ANGELO, J.:

This is a petition for review of a decision of the Court of Appeals which affirms that of court
as origin dismissing the complaint without pronouncement as to costs..

The facts, as found by the Court of Appeals, are:.

It appears that in the month of December, 1945 the goods specified in the Bill of Lading
marked as Annex A, were shipped on the 'S.S. Sea Hydra,' of Isthmian Steamship Company,
from New York to Manila, and were received by the consignee 'Udharam Bazar and Co.',
except one case of vanishing cream valued at P159.78. The goods were insured against
damage or loss by the 'Atlantic Mutual Insurance Co.' `Udharam Bazar and Co.' Inc., who
denied having received the goods for custody, and the 'International Harvester Co. of the
Philippines,' as agent for the shipping company, who answer that the goods were landed
and delivered to the Customs authorities. Finally, 'Udaharam Bazar and Co.' claimed for
indemnity of the loss from the insurer, 'Atlantic Mutual Insurance Co.', and was paid by the
latter's agent 'E. E. Elser Inc.' the amount involved, that is, P159.78..

As may be noted, the Court of Appeals held that petitioners have already lost their right to
press their claim against respondent because of their failure to serve notice thereof upon
the carrier within 30 days after receipt of the notice of loss or damage as required by clause
18 of the bill of lading which was issued concerning the shipment of the merchandise which
had allegedly disappeared. In this respect, the court said that, "appellant unwittingly
admitted that they were late in claiming the indemnity for the loss of the case of the
vanishing cream as their written claim was made on April 25, 1946, or more than 30 days
after they had been fully aware of said loss," and because of this failure, the Court said the
action of petitioners should, and must, fall. Petitioners now contend that this finding is
erroneous in the light of the provisions of the Carriage of Goods by Sea Act of 1936, which
apply to this case, the same having been made an integral part of the covenants agreed upon
in the bill of lading.

There is merit in this contention. If this case were to be governed by clause 18 of the bill of
lading regardless of the provisions of the Carriage of Goods by Sea Act of 1936, the
conclusion reached by the Court of Appeals would indeed the correct, but in our opinion
this Act cannot be ignored or disregard in determining the equities of the parties it
appearing that the same was made an integral part of the bill of lading by express
stipulation. It should be noted, in this connection, that the Carriage of Goods by Sea Act of
1936 was accepted and adopted by our government by the enactment of Commonwealth
Act No. 65 making said Act "applicable to all contracts for the carriage in foreign trade." And
the pertinent provisions of the Carriage of the Goods by Sea Act of 1936 are:

6. Unless notice of loss or damage and the general nature of such loss or damage be given in
writing to the carrier of his agent at the port of discharge or at the time of the removal of the
goods into the custody of the person entitled to delivery thereof under the contract of
carriage, such removal shall be prima facie evidence of the delivery by the carrier of the
goods as described in the bill of lading. If the loss or damage is not apparent, the notice must
be given within three days of the delivery.

xxx xxx xxx

In any event the carrier and the ship shall be discharged from all liability in respect of loss
or damage unless suit is brought within one year after delivery of the goods or the date
when the goods should have been delivered: PROVIDED, That if a notice of loss or damage,
either apparent or concealed, is not given as provided for in this section, that fact shall not
affect or prejudice the right of the shipper to bring suit within one year after the delivery of
the goods or the date when the goods should have been delivered. (Section 3; Emphasis
supplied.).

It would therefore appear from the above that a carrier can only be discharged from liability
in respect of loss or damage if the suit is not brought within one year after the delivery of
the goods or the date when the goods should have been delivered, and that, even if a notice
of loss or damage is not given as required, "that fact shall not affect or prejudice the right of
the shipper to bring suit within one year after the delivery of the goods." In other words,
regardless of whether the notice of loss or damage has been given, the shipper can still
bring an action to recover said loss or damage within one year after the delivery of the
goods, and, as we have stated above, this is contrary to the provisions of clause 18 of the bill
of lading. The question that now rises is: Which of these two provisions should prevail? Is it
that contained in clause 18 of the bill of lading, or that appearing in the Carriage of Goods by
Sea Act?.

The answer is not difficult to surmise. That clause 18 must of necessity yields to the
provisions of the Carriage of Goods by Sea Act in view of the proviso contained in the same
Act which says: "any clause, covenant, or agreement in a contract of carriage relieving the
carrier or the ship from liability for loss or damage to or in connection with the goods . . . or
lessening such liability otherwise than as provided in this Act, shall be null and void and of
no effect." (section 3.) This means that a carrier cannot limit its liability in a manner
contrary to what is provided for in said act. and so clause 18 of the bill of lading must of
necessity be null and void. This interpretation finds no support in a number of cases
recently decided by the American courts. Thus, in Balfour, Guthrie and Co., Ltd., et al., vs.
American-West African Line, Inc. and American-West African Line, Inc. vs. Balfour, Guthrie
& Co., Ltd., et al., 136 F. 2d. 320, wherein the bill of lading provided that the owner should
not be liable for loss of cargo unless written notice thereof was given within 30 days after
the goods should have been delivered and unless written claim therefor was given within
six months after giving such written notice, the United States Circuit Court of Appeals,
Second Circuit, in a decision promulgated on August 2, 1943, made the following ruling:.

But the Act, section 3 (6), 45 U.S.A. section 1303 (6) provides that failure to give 'notice of
loss or damages' shall not prejudice the right of the shipper to bring suit within one year
after the date when the goods should have been delivered. to enforce a bill of lading
provision conditioning a ship owner's liability upon the filing of written claim of loss, which
in turn requires and depends upon the filing of a prior notice of loss, certainly would do
violence to section 3(6) is that failure to file written claim of loss in no event may prejudice
right of suit within a year of the scheduled date for cargo delivery. This is also to be
concluded from section 3(8) 46 U.S. C. A. Section 1303 (8),that any clause in a bill of lading
lessening the liability of the carrier otherwise than as provided in the Act shall be null and
void. A similar provision in the British Carriage of Goods by Sea Act, 14 and 15 Geo. V. c.22,
has been interpreted to nullify any requirement of written claim as a condition to suit at any
time. CF. Australian United Steam Navigation Co., Ltd., vs. Hunt (1921) 2 A. C. 351;
Conventry Sheppard and Co., vs. Larrinaga S. S. Co., 73 ll. L. Rep. 256.1

But respondents contend that while the United States Carriage of Goods by Sea Act of 1936
was accepted and adopted by our government by virtue of Commonwealth Act No. 65,
however, said Act does not have any application to the present case because the shipment in
question was made in December, 1945, and arrived in Manila in February, 1946 and at that
time the Philippines was still a territory or possession of the United States and, therefore it
may be said that the trade then between the Philippines and the United States was not a
"foreign trade". In other words, it is contended that the Carriage of Goods by Sea Act as
adopted by our government is only applicable "to all contracts for the carriage of goods by
sea to and from Philippine ports in foreign trade," and, therefore, it does not apply to the
shipment in question..

Granting arguendo that the Philippines was a territory or possession of the United States for
the purposes of said Act and that the trade between the Philippines and the United States
before the advent of independence was not foreign trade or can only be considered in a
domestic sense, still we are of the opinion that the Carriage of Goods by Sea Act of 1936 may
have application to the present case it appearing that the parties have expressly agreed to
make and incorporate the provisions of said Act as integral part of their contract of carriage.
This is an exception to the rule regarding the applicability of said Act. This is expressly
recognized by section 13 of said Act which contains the following proviso:

Nothing in this Act shall be held to apply to contracts for carriage of gods by sea between
any port of the United States or its possessions, and any other port of the United States or its
possessions: Provided, however, That any bill of lading or similar document of title which
evidence of a contract for the carriage of goods by sea between such ports, containing an
express statement that it shall be subject to the provisions of this Act, shall be subjected
hereto as fully as if subject hereto by the express provisions of this Act. (Emphasis
supplied.).

This is also recognized by the very authority cited by counsel for respondents, who, on this
matter, has made the following comment:

The Philippine Act of 1936 like the U.S. Act of 1936, applies propio vigore only to foreign
commerce to all contracts for the carriage of goods by sea and from Philippine ports in
foreign trade.

Prior to Philippine Independence on July 4, 1946, trade between the Philippines and other
ports and places under the American Flag, was not, by an ordinary definition, foreign
commerce. Hence, the U. S. and Philippine Acts did not apply to such trades, even though
conducted under foreign bottoms and under foreign flag, unless the carrier expressly
exercised the option given by section 13 of the U.S. Act to carry under the provisions of that
Act. The fact that the U.S. coastwise flag monopoly did not extend to the Philippine trade did
not alter the fact that the U.S. Trade with the Islands is domestic. (knaught, Ocean Bills of
Lading, 1947 ed. p. 250 (Emphasis supplied.).

Having reached the foregoing conclusion, it would appear clear that action of petitioners
has not yet lapsed or prescribed, as erroneously held by the Court of Appeals, it appearing
that the present action was brought within one year after the delivery of the shipment in
question..

As regards the contention of respondents that petitioners have the burden of showing that
the loss complained of did not take place under after the goods left the possession or
custody of the carrier because they failed to give notice of their loss or damage as required
by law, which failures gives rise to the presumption that the goods were delivered in the bill
of lading, suffice it to state that, according to the Court of Appeals, the required notice was
given by the petitioners to the carrier or its agent on April 25, 1946. That notice is sufficient
to overcome the above presumption within the meaning of the law..

Wherefore the decision appealed from is reversed. Respondents, other than the Court of
Appeals, are hereby sentenced to pay to the petitioners the sum of P159.78, with legal
interest thereon from the date of the filing of the complaint, plus the costs of action..

Paras, C.J., Pablo, Bengzon, Padilla, Montemayor, Reyes, A., Concepcion and Reyes, J. B. L., JJ.,
concur.

Footnotes