Everett Steamship Corp. vs.

CA and Hernandez Trading

FACTS:
Hernandez Trading (Hernandez) imported three crates of bus spare
parts (labelled Marco 12, 13, 14) from its supplier, Maruman
Trading in Japan. The ships were transported to Manila on board
ADELFAEVERETTE, a vessel owned by petitioners principal,
Everett Orient Lines. A bill of lading was issued for the crates.
When the vessel arrived in Manila, it was discovered that Marco
14 was missing. Petitioner admitted and confirmed the loss in a
letter. Hernandez made a claim of Y1,552,500, the amount shown
in the invoice. Petitioner claims its liability was only limited to
Y100,000, which was the maximum limit on its liability as stated
in Clause 18 of the Bill of Lading.
Hernandez filed a collection suit against petitioner with the RTC of
Caloocan.
The RTC ruled in favour of Hernandez, making petitioner liable
for Y1,552,500 plus attorneys fees and cost of the suit.
RTC Ratio: Everett categorically admitted to its fault. It failed to
overcome the presumption of negligence. The limitation clause
was in fine print at the back of the bill of lading.
o Under Article 1750 of the Civil Code, a contract fixing
the sum that may be recovered by the owner/shipper for
the loss must be reasonable and just under the
circumstances, and must be freely agreed upon.
o The requisites have not been met by Everett. The letters
were so small that it could not have been presumed that
Hernandez read and was aware of the conditions.
CA affirmed the ruling of the RTC. It added that Hernandez was
not bound by the conditions of the bill of lading because it was not
a privy to the contract of carriage between Everett and Maruman
Trading, the shipper named in the bill of lading.
o CA held that Hernandez was entitled to the full amount of
the value loss, based on Article 1735 of the Civil Code.
Everett never overcame the presumption of negligience.
ISSUES:
1. W/N the consent of the consignee to the bill of lading is necessary
to make the terms and conditions therein binding upon him;
2. W/N the limited liability under Clause 18 applies to this case.

HELD and RATIO:

The Supreme Court ruled in favour of petitioner.
ARTICLE 1749 states that a stipulation limiting the carriers
liability to value of the goods in the bill of lading is valid,
UNLESS the shipper or owner declares a higher value.
ARTICLE 1750 states that a contract fixing the sum of what the
owner or shipper may recover for the loss of the goods is valid, if it
is just and reasonable under the circumstances and is freely and
fairly agreed upon.
The limited-liability clause has constantly been sustained by the
Court in numerous cases.1
The bill of lading expressly provided that the liability of the carrier
shall be limited to Y100,000 unless a higher amount is declared in
writing by the shipper in the bill of lading, and extra freight is paid.
o The above stipulation is reasonable and just. Maruman
Trading had the option of declaring a higher value, yet it
failed to do so.
o Contracts of adhesion are not invalid per se. The other
party is free to accept or reject it in its entirety. Ignorance
is not an excuse because the shipper, owner, or consignee
has the responsibility to fully comprehend the contract.2
o Maruman trading, the shipper is extensively engaged in
the trading business, and is presumed to be aware of the
terms and conditions of shipping transactions.
Consignee is bound by the transaction, even if the shipping
contract was between shipper and carrier. The relationship between
consignee and shipper is one of agency, or his status as some
stranger in whose favour some stipulation is made in the contract.
He automatically becomes a party thereto the moment he enforces
and demands the fulfilment of that stipulation. When Hernandez

1 Sea Land Services vs. IAC. The just and reasonable character of such a clause is upheld. It
still gives the owner the option to disregard the clause by properly declaring the nature and
value of the shipment.

2 PAGI vs. Sweet Lines and Ong Yiu vs. CA

formally claimed reimbursement for the missing goods based on

the very same bill of lading, it accepted the provisions of the

contract and consequently became bound by it. It is thus estopped

from rejecting the limitedliability clause in the bill of lading.