American President Lines, Ltd. vs. Klepper

A bill of lading's stipulations are binding on a shipper-consignee who did not sign it where the bill expressly provides that acceptance binds the shipper to all stipulations, and the shipper impliedly accepted it by shipping goods and paying the corresponding freight. The Carriage of Goods by Sea Act's per-package liability limitation is merely suppletory to the Civil Code's provisions on common carriers, pursuant to Articles 1753 and 1766.

Richard A. Klepper shipped personal and household effects from Yokohama, Japan to Manila aboard the S.S. President Cleveland, a vessel owned and operated by American President Lines, Ltd. The shipment was covered by a bill of lading containing a clause limiting the carrier's liability to $500.00 per package unless a higher value was declared in writing and inserted in the bill. Delgado Brothers, Inc. operated the gantry crane used to unload cargo at the Manila pier. The Carriage of Goods by Sea Act (Commonwealth Act No. 65) and the Civil Code's provisions on common carriers governed the respective rights and obligations of the parties.

On February 17, 1955, Richard A. Klepper shipped one lift van containing personal and household effects aboard the S.S. President Cleveland at Yokohama, Japan, destined for Manila. The shipment was covered by bill of lading No. 82, issued by American President Lines, Ltd. The vessel arrived at the Port of Manila on February 22, 1955. While the lift van was being unloaded by a gantry crane operated by Delgado Brothers, Inc., it fell onto the pier, spilling and scattering its contents. A survey was conducted, revealing that Klepper suffered total damages of P6,729.50 from the breakage, denting, and smashing of the goods.

Klepper filed an action before the Court of First Instance of Manila against both American President Lines and Delgado Brothers, Inc. to recover P6,729.50 as damages, P2,000.00 as sentimental value of the damaged goods, and attorney's fees. The shipping company did not contest its status as a common carrier or the finding that the damage was due to negligence. Its responsibility as a common carrier was extraordinary, lasting from the time the goods were placed in its possession until delivery to the consignee, and it could be exempted only for causes enumerated in Article 1734 of the Civil Code.

The dispute centered on the extent of the carrier's liability. The bill of lading contained Clause 17, which provided that in case of any loss or damage exceeding $500.00 per package, the value of the goods would be deemed to be $500.00 per package unless a higher value had been declared in writing by the shipper and inserted in the bill of lading. The bill also bore a clause printed in red ink on its face stating that in accepting the bill of lading, the shipper, consignee, and owner of the goods agreed to be bound by all stipulations, exceptions, and conditions contained therein. Klepper had not signed the bill of lading, nor had any agent signed on his behalf; he received the bill only after arriving in Manila. He was, however, both the shipper and the consignee of the goods, and he had paid the corresponding freight.

The trial court rendered judgment on November 5, 1957, ordering the shipping company to pay Klepper P6,729.50 as the value of the damaged goods, P500.00 as sentimental value, and P1,000.00 as attorney's fees, with legal interest from the filing of the complaint, and directing Delgado Brothers to reimburse the shipping company upon satisfaction. Both defendants appealed to the Court of Appeals, which affirmed the trial court's decision in toto, ruling that the bill of lading's limitation clause was not binding on Klepper because he had not signed it. The shipping company then filed the present petition for review.

• Limitation of Liability Under the Bill of Lading: Petitioner contended that its liability for the damaged goods could not exceed $500.00, invoking Clause 17 of the bill of lading and Section 4(5) of the Carriage of Goods by Sea Act, both of which limited the carrier's liability to $500.00 per package unless a higher value was declared by the shipper and inserted in the bill of lading.
• Binding Effect of the Bill of Lading: Petitioner argued that the bill of lading was binding on respondent despite his not having signed it, because the bill expressly stated on its face that acceptance bound the shipper, consignee, and owner to all stipulations, and respondent had impliedly accepted it by shipping his goods and paying the corresponding freight.

• Non-Signature of the Bill of Lading: Respondent countered that the bill of lading's limitation clause was not binding upon him because neither he nor any agent of his signed it, and he received the bill only after arriving in Manila, relying on the doctrine in Mirasol vs. Robert Dollar Co.
• Full Recovery of Damages: Respondent maintained that, as the bill of lading limitation was not binding, he was entitled to full recovery of the actual damages sustained, as affirmed by both the trial court and the Court of Appeals.

• Binding Effect of the Bill of Lading: Whether the bill of lading's stipulation limiting the carrier's liability to $500.00 per package is binding on the shipper-consignee who did not sign the bill of lading.
• Applicability of the Carriage of Goods by Sea Act: Whether Section 4(5) of the Carriage of Goods by Sea Act, limiting carrier liability to $500.00 per package, should control the case over the Civil Code's provisions on common carriers.

• Binding Effect of the Bill of Lading: Yes. The bill of lading's stipulations are binding on the shipper-consignee because the bill expressly provided that acceptance bound the shipper to all stipulations, and the shipper impliedly accepted it by shipping the goods and paying freight, notwithstanding that he did not sign it.
• Applicability of the Carriage of Goods by Sea Act: The COGSA provision is merely suppletory. Article 1753 of the Civil Code directs that the law of the country of destination governs the carrier's liability, meaning Philippine law; Article 1766 makes special laws applicable only in matters not regulated by the Code, and Articles 1736, 1737, and 1738 do regulate the matter.

• Binding Effect of the Bill of Lading: The Court found two decisive circumstances distinguishing this case from Mirasol vs. Robert Dollar Co., upon which the Court of Appeals had relied. First, the bill of lading bore a clause printed in red ink on its face stating that in accepting the bill, the shipper, consignee, and owner agreed to be bound by all stipulations, exceptions, and conditions written, printed, or stamped thereon. This clause made clear that a party who accepts the bill cannot evade provisions that prejudice him while taking advantage of beneficial ones. Second, the respondent had shipped his goods aboard petitioner's vessel and paid the corresponding freight, which constituted implied acceptance of the bill of lading issued in connection with the shipment. Because respondent was both shipper and consignee, the bill was binding upon him as if it had been actually signed by him or by a person on his behalf. The Court placed this case within the doctrine of Mendoza vs. Philippines Air Lines, Inc., where a consignee's demand for delivery was treated as acceptance of the stipulations in the contract of carriage, making him a party to the contract and founding his cause of action on its breach.

• Applicability of the Carriage of Goods by Sea Act: The Court agreed with the Court of Appeals that the COGSA provision did not independently control. Article 1753 of the Civil Code provides that the law of the country to which the goods are to be transported governs the liability of the common carrier for loss, destruction, or deterioration—meaning Philippine law, the Civil Code. Article 1766 provides that in all matters not regulated by the Code, the rights and obligations of common carriers are governed by the Code of Commerce and special laws. Because Articles 1736, 1737, and 1738 of the Civil Code do regulate the rights and obligations of common carriers, Section 4(5) of the COGSA—though it states that the carrier shall not be liable in an amount exceeding $500.00 per package unless the value was declared—is merely suppletory to the Civil Code's provisions. The limitation of liability thus rested on the bill of lading stipulation, which the Court found binding, rather than on the statute alone.

• Extraordinary Responsibility of Common Carriers — The responsibility of a common carrier is extraordinary and lasts from the time goods are placed in its possession until they are delivered, actually or constructively, to the consignee or the person entitled to receive them. The carrier can be exempted only for causes enumerated in Article 1734 of the Civil Code. The Court applied this doctrine to confirm the carrier's liability for the damage, which was conceded to have been caused by negligence.
• Implied Acceptance of Bill of Lading — Where a bill of lading provides that a shipper or consignee who accepts the bill becomes bound by all stipulations contained therein, the shipper or consignee cannot elude its provisions simply because they are prejudicial. Acceptance may be implied from the act of shipping goods and paying the corresponding freight, making the bill binding as if it had been signed. The Court applied this doctrine to hold Klepper bound by Clause 17's $500.00 limitation despite his non-signature, distinguishing the case from Mirasol vs. Robert Dollar Co.
• Suppletory Application of the Carriage of Goods by Sea Act — Under Articles 1753 and 1766 of the Civil Code, the law of the country of destination governs carrier liability, and special laws such as the COGSA apply only in matters not regulated by the Code. Because Articles 1736, 1737, and 1738 regulate common carrier rights and obligations, Section 4(5) of the COGSA is merely suppletory. The Court relied on this doctrine to confirm that the COGSA's $500.00 limitation did not independently control but operated in conjunction with the bill of lading stipulation.

• "the fact that respondent shipped his goods on board the ship of petitioner and paid the corresponding freight thereon shows that he impliedly accepted the bill of lading which was issued in connection with the shipment in question, and so it may be said that the same is binding upon him as if it has been actually signed by him or by any other person in his behalf." — This passage articulates the ratio decidendi on the binding effect of a bill of lading through implied acceptance, distinguishing the case from Mirasol and aligning it with Mendoza vs. Philippines Air Lines, Inc.

• "although Section 4(5) of the Carriage of Goods by Sea Act states that the carrier shall not be liable in an amount exceeding $500.00 per package unless the value of the goods had been declared by the shipper and inserted in the bill of lading, said section is merely suppletory to the provisions of the Civil Code." — This defines the hierarchical relationship between the Civil Code and the COGSA in matters of common carrier liability, a principle frequently invoked in subsequent maritime jurisprudence.

• "the shipping company's liability would attach because being a common carrier its responsibility is extraordinary and lasts from the time the goods are placed in its possession until they are delivered, actually or constructively, to the consignee or to the person who has a right to receive them" — This restates the canonical formulation of the extraordinary diligence doctrine under Article 1736, applied here to confirm liability irrespective of the negligence finding.

• Mirasol vs. Robert Dollar Co., 53 Phil. 124 — Distinguished. The Court of Appeals had relied on Mirasol for the proposition that a consignee who did not sign the bill of lading was not bound by its limitation clause. The Supreme Court distinguished the case because here the bill of lading expressly stated that acceptance bound the shipper to all stipulations, and the respondent had impliedly accepted it by shipping goods and paying freight, while also being both shipper and consignee.
• Mendoza vs. Philippines Air Lines, Inc., 90 Phil. 836 — Followed. The Court applied Mendoza's reasoning that a consignee's demand for delivery constitutes acceptance of the stipulations in the contract of carriage, making the consignee a party to the contract and founding the cause of action on its breach. This supported the conclusion that Klepper was bound by the bill of lading's stipulations.

• Article 1734, Civil Code — Enumerates the causes for which a common carrier may be exempt from responsibility for loss, destruction, or deterioration of goods. The Court cited it to define the exclusive grounds for exemption from the extraordinary responsibility of common carriers.
• Article 1736, Civil Code — Provides that the extraordinary responsibility of a common carrier lasts from the time goods are placed in its possession until delivery to the consignee. Applied to confirm that the carrier's liability attached regardless of negligence.
• Articles 1737 and 1738, Civil Code — Cited alongside Article 1736 as provisions that regulate the rights and obligations of common carriers, establishing that the Civil Code governs these matters and that the COGSA is merely suppletory.
• Article 1753, Civil Code — Provides that the law of the country to which goods are to be transported governs the liability of the common carrier for loss, destruction, or deterioration. Applied to determine that Philippine law—the Civil Code—governs the carrier's liability for goods shipped to Manila.
• Article 1766, Civil Code — Provides that in all matters not regulated by the Civil Code, the rights and obligations of common carriers are governed by the Code of Commerce and special laws. Applied to establish that the COGSA, as a special law, is suppletory to the Civil Code because the Code already regulates common carrier liability through Articles 1736, 1737, and 1738.
• Section 4(5), Carriage of Goods by Sea Act (Commonwealth Act No. 65) — States that the carrier shall not be liable in an amount exceeding $500.00 per package unless the value of the goods has been declared by the shipper and inserted in the bill of lading. Held to be merely suppletory to the Civil Code; the limitation of liability was sustained through the bill of lading stipulation rather than the statute alone.
• Articles 355 and 363, Code of Commerce — Cited by the Court of Appeals as additional bases for the carrier's primary liability to deliver cargo in good order to the consignee; the Supreme Court agreed with this characterization.

Paras, C.J., Bengzon, Padilla, Labrador, Barrera, Gutierrez David, Paredes, and Dizon, JJ., concurred. Reyes, J.B.L., J., concurred separately, stating that he concurred specifically in view of the difference in requisites between Article 1744 and Article 1749 of the Civil Code of the Philippines.