Mirasol vs. The Robert Dollar Co.

A common carrier that receives goods in good condition and delivers them damaged bears the burden of proving that the damage was caused by a circumstance legally exempting it from liability; a clause in a bill of lading purporting to limit the carrier's liability is not binding on a shipper who did not sign the bill of lading or know its contents at the time it was issued.

The plaintiff, Amando Mirasol, was the owner and consignee of two cases of books shipped from New York, U.S.A., to Manila aboard the defendant's steamship President Garfield, with all freight charges prepaid. The defendant, The Robert Dollar Co., operated as a common carrier in the ocean transport of goods. The bill of lading issued by the defendant contained clauses purporting to exempt the carrier from liability for "Acts of God," "perils of the sea," and "sea water" damage, and to limit liability to $250 per package unless a higher value was declared and ad valorem freight paid. The dispute centered on whether these clauses were enforceable against the plaintiff and whether the carrier had discharged its burden of proving an exempting cause for the damage.

Amando Mirasol was the owner and consignee of two cases of books shipped in good order and condition from New York, U.S.A., aboard the defendant's steamship President Garfield, destined for delivery to him in Manila, with all freight charges prepaid. The two cases arrived in Manila on September 1, 1927, in bad order and damaged condition, resulting in the total loss of one case and a partial loss of the other. The loss in the totally lost case was valued at P1,630, and the partial loss in the other at P700. Mirasol filed claims with the defendant, which refused payment on the ground that the damage "was caused by sea water."

On September 3, 1927, Mirasol wrote the defendant a letter stating: "Therefore, I wish to file claim of damage to the meager maximum value that your bills of lading will indemnify me, that is $250 as per condition 13." At that time, he had not yet ascertained the contents of the damaged case and could not determine their value. On September 9, 1927, when the other case was found, he filed a claim for the real damage to the books therein in the sum of $375. Mirasol maintained that he never entered into any contract with the defendant limiting its liability as a common carrier, never intended to ratify or confirm any such agreement, and did not sign the bill of lading or know its contents when it was issued.

The defendant, for its part, alleged that the President Garfield was at all times seaworthy and properly manned, equipped, and supplied. It contended that any damage resulted from faults or errors in navigation or management of the vessel, not from its negligence or the vessel's unseaworthiness. The defendant relied on clause 13 of the bill of lading, which limited liability to $250 per package unless a higher value was declared and ad valorem freight paid, and on provisions exempting it from liability for "Acts of God," "perils of the sea," and "sea water" damage. The defendant also invoked Article 361 of the Code of Commerce, which provides that merchandise is transported at the risk and venture of the shipper unless otherwise stipulated, and that damage caused by accident, force majeure, or the nature or defect of the articles is for the account of the shipper.

After trial, the lower court rendered judgment for the plaintiff for P2,080, with legal interest from the date the judgment becomes final, with costs. The lower court found that the defendant had not attempted to prove that the two cases were wet with sea water by force majeure, nature, or defect of the things themselves, and that it must be presumed the damage was caused by matters entirely distinct from and not imputable to the plaintiff. Both parties appealed, the plaintiff contesting the amount of damages and the date from which legal interest should run, and the defendant contesting its liability altogether and the validity of the limitation clause.

• Insufficiency of Damages: Plaintiff argued that the lower court erred in compensating his damage for the partially damaged case at only P450 instead of P750 as claimed, and consequently in awarding only P2,080 instead of P2,380.
• Legal Interest: Plaintiff maintained that he was entitled to legal interest from the date of rendition of the lower court judgment (January 30, 1928), not from the date the judgment becomes final.
• Non-Binding Limitation Clause: Plaintiff contended that he never entered into any contract limiting the defendant's liability, never signed the bill of lading, and did not know its contents when issued; his September 3, 1927 letter was written before he had ascertained the contents of the damaged case and was never intended to ratify any limitation agreement.

• Validity of Limitation Clause: Defendant argued that the limited liability clause in the bill of lading (clause 13, capping liability at $250 per package) was valid and binding on the plaintiff, and that the plaintiff's September 3, 1927 letter constituted an election to claim under that clause.
• Exemption for Sea Water Damage: Defendant argued that the damage was caused by "sea water," which is a shipper's risk under the bill of lading and Article 361 of the Code of Commerce, and that the carrier is not liable for such damage.
• Perils of the Sea: Defendant contended that the damage fell under "Acts of God" or "perils of the sea" as exempted under the bill of lading.
• Evidentiary Objection: Defendant objected to the admission of Exhibits G, H, I, and J and argued that no damages should have been awarded in any amount.

• Validity of Limitation Clause: Whether the limited liability clause in the bill of lading is binding on the plaintiff who did not sign the bill of lading or know its contents at the time it was issued.
• Carrier Liability for Sea Water Damage: Whether the defendant carrier is liable for damage caused by sea water, absent proof that the damage resulted from force majeure or perils of the sea.
• Burden of Proof: Whether the burden of proving that the damage was caused by an exempting circumstance rests on the carrier once goods received in good condition are delivered in damaged condition.
• Legal Interest: Whether the plaintiff is entitled to legal interest from the date of rendition of the lower court judgment rather than from the date the judgment becomes final.
• Amount of Damages: Whether the lower court's award of P2,080 is proper, or whether the plaintiff is entitled to P2,380.

• Validity of Limitation Clause: No. The limitation clause was not binding on the plaintiff because he did not sign the bill of lading and was unaware of its contents when it was issued, pursuant to the rule laid down in Juan Ysmael and Co. vs. Gabino Baretto and Co., 51 Phil. 90.
• Carrier Liability for Sea Water Damage: Yes. The carrier is liable because damage by "sea water" standing alone is not evidence of force majeure or a cause beyond the carrier's control; "perils of the sea" requires something fortuitous and out of the ordinary course.
• Burden of Proof: Yes. Upon the carrier's admission that goods were damaged while in its possession, the burden shifted to the defendant to allege and prove a fact legally exempting it from liability.
• Legal Interest: Yes. Legal interest runs from the date of rendition of the lower court judgment, not from the date it becomes final.
• Amount of Damages: Yes. The lower court's finding of P2,080 in damages is sustained by the evidence; the plaintiff's claim for P700 for the Encyclopedia Britannica is not tenable because P400 suffices to purchase a new set containing the same material.

• Validity of Limitation Clause: There was no claim or pretense that the plaintiff signed the bill of lading or knew of its contents at the time it was issued. Under those circumstances, he was not legally bound by the clause purporting to limit the defendant's liability. This question was squarely decided in Juan Ysmael and Co. vs. Gabino Baretto and Co., 51 Phil. 90, which held that a shipper who does not sign a bill of lading is not bound by its limitation clauses. The U.S. Supreme Court decision in The Kensington, 46 Law. Ed. 190, further supported this conclusion by holding that restrictions on a carrier's liability for its own negligence are against public policy and will not be upheld. Both the facts and legal principles of The Kensington were found to be squarely in point.

• Carrier Liability for Sea Water Damage: The defendant received the two cases in good condition in New York and delivered them in bad condition in Manila. During the entire transit, the cases were under the defendant's control and supervision and beyond the plaintiff's control. The fact that the cases were damaged by "sea water" standing alone is not evidence that they were damaged by force majeure or by a cause beyond the defendant's control. The words "perils of the sea" apply to marine casualties such as shipwreck, foundering, stranding, tempest, rocks, shoals, and icebergs — things that are fortuitous and out of the ordinary course. The defendant presented no proof that any such peril was the proximate cause of the loss. The lower court itself found that the defendant had not even attempted to prove that the cases were wet with sea water by force majeure, nature, or defect of the things themselves. The case of Government of the Philippine Islands vs. Ynchausti & Company, 40 Phil. 219, relied upon by the defendant, was distinguished because its facts were very different and not in point.

• Burden of Proof: Because the defendant admitted the boxes were damaged while in transit and in its possession, the burden of proof shifted to the defendant to both allege and prove that the damage was caused by some fact legally exempting it from liability. How, when, or where the boxes were damaged was a matter exclusively within the knowledge of the defendant's ship officers and could not be within the plaintiff's knowledge. To require the plaintiff to prove how the damage was caused would force him to rely on the defendant's own employees, effectively denying him any redress. Article 361 of the Code of Commerce itself places the burden of proving exempting accidents on the carrier.

• Legal Interest: Under all authorities, the plaintiff is entitled to legal interest from the date of rendition of the lower court judgment, not from the date it becomes final. The plaintiff's third assignment of error was therefore well taken.

• Amount of Damages: The lower court's finding that the plaintiff's damage was P2,080 is sustained by the evidence. There was a total loss of one case and a partial loss of the other, and the plaintiff could not prove his loss in any other manner than he did. The trial court, which heard him testify, was convinced of the truth of his testimony. The plaintiff's contention that he was entitled to P700 for his Encyclopedia Britannica was not tenable, because the evidence showed that for the P400 allowed by the court, he could buy a new set containing all the material and subject matter of the one he lost.

• Burden of Proof on Common Carrier for Damaged Goods — When a common carrier receives goods in good order and condition and delivers them in bad order and condition, the burden of proof shifts to the carrier to allege and prove that the damage was caused by a fact legally exempting it from liability. The carrier has exclusive knowledge of the circumstances of transit; requiring the shipper to prove the cause of damage would effectively deny recovery. Applied here: the defendant admitted the goods were damaged in transit and in its possession, yet failed to prove force majeure or perils of the sea.

• Non-Binding Effect of Bill of Lading Limitation Clauses on Non-Signing Shippers — A clause in a bill of lading purporting to limit a carrier's liability is not binding on a shipper who did not sign the bill of lading or know its contents at the time it was issued. Applied here: the plaintiff never signed the bill of lading and was unaware of its contents, so clause 13's $250 per-package limitation was unenforceable against him.

• "Perils of the Sea" vs. Mere Sea Water Damage — "Perils of the sea" refers to marine casualties such as shipwreck, foundering, stranding, tempest, rocks, shoals, and icebergs — things fortuitous and out of the ordinary course of events. Damage by "sea water" alone, without proof of such extraordinary peril, does not constitute force majeure or establish an exempting cause. Applied here: the defendant proved only that sea water caused the damage but failed to prove any fortuitous event or extraordinary peril.

• "There is no claim or pretense that the plaintiff signed the bill of lading or that he knew of his contents at the time that it was issued. In that situation he was not legally bound by the clause which purports to limit defendant's liability." — This passage states the ratio decidendi on the non-binding effect of bill of lading limitation clauses on non-signing shippers.

• "The defendant having received the two boxes in good condition, its legal duty was to deliver them to the plaintiff in the same condition in which it received them. From the time of their delivery to the defendant in New York until they are delivered to the plaintiff in Manila, the boxes were under the control and supervision of the defendant and beyond the control of the plaintiff." — This articulates the foundational principle of carrier liability and the rationale for shifting the burden of proof to the carrier.

• "The fact that the cases were damaged by 'sea water,' standing alone and within itself, is not evidence that they were damaged by force majeure or for a cause beyond the defendant's control." — This defines the distinction between mere sea water damage and exempting perils of the sea, a point frequently cited in subsequent transportation law jurisprudence.

• Juan Ysmael and Co. vs. Gabino Baretto and Co., 51 Phil. 90 — Controlling precedent followed. Held squarely that a shipper who does not sign a bill of lading is not legally bound by its limitation clauses. The Court applied this rule directly to find the plaintiff not bound by clause 13.

• The Kensington, 46 Law. Ed. 190 (U.S. Supreme Court, 1902) — Persuasive authority followed. Held that restrictions on a carrier's liability for its own negligence are against public policy and will not be upheld. The Court found both the facts and legal principles squarely in point.

• Government of the Philippine Islands vs. Ynchausti & Company, 40 Phil. 219 — Distinguished. The defendant relied on this case, but the Court found the facts very different and therefore not in point.

• H.E. Heacock Co. vs. Macondray & Co., 42 Phil. 205 — Cited by the dissenting opinion. Upheld a limitation clause of the same character as clause 13; the dissent argued the majority should have followed this precedent.

• Freixas & Co. vs. Pacific Mail Steamship Co., 42 Phil. 198 — Cited by the dissenting opinion. Also upheld a similar limitation clause; the dissent relied on it to argue that liability should be capped at $250 per package.

• Article 361, Code of Commerce — Provides that merchandise is transported at the risk and venture of the shipper unless otherwise expressly stipulated, and that damage caused by accident, force majeure, or the nature or defect of the articles is for the shipper's account; the proof of these accidents is incumbent on the carrier. The Court applied this provision to place the burden of proving exempting causes on the defendant carrier, noting that the defendant had not even attempted to prove force majeure.

Johnson, Malcolm, Ostrand, Romualdez, and Villa-Real, JJ., concurred.

• Street, J. — Dissenting in part. Justice Street agreed that the defendant was liable to the plaintiff but believed the liability should be limited, under clause 13 of the bill of lading, to $250 for each of the two boxes. He reasoned that while the law does not permit a carrier to gratuitously exempt itself from liability for the negligence of its servants, it may do so for a valuable consideration; where freight rates are adjusted on the basis of a reasonable limited value per package and the shipper does not declare a higher value, the limitation is binding. He cited H.E. Heacock Co. vs. Macondray & Co., 42 Phil. 205, and Freixas & Co. vs. Pacific Mail Steamship Co., 42 Phil. 198, as two well-considered decisions upholding limitations of exactly the character of clause 13, and found no sufficient reason to ignore them.