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PHILIPPINE AMERICAN GENERAL INSURANCE CO. v. SWEET LINES

FACTS:

The petitioners, Philippine American General Insurance Co., Inc. (Philamgen) and Tagum Plastics, Inc. (TPI), filed a maritime suit against the private respondents, Sweet Lines, Inc. (SLI) and Davao Veterans Arrastre and Port Services, Inc. (DVAPSI), seeking recovery of the cost of lost or damaged shipment. The cargoes in question were insured by Tagum Plastics Inc. with Philamgen and were loaded in the vessel SS 'VISHVA YASH' and later transhipped to the vessel M/V 'Sweet Love' owned and operated by SLI. After delivery, a survey conducted showed shortages, damages, and losses to the cargoes. The trial court rendered judgment in favor of the petitioners, but the decision was reversed by the appellate court on the ground of prescription. The petitioners filed a petition for review on certiorari, alleging errors such as the failure to provide proof of the existence of a prescriptive period and the failure to find their substantial compliance with the prescriptive period.

In another case, SLI filed a complaint against Marina Davao Co., Inc. (MDCI) for the recovery of the value of lost cargo. The bills of lading covering the cargo contained provisions stating that any claim for loss or damage must be filed within 30 days and any legal action must be filed within 60 days. MDCI argued that the claim and action are already prescribed because SLI failed to comply with these time limitations. The lower court ruled in favor of SLI, holding that the provisions in the bills of lading are unreasonable and contrary to public policy. However, the Court of Appeals reversed the decision, finding that SLI impliedly admitted the existence and contents of the bills of lading by failing to specifically deny them. SLI appealed to the Supreme Court, arguing that the provisions in the bills of lading are void for being unreasonable and contrary to public policy.

The Supreme Court upheld the Court of Appeals' ruling, stating that SLI admitted the existence of the bills of lading and the provisions therein through its failure to specifically deny them. The Court also held that the non-presentation of the bills of lading during trial is not fatal and rejected SLI's argument regarding the validity of the time limitations as contracts of adhesion.

ISSUES:

  1. Whether the time limitation for filing a claim in the bills of lading is reasonable or contrary to public policy.

  2. Whether the performance of the condition precedent for filing a claim is necessary before a right of action can accrue.

  3. Whether the failure to comply with the stipulated requirement of filing a notice of claim within the prescribed period bars recovery for loss or damage suffered.

  4. Whether the filing of the complaint within the stipulated time period is sufficient to preserve the right to sue.

  5. Whether the stipulated period of 60 days for filing a claim for loss or damage to cargo is reasonable and valid.

  6. Whether the stipulated limitation on venue of action provided in the bill of lading is void for being a contract of adhesion and contrary to public policy.

  7. Whether the arrastre operator should be held liable for the loss or damage to the goods entrusted to it

  8. Whether the petitioners' failure to seasonably file the requisite claim affects their right to recover from the arrastre operator

RULING:

  1. The time limitation for filing a claim in the bills of lading is reasonable and not contrary to public policy. The stipulation is uniformly adopted by nearly all shipping companies and serves as a countervailing balance to the legal presumption of negligence on the carrier. The fulfillment of the condition precedent for filing a claim is necessary for the enforcement of the contract. Therefore, it is not a limitation of action, but rather a valid condition precedent.

  2. The performance of the condition precedent for filing a claim is necessary before a right of action can accrue. The right of action does not arise until all conditions precedent are fulfilled. The burden of proof to show that a party has a right of action lies with the person initiating the suit.

  3. Yes. The failure to comply with the stipulated requirement of filing a notice of claim within the prescribed period bars recovery for loss or damage suffered. The validity of a contractual limitation of time for filing the suit itself against a carrier shorter than the statutory period has been upheld as it only affects the shipper's remedy and does not affect the carrier's liability. In this case, the claim was filed beyond the period provided in the bills of lading, thus resulting in the loss of petitioners' remedy or right to sue.

  4. No. The filing of the complaint within the stipulated time period is not sufficient to preserve the right to sue. Even if the complaint was filed within the stipulated time period, the claim was time-barred and the right of action had already prescribed. The time limits for filing the complaint, whether viewed as a condition precedent or a prescriptive period, would have the same result of barring the claim.

  5. The shortened period of 60 days for filing a claim for loss or damage to cargo is reasonable and valid. The Court held that there is no constitutional or statutory prohibition against the stipulated period. It is deemed sufficient for the parties to ascertain the facts and bring an action if necessary. The 60-day period agreed upon by the parties, which shortened the statutory period, is binding.

  6. The stipulated limitation on venue of action provided in the bill of lading is not void for being a contract of adhesion and contrary to public policy. The Court differentiated this case from a previous ruling where a similar restriction was held to be void. The Court explained that the restriction in this case was reasonable and the environmental facts involved were different. It further emphasized that contracts of adhesion are not entirely prohibited and the party who adheres to the contract is considered to have given consent.

  7. An arrastre operator does not have a presumption of negligence in case of loss, destruction, or deterioration of goods discharged into its custody. To hold an arrastre operator liable for loss or damage, there must be preponderant evidence that it did not exercise due diligence in handling and caring for the goods.

  8. The petitioners failed to establish the liability on any of the original defendants, and their failure to seasonably file the required claim affects their right to recover. The court could not ascertain when, where, how, and under whose responsibility the loss or damage occurred.

PRINCIPLES:

  • Parties bound by stipulations in bills of lading. Acceptance and acknowledgment of bills of lading by shipping goods on a carrier's vessel renders the parties bound by all stipulations contained therein.

  • Time limitation for filing a claim. The time limitation for filing a claim is a reasonable condition precedent to enforce the carrier's liability. It allows the carrier to investigate the claim while it is still fresh and easily investigated.

  • Conditions precedent. All valid conditions precedent must be performed or complied with before commencing an action, as they are necessary elements of a cause of action. The burden of proof to show compliance lies with the party initiating the suit.

  • Notice of loss or claim for damage is a condition precedent required in a contract of carriage. Failure to comply with this requirement bars recovery for loss or damage suffered.

  • Parties to a contract of carriage may fix by agreement a shorter time for filing a suit on a claim for loss or damage than that provided by the statute of limitations. Such a limitation is not contrary to public policy and may be enforced if reasonable.

  • The filing of a complaint within the stipulated time period does not preserve the right to sue if the claim itself is time-barred. The right of action must be asserted within the stipulated time period.

  • A stipulated period for filing a claim for loss or damage to cargo may be valid if it is reasonable and does not violate any constitutional or statutory prohibition.

  • Contracts of adhesion, wherein one party imposes a ready-made form of contract on the other, are not entirely prohibited. The party who adheres to the contract is considered to have given consent.

  • Substantial compliance with provisions on filing claims for loss or damage to cargo may not be sufficient if it does not serve the purpose of promptly apprising the carrier and allowing for a prompt investigation.

  • The carrier cannot be expected to presume the existence of a claim for every loss or damage tallied in a report on losses and damages. A notice of claim must be filed separately to fix responsibility and indicate an intent to claim compensation.

  • An arrastre operator does not have a presumption of negligence in cases of loss, destruction, or deterioration of goods. Liability can only be established with preponderant evidence of the operator's failure to exercise due diligence.

  • Failure to seasonably file the required claim affects the right to recover for loss or damage to goods.