View full case

MAERSK LINE v. CA

FACTS:

The case involved a dispute between Maersk Line, a shipping company, and Efren Castillo, the owner of Ethegal Laboratories, a pharmaceutical manufacturing firm. Castillo ordered 600,000 empty gelatin capsules from Eli Lilly, Inc. of Puerto Rico, with the capsules to be shipped on board MV "Anders Maerskline" under Voyage No. 7703. The expected arrival date of the cargo was April 3, 1977. However, the cargo was mishipped and diverted to Richmond, Virginia, USA, before being transported back to Oakland, California. The goods finally arrived in the Philippines on June 10, 1977, two months later than specified in the memorandum of shipment.

Due to the delay, Castillo refused to accept the delivery of the goods and filed a lawsuit against Maersk Line and Eli Lilly, Inc. for breach of contract and damages. The trial court ruled in favor of Castillo, finding Maersk Line liable for its negligence in shipping the capsules late. On appeal, the appellate court affirmed the lower court's decision with modifications, ordering Maersk Line to pay compensatory damages, moral damages, exemplary damages, attorney's fees, and costs of suit.

ISSUES:

  1. The issue in this case is whether the petitioner, as the carrier, can be held liable for damages due to alleged delay in the delivery of the goods.

  2. Whether the delay in the delivery of the goods is reasonable.

  3. Whether the carrier can be held liable for damages.

  4. Whether the award of actual, moral, and exemplary damages, as well as attorney's fees, is valid.

  5. Whether or not the fee charged by the seller to the buyer for the right to match any selling price for property is unconscionable.

  6. Whether or not the fee charged by the seller violates the principle of mutuality of contracts.

RULING:

  1. The court ruled that the petitioner can be held liable for damages due to the delay in the delivery of the goods. The trial court based petitioner's liability on its delay or negligence to deliver the goods within a reasonable time, resulting in damages under Article 1170 of the New Civil Code. The court also found that the provision in the bill of lading, which exempts the carrier from liability for delay, is void as it goes against public policy. Furthermore, the court held that the contracts of adhesion, such as the bill of lading, are not entirely prohibited and the party adhering to the contract has the option to reject it in its entirety.

  2. The delay in the delivery of the goods spanning two months and seven days is deemed unreasonable.

  3. The carrier can be held liable for damages due to breach of contract of carriage through gross negligence amounting to bad faith.

  4. The award of actual damages is valid as it was sufficiently proven. The award of moral damages is also valid as the carrier acted in bad faith. Exemplary damages can be awarded due to gross negligence, and attorney's fees can be granted since exemplary damages were awarded.

  5. The fee charged by the seller to the buyer for the right to match any selling price for property is found to be unconscionable. The ruling of the lower court in favor of the private respondent is affirmed, with the modification that item 4 of the respondent court's decision, which awards attorney's fees in favor of private respondent, should be deleted.

PRINCIPLES:

  • Those who in the performance of their obligations are guilty of fraud, negligence, or delay and those who contravene the tenor thereof are liable for damages under Article 1170 of the New Civil Code.

  • Contracts of adhesion are generally considered void as they are prepared and drafted only by one party, but the party adhering to the contract has the option to reject it in its entirety.

  • Bills of lading operate both as a receipt and as a contract. They are considered contracts between the parties who are bound by their terms and conditions, provided that these are not contrary to law, morals, good customs, public order, and public policy.

  • Delivery of shipment or cargo should be made within a reasonable time, even in the absence of a special contract indicating the date of arrival. (Saludo, Jr. v. Court of Appeals)

  • Common carriers can be held liable for delay in transportation of goods if they have made an express contract to transport and deliver the goods within a specified time. (Saludo, Jr. v. Court of Appeals)

  • Actual damages require substantial proof, but in this case, the amount paid as costs of the credit line for the goods was sufficiently proven. (Capco v. Macasaet)

  • Moral damages may be awarded for breaches of contract where the defendant acted fraudulently or in bad faith. (Pan American World Airways v. Intermediate Appellate Court)

  • Exemplary damages may be awarded if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. Gross negligence can constitute wanton misconduct. (Radio Communications of the Phils., Inc. v. Court of Appeals)

  • Attorney's fees can be awarded if exemplary damages are granted. (Article 2208, New Civil Code)

  • Unconscionability refers to a contract term or clause that is heavily weighed in favor of one party and is unreasonably advantageous to that party.

  • The principle of mutuality of contracts requires that the parties in a contract have equal rights, obligations, and benefits under the agreement.