Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc., G.R. No. 87434, [Case Digest]

Philippine American General Insurance Co., Inc. v. Sweet Lines, Inc.,
G.R. No. 87434, August. 5, 1992

Facts:
    SS "VISHVA YASH" belonging to or operated by the foreign common carrier, took on board at Baton Rouge, LA, two (2) consignments of cargoes for shipment to Manila and later for transhipment to Davao City, consisting of 600 bags Low Density Polyethylene 631 and another 6,400 bags Low Density Polyethylene 647, both consigned to the order of Far East Bank and Trust Company of Manila, with arrival notice to Tagum Plastics, Inc., Madaum, Tagum, Davao City. Said cargoes were covered, respectively, by Bills of Lading Nos. 6 and 7 issued by the foreign common carrier. The cargoes were likewise insured by the Tagum Plastics Inc. with plaintiff Philippine American General Insurance.
    The said vessel arrived at Manila and discharged its cargoes in the Port of Manila for transhipment to Davao City. For this purpose, the foreign carrier awaited and made use of the services of the vessel called M/V "Sweet Love" owned and operated by defendant interisland carrier.
    Subject cargoes were loaded in Holds Nos. 2 and 3 of the interisland carrier. These were commingled with similar cargoes belonging to Evergreen Plantation and also Standfilco.
    The cargo covered by Bill of Lading No. 25 or (2)6, supposed to contain 6,400 bags of Low Density Polyethylene 647 originally inside 160 pallets, there were delivered to the consignee 5,413 bags in good order condition. The survey shows shortages, damages and losses.  Of the 600 bags of Low Density Polyethylene 631, the survey conducted on the same day shows an actual delivery to the consignee of only 507 bags in good order condition. Likewise noted were the following losses, damages and shortages.
    Before trial, a compromise agreement was entered into between petitioners, as plaintiffs, and defendants S.C.I. Line and F.E. Zuellig, upon the latter's payment of P532.65 in settlement of the claim against them. Whereupon, the trial court in its order of August 12, 1981 3 granted plaintiffs' motion to dismiss grounded on said amicable settlement and the case as to S.C.I. Line and F.E. Zuellig was consequently "dismissed with prejudice and without pronouncement as to costs."  The trial court thereafter rendered judgment in favor of herein petitioners.
    Due to the reversal on appeal by respondent court of the trial court's decision on the ground of prescription. Respondent file petition for certiorari in SC. respondent carrier duly raised prescription as an affirmative defense in its answer setting forth paragraph 5 of the pertinent bills of lading which comprised the stipulation thereon by parties, to wit:
5. Claims for shortage, damage, must be made at the time of delivery to consignee or agent, if container shows exterior signs of damage or shortage. Claims for non-delivery, misdelivery, loss or damage must be filed within 30 days from accrual. Suits arising from shortage, damage or loss, non-delivery or misdelivery shall be instituted within 60 days from date of accrual of right of action. Failure to file claims or institute judicial proceedings as herein provided constitutes waiver of claim or right of action. In no case shall carrier be liable for any delay, non-delivery, misdelivery, loss of damage to cargo while cargo is not in actual custody of carrier.
    On the issue of the validity of the controverted paragraph 5 of the bills of lading above quoted which unequivocally prescribes a time frame of thirty (30) days for filing a claim with the carrier in case of loss of or damage to the cargo and sixty (60) days from accrual of the right of action for instituting an action in court, which periods must concur, petitioners posit that the alleged shorter prescriptive period which is in the nature of a limitation on petitioners' right of recovery is unreasonable and that SLI has the burden of proving otherwise, citing the earlier case of Southern Lines, Inc. vs. Court of Appeals, et al. They postulate this on the theory that the bills of lading containing the same constitute contracts of adhesion and are, therefore, void for being contrary to public policy, supposedly pursuant to the dictum in Sweet Lines, Inc. vs. Teves, et al.
    SLI asserts and defends the reasonableness of the time limitation within which claims should be filed with the carrier; the necessity for the same, as this condition for the carrier's liability is uniformly adopted by nearly all shipping companies if they are to survive the concomitant rigors and risks of the shipping industry; and the countervailing balance afforded by such stipulation to the legal presumption of negligence under which the carrier labors in the event of loss of or damage to the cargo.

Issue:
    Whether or not prescription can be maintained as defense by herein respondent.

Held:
    YES. It has long been held that Article 366 of the Code of Commerce applies not only to overland and river transportation but also to maritime transportation.  Moreover, we agree that in this jurisdiction, as viewed from another angle, it is more accurate to state that the filing of a claim with the carrier within the time limitation therefor under Article 366 actually constitutes a condition precedent to the accrual of a right of action against a carrier for damages caused to the merchandise. The shipper or the consignee must allege and prove the fulfillment of the condition and if he omits such allegations and proof, no right of action against the carrier can accrue in his favor. As the requirements in Article 366, restated with a slight modification in the assailed paragraph 5 of the bills of lading, are reasonable conditions precedent, they are not limitations of action. Being conditions precedent, their performance must precede a suit for enforcement and the vesting of the right to file spit does not take place until the happening of these conditions.
    Now, before an action can properly be commenced all the essential elements of the cause of action must be in existence, that is, the cause of action must be complete. All valid conditions precedent to the institution of the particular action, whether prescribed by statute, fixed by agreement of the parties or implied by law must be performed or complied with before commencing the action, unless the conduct of the adverse party has been such as to prevent or waive performance or excuse non-performance of the condition.
    More particularly, where the contract of shipment contains a reasonable requirement of giving notice of loss of or injury to the goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to enforce the carrier's liability. Such requirement is not an empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims.
    Stipulations in bills of lading or other contracts of shipment which require notice of claim for loss of or damage to goods shipped in order to impose liability on the carrier operate to prevent the enforcement of the contract when not complied with, that is, notice is a condition precedent and the carrier is not liable if notice is not given in accordance with the stipulation, as the failure to comply with such a stipulation in a contract of carriage with respect to notice of loss or claim for damage bars recovery for the loss or damage suffered.
    On the other hand, the validity of a contractual limitation of time for filing the suit itself against a carrier shorter than the statutory period therefor has generally been upheld as such stipulation merely affects the shipper's remedy and does not affect the liability of the carrier. In the absence of any statutory limitation and subject only to the requirement on the reasonableness of the stipulated limitation period, the parties to a contract of carriage may fix by agreement a shorter time for the bringing of suit on a claim for the loss of or damage to the shipment than that provided by the statute of limitations. Such limitation is not contrary to public policy for it does not in any way defeat the complete vestiture of the right to recover, but merely requires the assertion of that right by action at an earlier period than would be necessary to defeat it through the operation of the ordinary statute of limitations.
    In the case at bar, there is neither any showing of compliance by petitioners with the requirement for the filing of a notice of claim within the prescribed period nor any allegation to that effect. It may then be said that while petitioners may possibly have a cause of action, for failure to comply with the above condition precedent they lost whatever right of action they may have in their favor or, token in another sense, that remedial right or right to relief had prescribed.