PHILAMGEN vs.

SWEET LINES

Facts:

7,000 bags of low density polyethylene were shipped from Baton Rouge, LA to Manila on board SS
Vishva Yash, a vessel belonging to the Shipping Corporation of India (SCI). From Manila, the cargoes
were transshipped to Davao on board MV Sweet Love, a vessel owned by Sweet Lines, Inc. The
consignee was Far East Bank with arrival notice to Tagum Plastics, Inc. The cargoes were insured by Far
East Bank with the Philippine American General Insurance Co (Philamgen) and were covered by bills of
lading which contained the following stipulation in paragraph 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 May 15, 1977, the shipment(s) were discharged from the interisland carrier into the custody of the
consignee. A survey conducted on July 8, 1977 showed that only a total of 5,820 bags were delivered to
the consignee in good order condition, leaving a balance of 1,080 bags. Some of the 1,080 bags were
either MISSING OR DAMAGED beyond the point of being useful for the intended purpose, hence,
petitioner commenced this suit for recovery of damages.

The trial court ruled in favour of Philamgen and Tagum Plastics. The CA reversed on the ground of
prescription on account of the aforesaid stipulation in paragraph 5 of the bill of lading.

Issues:

W/n the prescriptive period provided in the bill of lading is valid.

Ruling:

The Court found no merit in Philamgen’s assertion that the bills of lading were contracts of adhesion and
that the provisions in paragraph 5 were “contrary to law and public policy”. The SC, citing Ong Yu vs CA,
said “that contracts of adhesion are not entirely prohibited. The one who adheres to the contract is in
reality free to reject it entirely; if he adheres he gives his consent.” Philamgen, thus, gave its consent to
the contracts – the bills of lading – including consent to the prescriptive periods therein.

The SC also agreed with the CA that parties can stipulate a shorter prescriptive period for the filing of
suits. The SC quoted the CA, “It must be noted, at this juncture, that the aforestated time limitation
(paragraph 5) in the presentation of claim for loss or damage, is but a restatement of the rule prescribed
under Art. 366 of the Code of Commerce... ” The SC said that, “... 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.” The SC also said that, “..., the shortened period for
filing suit is not unreasonable and has in fact been generally recognized to be a valid business practice in
the shipping industry.” This is in recognition of the inherent dangers of carriage by sea.