This was a petition for review on certiorari of the judgment of the Court of Appeals (CA) in CA-GR CV No 52855 holding the respondents liable for damages to the petitioner, subject to the limited liability provision in the bill of lading.

On 30 September 1993, LT Garments Manufacturing Corp Ltd shipped three sets of warp yarn on returnable beams in a container from Hong Kong on board the respondent Neptune Orient Lines' vessel, the M/V Baltimar Orion, for transport and delivery to Fukuyama Manufacturing Corp (Fukuyama) in Manila. Fukuyama insured the shipment against all risks with the petitioner. During the course of the voyage, the container fell overboard and was lost.

The petitioner paid out the full value of the cargo and demanded reimbursement from the respondents. The regional trial Court held that the respondents, as common carriers, failed to prove that they observed the required extraordinary diligence to prevent loss of the cargoes in accordance with the pertinent provisions of the Civil Code, and were ordered to pay the petitioner HKD 55,000 or PHP 228,085, whichever was lower. The respondents appealed to the CA. The CA modified the decision of the regional trial Court, holding that the respondents' liability was limited to the value of the three packages lost, computed at the rate of USD 500 per package, or a total of USD 1,500.

The petitioner appealed to the Supreme Court.

Held: The petition is denied and the CA decision is affirmed.

The petitioner contends that the CA erred in awarding damages to the respondents subject to the USD 500 per package limitation, since the vessel committed a 'quasi deviation', which is a breach of the contract of carriage, when it intentionally threw the container overboard during the voyage to Manila for its own benefit or preservation. According to the petitioner, this breach of contract resulted in the abrogation of the respondents' rights under the contract and COGSA, including the USD 500 per package limitation. Hence, the respondents cannot invoke the benefit of package limitation.

The contention lacks merit. The facts as found do not support this new allegation regarding the intentional throwing overboard of the cargo and quasi-deviation. All of the evidence points to the container falling overboard during heavy weather. The petitioner should not vary the facts of the case on appeal. This Court is not a trier of facts, and, in this case, the factual finding of the Courts below, which is supported by the evidence on record, is conclusive upon this Court.

Since the cargoes were lost while being transported by a common carrier from Hong Kong to the Philippines, Philippine law applies pursuant to the Civil Code which provides:

Art. 1753. The law of the country to which the goods are to be transported shall govern the liability of the common carrier for their loss, destruction or deterioration.
Art. 1766. In all matters not regulated by this Code, the rights and obligations of common carriers shall be governed by the Code of Commerce and by special laws.

The rights and obligations of respondent common carrier are thus governed by the provisions of the Civil Code, and COGSA, which is a special law, applies suppletorily. The pertinent provisions of the Civil Code applicable to this case are as follows:

Art. 1749. A stipulation that the common carrier's liability is limited to the value of the goods appearing in the bill of lading, unless the shipper or owner declares a greater value, is binding.
Art. 1750. A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon.

In addition, s 4(5) of COGSA, which is applicable to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade, provides:

Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before shipment and inserted in the bill of lading. This declaration, if embodied in the bill of lading shall be prima facie evidence, but shall be conclusive on the carrier.

In this case, the bill of lading stipulates:

Neither the Carrier nor the vessel shall in any event become liable for any loss of or damage to or in connection with the transportation of Goods in an amount exceeding US$500 (which is the package or shipping unit limitation under U.S. COGSA) per package or in the case of Goods not shipped in packages per shipping unit or customary freight, unless the nature and value of such Goods have been declared by the Shipper before shipment and inserted in this Bill of Lading and the Shipper has paid additional charges on such declared value.

The shipper in Hong Kong did not declare the actual value of the goods as insured by Fukuyama before shipment, and the value was not inserted in the bill of lading, and so no additional charges were paid. Hence, the stipulation in the bill of lading that the carrier's liability shall not exceed USD 500 per package applies. Such a stipulation in the bill of lading limiting the respondents' liability is allowed under art 1749 of the Civil Code and s 4(5) of COGSA. Everett Steamship Corp v Court of Appeals, GR No 122494, 8 October 1998, 297 SCRA 496, 501-502 held:

A stipulation in the bill of lading limiting the common carrier's liability for loss or destruction of a cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law, particularly Articles 1749 and 1750 of the Civil Code ... . Such limited-liability clause has also been consistently upheld by this court in a number of cases. Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled:

It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless fully sustainable on the basis alone of the cited Civil Code Provisions. That said stipulation is just and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would amount to questioning the justness and fairness of the law itself ... . But over and above that consideration, the just and reasonable character of such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability limitation by the simple and surely far from onerous expedient of declaring the nature and value of the shipment in the bill of lading.

The CA, therefore, did not err in holding the respondents liable for damages to the petitioner subject to the USD 500 per package limited liability provision in the bill of lading.