This petition for review on certiorari seeks to reverse and set aside the judgment of the Court of Appeals (CA) in CA-GR SP No 143912.

On 13 January 2012, the shipper, Chillies Export House Ltd, turned over to the respondent, APL Co Pte Ltd (APL), 250 bags of chili pepper for transport from the port of Chennai, India, to Manila. The shipment, with a total declared value of USD 12,272.50, was loaded onto the M/V Wan Hai 262. The consignee, BSFIL Technologies Inc (BSFIL), insured the cargo with the petitioner. On 2 February 2012, the shipment arrived at the port of Manila and was temporarily stored at North Harbour, Manila. On 6 February 2012, the bags of chili were withdrawn and delivered to BSFIL. Upon receipt, it discovered that 76 bags were wet and heavily infested with mould. The shipment was declared unfit for human consumption and was eventually declared as a total loss. As a result, BSFIL made a formal claim against APL and the petitioner. The latter paid BSFIL PHP 195,505.65 after evaluating the claim, and then sued APL.

The trial Court granted the complaint, and ordered APL to pay the petitioner the amount claimed. The trial Court declared that as a common carrier, APL was bound to observe extraordinary diligence. It noted that, because the goods were damaged while in APL's custody, it was presumed that APL did not exercise extraordinary diligence, and that the latter failed to overcome such presumption. The regional trial Court upheld the trial Court's ruling. APL appealed to the CA. The CA reversed the decisions of the trial Courts, and ruled that the action was barred by prescription. The CA noted that under cl 8 of the bill of lading, the carrier is absolved from any liability unless a case is filed within nine months after the delivery of the goods. It explained that a shorter prescriptive period may be stipulated upon, provided that it is reasonable. The CA held that the nine-month prescriptive period set out in the bill of lading was reasonable, and provided a sufficient period of time within which an action to recover any loss or damage arising from the contract of carriage might be instituted. The petitioner appealed to the Supreme Court.

Held: The petition is granted. The decision of the regional trial Court is reinstated.

The petitioner insists that the action, which was filed on 1 February 2013, was within the one-year prescriptive period under COGSA after BSFIL received the goods on 6 February 2012. It argues that the nine-month period provided under the bill of lading is inapplicable, because the bill of lading itself states that in the event that this time period is found to be contrary to any law compulsorily applicable, the period prescribed by that law shall apply. The stipulation in the bill of lading is subordinate to COGSA. While parties are free to stipulate the terms and conditions of their contract, the same should not be contrary to law, morals, good customs, public order, or public policy.

APL counters that the nine-month period under the bill of lading applies, unless there is a law to the contrary. APL explains that 'absence' differs from 'contrary'. The nine-month period is applicable because it is not contrary to any applicable law.

The petition is meritorious. It is true that in Philippine American General Insurance Co Inc v Sweet Lines Inc 287 Phil 212 (1992), this Court recognised that stipulated prescriptive periods shorter than their statutory counterparts are generally valid because they do not affect the liability of the carrier but merely affect the shipper's remedy. The CA, nevertheless, erred in applying Philippine American to this case as it does not fall squarely within the present circumstances.

The present case involves lost or damaged cargo. It has long been settled that in the case of loss or damage of cargoes, the one-year prescriptive period under the COGSA applies: see Mitsui OSK Lines Ltd v CA 350 Phil 813, 817-818 (1998) (CMI1497); Belgian Overseas Chartering & Shipping NV v Philippine First Insurance Co Inc 432 Phil 567, 585 (2002) (CMI1495); Asian Terminals Inc v Philam Insurance Co Inc 715 Phil 78, 98 (2013) (CMI1498).

A reading of the bill of lading reveals that the nine-month prescriptive period is not applicable in all actions or claims. As an exception, the nine-month period is inapplicable when there is a different period provided by a law for a particular claim or action - unlike in Philippine American, where the bill of lading stipulated a prescriptive period for actions without exceptions. The exception under the bill of lading became operative, because there is a compulsory law applicable which provides for a different prescriptive period. Hence, strictly applying the terms of the bill of lading, the one-year prescriptive period under COGSA should govern, because the present case involves loss of goods. In finding so, the Court does not construe the bill of lading any further, but merely applies its terms according to its plain and literal meaning.