Valencia Hardwood v CA

G.R. No. 102316. June 30, 1997

Art. 1306 – The contracting parties may establish such stipulations, clauses, terms and conditions NOT contrary to law, morals, good customs, public order or public policy.

Facts:

·         Plaintiff Valenzuela Hardwood and Industrial Supply, Inc. entered into an agreement with the defendant Seven Brothers Shipping Corporation, whereby the latter undertook to load on board its vessel M/V Seven Ambassador the former’s lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila.

·         Valenzuela insured the logs against loss and/or damage with South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00.

·         Valenzuela tendered a check as payment for premium on the insurance policy. The following day MV Seven Ambassador sank.

·         A check for P5,625.00 to cover payment of the premium and documentary stamps due on the policy was tendered due to the insurer, but was not accepted. Instead, the South Sea Surety cancelled the insurance policy it issued as of the date of the inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code.

·         Valenzuela filed formal claims against South Sea Surety and Seven Brothers.

Issue:

WoN the contract of private carriage entered by the Valenzuela Hardwood with Seven Brothers is valid within the purview of Article 1306 of the New Civil Code.

Held:

Yes, the Court holds that the parties are at liberty to establish stipulations in their contract provided that they are not divergent to law, morals, good customs, public order, or public policy.

Pursuant to Article 1306 of the Civil Code, such stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals, good customs, public order, or public policy.

The court stress that in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers.