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G.R. No.

L-25783 February 25, 1975


MACONDRAY AND COMPANY INC., in its capacity as ship
agent
of
the
S/S
"TAI
PING", petitioner,
vs.
ACTING COMMISSIONER OF CUSTOMS, respondent.
Ross, Selph, Salcedo, Del Rosario, Bito and Misa for petitioner.
Office of the Solicitor General Antonio P. Barredo, Assistant
Solicitor General Felicisimo R. Rosete and Solicitor Sumilang
Bernardo for respondent.
ESGUERRA, J.:
Petition for review on certiorari of a decision of the Court of
Tax Appeals dated November 15, 1965, affirming a decision of
the Collector of Customs which imposed a fine of P1,000.00
upon petitioner for violation of Section 1005 in relation to
Section 2521 of the Tariff and Customs Code on unmanifested
cargoes.
On November 2, 1962, the vessel S/S TAI PING", of which
petitioner is the local agent, arrived at the port of Manila from
San Francisco, California, U.S.A., conveying various shipments
of merchandise, among which was a shipment of one (1) coil
carbon steel, one (1) bundle carbon steel flat and one (1)
carton containing carbon tool holders carbide cutters, ground,
all of which appeared in the Bill of Lading No. 22, consigned to
Bogo Medellin Millings Co., Inc. The shipment, except the one
(1) coil carbon steel was not reflected in the Inward Cargo
Manifest as required by Section 1005 in relation to Section
2521 of the Tariff and Customs Code of the Philippines. Allied
Brokerage Corporation, acting for and in behalf of Bogo
Medellin Milling Co. requested petitioner Macondray & Co.,
agent of the vessel S/S TAI PING", to correct the manifest of the
steamer so that it may take delivery of the goods at Customs
House. Meanwhile, the Collector of Customs required herein
petitioner to explain and show cause why no administrative
fine should be imposed upon said vessel. On August 15, 1963,
counsel for petitioner wrote a letter to the Collector of
Customs pertinent portion of which reads as follows:
It appears from our client's records that the
disputed shipment was described in the ship's
manifest as "1 coil carbon steel" only.
However, the bill of lading issued and
surrendered to our client, duly endorsed by
the consignee, called for the delivery of 1 coil
carbon steel, 1 bundle carbon steel flat and 1
carbon containing tool holders carbide
cutters ground. Upon investigation by our
client, it was verified that the vessel actually
carried on board and discharged at Manila 3
as called for in the bill of lading. By a letter
dated November 15, 1962, our client
immediately applied with your Bureau for the
appropriate amendment on an approved
customs form to reflect the true correct
description of the shipment and to effect its
release from the customs house.
To said letter, the Collector of Customs replied on September
26, 1963, as follows:

On August 13, 1963 you wrote this Office


informing that this case would be referred to
your lawyers who would in turn take the
matter with us. However, this Office would
like to inform you that under Section 2308, in
relation to Section 2312, of the Tariff and
Customs Code, you are free to contest by
appropriate protest the action of this Office
in imposing the fine, but you have to pay the
fine first.
The records of this Office show that the vesels
under your agency have oftentimes failed to
declare correctly the cargoes they convey as
covered by the pertinent bill of lading.
Intentionally, or otherwise, such incorrect
preparation of cargo manifests cannot be
tolerated for it does not only enhance the
commission of fraud but also makes
smuggling suspicious since it renders difficult
tracing of the source of contraband goods. In
passing, it may be stated that your vessels
have been found committing the same
violations despite the warnings heretofore
given and which your company has not given
any concern. As a matter of fact, your vessel
have oftentimes been reported committing
the same violations, which conduct is
tantamount to willful and deliberate defiance
of constituted authority. (p. 5 Customs
Record)
The fine of P1,000 was paid by herein petitioner under protest
on December 4, 1963.
Hearing on the protest, docketed as Manila Protest No. 812,
proceeded thereafter. On August 24, 1964, the Collector of
Customs of the Port of Manila ordered the dismissal of said
protest for lack of merit. (Customs Record pp. 92-95) On appeal
to the Commissioner of Customs (Customs Case No. 725) the
latter sustained the Collector of Customs. Herein petitioner
filed a petition for review with the Court of Tax Appeals where
the parties submitted the case on the pleadings and the
customs record. The Court of Tax Appeals affirmed the decision
of the Collector of Customs as affirmed by the Commissioner of
Customs. (p. 39 Customs Record) Hence this petition for review
with the petitioner assigning as errors the following:
1. The Court of Tax Appeals erred in holding
that the bill of lading whereon the shipment
was correctly manifested was not a
substantial compliance with the provision of
Section 1005 of the Tariff and Customs Code;
2. The Court of Tax Appeals erred in holding
that the original manifest was not amended
to reflect the true and accurate description of
the shipment;
3. The Court of Tax Appeals erred in affirming
the decision of respondent with costs against
petitioner.
The sole question to be resolved is whether or not the Collector
of Customs erred in imposing a fine on the vessel, S/S TAI PING,

for alleged violation of section 1005 in relation to section 2521


of the Tariff and Customs Code for landing unmanifested cargo
at the port of Manila.
I
On the first assigned error, petitioner herein contends that
from "the fact the whole shipment was indicated in the bill of
lading, it is clear that the deficiency of the original vessel's
manifest was adequately supplied by the entries of said bill of
lading and, therefore, no violation of the provision of the Tariff
and Customs Code, was committed." (Brief for petitioner pp. 67.)We do not subscribe to such conclusion. Sections 1004 and
1005, in relation to section 2521 of the Tariff and Customs
Code, explicitly provide:
Section 1004. Documents to be produced by
master upon entry of a vessel For the
purpose of making entry of a vessel engaged
in foreign trade, the master thereof shall
present the following documents, duly
certified by him, to the customs boarding
official:.
a. The original manifest of all cargo destined
for the port, to be returned with the
indorsement of the boarding official;
b. Three copies of the same manifest, one of
which upon certification by the boarding
official as to the correctness of the copy, shall
be returned to the master;
c. ...
Section 1005. Manifest required of vessel
from foreign port. Every vessel from a
foreign port must have on board a complete
manifest of all her cargo.
All of the cargo intended to be landed at a
port, in the Philippines, must be described in
separate manifests for each port of
call therein. Each manifest shall include the
port of departure and the port of delivery
with the marks, numbers, quantity and
description of the packages and the names of
the consignees thereof. Every vessel from a
foreign port must have on board complete
manifests of passengers and their baggage, in
the prescribed form, setting forth their
destination and all particulars required by the
immigration laws; ...
Section 2521. Failure to supply requisite
manifests. If any vessel or aircraft enters or
departs from a port of entry without
submitting the proper manifests to the
customs authorities, or shall enter or depart
conveying unmanifested cargo other than as
stated in the next proceeding section
hereof, such vessel or aircraft shall be fined in
a sum not exceeding ten thousand pesos.
The same fine shall be imposed upon any
arriving or departing vessel or aircraft if the
master or pilot in command shall fail to
deliver or mail to the Auditor General a true

copy of the manifest of the incoming or


outgoing cargo, as required by law.
The inclusion of the unmanifested cargoes in the Bill of Lading
does not satisfy the requirement of the aforequoted sections of
the Tariff and Customs Code. It is to be noted that nowhere in
the said section is the presentation of a Bill of Lading required,
but only the presentation of a Manifest containing a true and
accurate description of the cargoes. This is for the simple
reason that while a manifest is a declaration of the entire
cargo, a bill of lading is but a declaration of a specific part of
the cargo and is a matter of business convenience based
1
exclusively on a contract. The object of a manifest is to furnish
the customs officers with a list to check against, to inform our
revenue officers what goods are being brought into the
country, and to provide a safeguard against goods being
brought into this country on a vessel and then smuggled
2
ashore. In short, while a bill of lading is ordinarily merely a
convenient commercial instrument designed to protect the
importer or consignee, a manifest of the cargo is absolutely
essential to the exportation or importation of property in all
vessels, the evident intent and object of which is to impose
upon the owners and officers of such vessel an imperative
obligation to submit lists of the entire loading of the ship in the
prescribed form, to facilitate the labors of the customs and
immigration officers and to defeat any attempt to make use of
such vessels to secure the unlawful entry of persons or things
3
into the country. Since therefore, the purpose served by the
manifest is far different from that of the bill of lading, We
cannot acceptor place an imprimatur on the contention of
petitioner that the entries in the bill of lading adequately
supplied the deficiency of the manifest and cured it of its
infirmity. The mandate of the law is clear and We cannot settle
for less. The law imposes the absolute obligation, under
penalty for failure, upon every vessel from a foreign port to
have "on board complete written or typewritten manifests of
all her cargo, signed by the master". Where the law requires a
manifest to be kept or delivered, it is not complied with unless
the manifest is true and accurate. (U.S. vs. The S.S. Islas
Filipinos, No. 8746, 28 Phil. 291.297).
II
On the second assigned error, petitioner would want Us to
believe that an amendment was made on the manifest to
reflect the true and accurate description of the shipment. We
have, however, gone over the record very carefully but found
no evidence to substantiate the allegation of herein petitioner.
The testimony of Irineo Lumabi, (t.s.n. March 2, 1964, p. 78
Customs Record), manifest clerk of the Marine Division, that he
prepared the amending entries himself is of no moment. In the
first place, Lumabi alleged in his testimony that he "made" the
entries reflecting the unmanifested cargoes without prior
approval from either the Collector of Customs, his Deputy, or
the chief of the Marine Division and, therefore, in
contravention of the usual and accepted office procedure.
Secondly, no amended manifest was ever presented during the
hearing inspite of ample time requested by and granted to
petitioners to enable them to produce this document. Also, the
supposed amendments were never attached to the manifest
itself as required by Section 1005 4 but as mentioned earlier,

said "amendments were allegedly annotated" by Irineo Lumabi


on the manifest itself after he "noted" the discrepancy
between the entries in the original manifest and the entry
papers.
Likewise, petitioner Macondray & Co. presented Dominador
Bergano, its chief of claims but whose testimony did not in any
way bolster up petitioner's stand. All he testified to was the
fact that they (Macondray & Co.) approved the amendment to
the manifest and filed the same with the Bureau of Customs
(t.s.n. p. 68 Customs Record) without even knowing whether or
not the same was approved by the Collector of Customs. What
is evident on record is the fact that no valid amendment to the
ship's manifest was made conformably with Section 1005 of
the Tariff and Customs Code supra. Since there was no valid
amendment, liability attached as to the unmanifested cargoes
and this is clearly provided for in Section 2521, supra, of the
Tariff and Customs Code. And as ably argued by then Solicitor
General, now Justice Antonio Barredo, in respondent's well
prepared brief; "that even granting arguendo, that the
amendment was approved and therefore valid it does not in
any way relieve the vessel from the liability which she had
already incurred prior to the amendment. The philosophy and
purpose behind the law authorizing amendment, under
paragraph 3 of Section 1005 of the Tariff and Customs Code, is
to protect innocent importers or consignees from the mistake
or unlawful acts of the master. In the case of Dobbins Distillery
vs. US 96 US 295-400, it was held that by the General Maritime
Law, vessels are made responsible for the unlawful acts of their
masters and crews. Likewise, in the case of Gillam vs. US (C.C.A,
S.C. 1928) 27F (2d) 296, USCA-Title 19, 1994, it was ruled that
'... statutory penalties are incurred where vessel bound for US
failed to produce manifest, or has on board unmanifested
merchandise.' "
WHEREFORE, We affirm the decision appealed from.
Without pronouncement as to costs.
SO ORDERED.

MAGELLAN MANUFACTURING MARKETING CORPORATION,


* petitioner,
vs.
COURT OF APPEALS, ORIENT OVERSEAS CONTAINER LINES and
F.E. ZUELLIG, INC. respondents.
REGALADO, J.:p
Petitioner, via this petition for review on certiorari, seeks the
reversal of the judgment of respondent Court of Appeals in CA1
G.R. CV No. 18781, affirming in part the decision of the trial
2
court, the dispositive portion of which reads:
Premises considered, the decision appealed
from is affirmed insofar as it dismisses the
complaint. On the counter-claim, however,
appellant is ordered to pay appellees the
amount of P52,102.45 with legal interest
from date of extra-judicial demand. The
3
award of attorney's fees is deleted.

The facts as found by respondent appellate court are as


follows:
On May 20, 1980, plaintiff-appellant Magellan
Manufacturers Marketing Corp. (MMMC)
entered into a contract with Choju Co. of
Yokohama, Japan to export 136,000 anahaw
fans for and in consideration of $23,220.00.
As payment thereof, a letter of credit was
issued to plaintiff MMMC by the buyer.
Through its president, James Cu, MMMC then
contracted F.E. Zuellig, a shipping agent,
through its solicitor, one Mr. King, to ship the
anahaw fans through the other appellee,
Orient Overseas Container Lines, Inc., (OOCL)
specifying that he needed an on-board bill of
lading and that transhipment is not allowed
under the letter of credit (Exh. B-1). On June
30, 1980, appellant MMMC paid F.E. Zuellig
the freight charges and secured a copy of the
bill of lading which was presented to Allied
Bank. The bank then credited the amount of
US$23,220.00 covered by the letter of credit
to appellant's account. However, when
appellant's president James Cu, went back to
the bank later, he was informed that the
payment was refused by the buyer allegedly
because there was no on-board bill of lading,
and there was a transhipment of goods. As a
result of the refusal of the buyer to accept,
upon appellant's request, the anahaw fans
were shipped back to Manila by appellees, for
which the latter demanded from appellant
payment
of
P246,043.43.
Appellant
abandoned the whole cargo and asked
appellees for damages.
In their Partial Stipulation of Facts, the parties
admitted that a shipment of 1,047 cartons of
136,000 pieces of Anahaw Fans contained in
1 x 40 and 1 x 20 containers was loaded at
Manila on board the MV 'Pacific Despatcher'
freight prepaid, and duly covered by Bill of
Lading No. MNYK201T dated June 27, 1980
issued by OOCL; that the shipment was
delivered at the port of discharge on July 19,
1980, but was subsequently returned to
Manila after the consignee refused to
4
accept/pay the same.
Elaborating on the above findings of fact of respondent court
and without being disputed by herein private respondents,
petitioner additionally avers that:
When
petitioner
informed
private
respondents about what happened, the latter
issued a certificate stating that its bill of
lading it issued is an on board bill of lading
and that there was no actual transhipment of
the fans. According to private respondents
when the goods are transferred from one
vessel to another which both belong to the

same owner which was what happened to


the Anahaw fans, then there is (no)
transhipment.
Petitioner
sent
this
certification to Choju Co., Ltd., but the said
company still refused to accept the goods
which arrived in Japan on July 19, 1980.
Private respondents billed petitioner in the
amount of P16,342.21 for such shipment and
P34,928.71 for demurrage in Japan from July
26 up to August 31, 1980 or a total of
P51,271.02. In a letter dated March 20, 1981,
private respondents gave petitioner the
option of paying the sum of P51,271.02 or to
abandon the Anahaw fans to enable private
respondents to sell them at public auction to
cover the cost of shipment and demurrages.
Petitioner opted to abandon the goods.
However, in a letter dated June 22, 1981
private respondents demanded for payment
of P298,150.93 from petitioner which
represents the freight charges from Japan to
Manila, demurrage incurred in Japan and
Manila from October 22, 1980 up to May 20,
1981; and charges for stripping the container
van of the Anahaw fans on May 20, 1981.
On July 20, 1981 petitioner filed the
complaint in this case praying that private
respondents be ordered to pay whatever
petitioner was not able to earn from Choju
Co., Ltd., amounting to P174,150.00 and
other damages like attorney's fees since
private respondents are to blame for the
refusal of Choju Co., Ltd. to accept the
Anahaw fans. In answer thereto the private
respondents alleged that the bill of lading
clearly shows that there will be a
transhipment and that petitioner was well
aware that MV (Pacific) Despatcher was only
up to Hongkong where the subject cargo will
be transferred to another vessel for Japan.
Private respondents also filed a counterclaim
praying that petitioner be ordered to pay
freight charges from Japan to Manila and the
demurrages in Japan and Manila amounting
to P298,150.93.
The lower court decided the case in favor of
private respondents. It dismissed the
complaint on the ground that petitioner had
given its consent to the contents of the bill of
lading where it is clearly indicated that there
will be transhipment. The lower court also
said that petitioner is liable to pay to private
respondent the freight charges from Japan to
Manila and demurrages since it was the
former which ordered the reshipment of the
cargo from Japan to Manila.
On appeal to the respondent court, the
finding of the lower (court) that petitioner

agreed to a transhipment of the goods was


affirmed but the finding that petitioner is
liable for P298,150.93 was modified. It was
reduced to P52,102.45 which represents the
freight charges and demurrages incurred in
Japan but not for the demurrages incurred in
Marta. According to the respondent (court)
the petitioner can not be held liable for the
demurrages incurred in Manila because
Private respondents did not timely inform
petitioner that the goods were already in
Manila in addition to the fact that private
respondent had given petitioner the option of
abandoning the goods in exchange for the
5
demurrages.
Petitioner, being dissatisfied with the decision of respondent
court and the motion for reconsideration thereof having been
denied, invokes the Court's review powers for the resolution of
the issues as to whether or not respondent court erred (1) in
affirming the decision of the trial court which dismissed
petitioner's complaint; and (2) in holding petitioner liable to
6
private respondents in the amount of P52,102.45.
I. Petitioner obstinately faults private respondents for the
refusal of its buyer, Choju Co., Ltd., to take delivery of the
exported anahaw fans resulting in a loss of P174,150.00
representing the purchase price of the said export items
because of violation of the terms and conditions of the letter of
credit issued in favor of the former which specified the
requirement for an on board bill of lading and the prohibition
against transhipment of goods, inasmuch as the bill of lading
issued by the latter bore the notation "received for shipment"
and contained an entry indicating transhipment in Hongkong.
We find no fault on the part of private respondents. On the
matter of transhipment, petitioner maintains that "... while the
goods were transferred in Hongkong from MV Pacific
Despatcher, the feeder vessel, to MV Oriental Researcher, a
mother vessel, the same cannot be considered transhipment
because both vessels belong to the same shipping company,
the private respondent Orient Overseas Container Lines,
7
Inc." Petitioner emphatically goes on to say: "To be sure,
there was no actual transhipment of the Anahaw fans. The
private respondents have executed a certification to the effect
that while the Anahaw fans were transferred from one vessel
to another in Hong Kong, since the two vessels belong to one
8
and the same company then there was no transhipment.
Transhipment, in maritime law, is defined as "the act of taking
9
cargo out of one ship and loading it in another," or "the
transfer of goods from the vessel stipulated in the contract of
affreightment to another vessel before the place of destination
10
named in the contract has been reached," or "the transfer for
further transportation from one ship or conveyance to
11
another." Clearly, either in its ordinary or its strictly legal
acceptation, there is transhipment whether or not the same
person, firm or entity owns the vessels. In other words, the fact
of transhipment is not dependent upon the ownership of the
transporting ships or conveyances or in the change of carriers,
as the petitioner seems to suggest, but rather on the fact of
actual physical transfer of cargo from one vessel to another.

That there was transhipment within this contemplation is the


inescapable conclusion, as there unmistakably appears on the
face of the bill of lading the entry "Hong Kong" in the blank
space labeled "Transhipment," which can only mean that
12
transhipment actually took place. This fact is further
13
bolstered by the certification issued by private respondent
F.E. Zuellig, Inc. dated July 19, 1980, although it carefully used
the term "transfer" instead of transhipment. Nonetheless, no
amount of semantic juggling can mask the fact that
transhipment in truth occurred in this case.
Petitioner insists that "(c)onsidering that there was no actual
transhipment of the Anahaw fans, then there is no occasion
under which the petitioner can agree to the transhipment of
the Anahaw fans because there is nothing like that to agree to"
and "(i)f there is no actual transhipment but there appears to
be a transhipment in the bill of lading, then there can be no
possible reason for it but a mistake on the part of the private
14
respondents.
Petitioner, in effect, is saying that since there was a mistake in
documentation on the part of private respondents, such a
mistake militates against the conclusiveness of the bill of lading
insofar as it reflects the terms of the contract between the
parties, as an exception to the parol evidence rule, and would
therefore permit it to explain or present evidence to vary or
contradict the terms of the written agreement, that is, the bill
of lading involved herein.
It is a long standing jurisprudential rule that a bill of lading
operates both as a receipt and as a contract. It is a receipt for
the goods shipped and a contract to transport and deliver the
same as therein stipulated. As a contract, it names the parties,
which includes the consignee, fixes the route, destination, and
freight rates or charges, and stipulates the rights and
15
obligations assumed by the parties. Being a contract, it is the
law between the parties who are bound by its terms and
conditions provided that these are not contrary to law, morals,
16
good customs, public order and public policy. A bill of lading
usually becomes effective upon its delivery to and acceptance
by the shipper. It is presumed that the stipulations of the bill
were, in the absence of fraud, concealment or improper
conduct, known to the shipper, and he is generally bound by
17
his acceptance whether he reads the bill or not.
The holding in most jurisdictions has been that a shipper who
receives a bill of lading without objection after an opportunity
to inspect it, and permits the carrier to act on it by proceeding
with the shipment is presumed to have accepted it as correctly
stating the contract and to have assented to its terms. In other
words, the acceptance of the bill without dissent raises the
presumption that all the terms therein were brought to the
knowledge of the shipper and agreed to by him and, in the
absence of fraud or mistake, he is estopped from thereafter
denying that he assented to such terms. This rule applies with
particular force where a shipper accepts a bill of lading with full
knowledge of its contents and acceptance under such
18
circumstances makes it a binding contract.
In the light of the series of events that transpired in the case at
bar, there can be no logical conclusion other than that the
petitioner had full knowledge of, and actually consented to, the
terms and conditions of the bill of lading thereby making the

same conclusive as to it, and it cannot now be heard to deny


having assented thereto. As borne out by the records, James Cu
himself, in his capacity as president of MMMC, personally
received and signed the bill of lading. On practical
considerations, there is no better way to signify consent than
by voluntarry signing the document which embodies the
agreement. As found by the Court of Appeals
Contrary to appellant's allegation that it did
not agree to the transhipment, it could be
gleaned from the record that the appellant
actually consented to the transhipment when
it received the bill of lading personally at
appellee's (F.E. Zuellig's) office. There clearly
appears on the face of the bill of lading under
column "PORT OF TRANSHIPMENT" an entry
"HONGKONG' (Exhibits'G-l'). Despite said
entries he still delivered his voucher (Exh. F)
and the corresponding check in payment of
the freight (Exhibit D), implying that he
consented to the transhipment (Decision, p.
19
6, Rollo).
Furthermore and particularly on the matter of whether or not
there was transhipment, James Cu, in his testimony on
crossexamination, categorically stated that he knew for a fact
that the shipment was to be unloaded in Hong Kong from the
MV Pacific Despatcher to be transferred to a mother vessel, the
MV Oriental Researcher in this wise:
Q Mr. Cu, are you not aware
of the fact that your
shipment
is
to
be
transferred or transhipped
at the port of Hongkong?
A I know. It's not transport,
they relay, not trans... yes,
that is why we have an
agreement if they should
not put a transhipment in
Hongkong, that's why they
even
stated
in
the
certification.
xxx xxx xxx
Q In layman's language,
would you agree with me
that transhipment is the
transfer of a cargo from one
vessel to the other?
A As a layman, yes.
Q So, you know for a fact
that your shipment is going
to be unloaded in Hongkong
from M. V. Dispatcher (sic)
and then transfer (sic) to
another vessel which was
the Oriental Dispatcher,
(sic) you know that for a
fact?
A Yes,
sir.
(Emphasis
20
supplied.)

21

Under the parol evidence rule, the terms of a contract are


rendered conclusive upon the parties, and evidencealiunde is
not admissible to vary or contradict a complete and
enforceable agreement embodied in a document, subject to
well defined exceptions which do not obtain in this case. The
parol evidence rule is based on the consideration that when
the parties have reduced their agreement on a particular
matter into writing, all their previous and contemporaneous
agreements on the matter are merged therein. Accordingly,
evidence of a prior or contemporaneous verbal agreement is
generally not admissible to vary, contradict or defeat the
22
operation of a valid instrument. The mistake contemplated
as an exception to the parol evidence rule is one which is a
23
mistake of fact mutual to the parties. Furthermore, the rules
on evidence, as amended, require that in order that parol
evidence may be admitted, said mistake must be put in issue by
the pleadings, such that if not raised inceptively in the
complaint or in the answer, as the case may be, a party can not
later on be permitted to introduce parol evidence
24
thereon. Needless to say, the mistake adverted to by herein
petitioner, and by its own admission, was supposedly
committed by private respondents only and was raised by the
former rather belatedly only in this instant petition. Clearly
then, and for failure to comply even only with the procedural
requirements thereon, we cannot admit evidence to prove or
explain the alleged mistake in documentation imputed to
private respondents by petitioner.
Petitioner further argues that assuming that there was
transhipment, it cannot be deemed to have agreed thereto
even if it signed the bill of lading containing such entry because
it had made known to private respondents from the start that
transhipment was prohibited under the letter of credit and
that, therefore, it had no intention to allow transhipment of
the subject cargo. In support of its stand, petitioner relies on
the second paragraph of Article 1370 of the Civil Code which
states that "(i)f the words appear to be contrary to the evident
intention of the parties, the latter shall prevail over the
former," as wen as the supposed ruling in Caltex Phil., Inc. vs.
25
Intermediate Appellate Court, et al. that "where the literal
interpretation of a contract is contrary to the evident intention
of the parties, the latter shall prevail."
As between such stilted thesis of petitioner and the contents of
the bill of lading evidencing the intention of the parties, it is
irremissible that the latter must prevail. Petitioner conveniently
overlooks the first paragraph of the very article that he cites
which provides that "(i)f the terms of the contract are clear and
leave no doubt upon the intention of the contracting parties,
the literal meaning of the stipulations shall control." In
addition, Article 1371 of the same Code provides that "(i)n
order to judge the intention of the contracting parties, their
contemporaneous and subsequent acts shall be principally
considered."
The terms of the contract as embodied in the bill of lading are
clear and thus obviates the need for any interpretation. The
intention of the parties which is the carriage of the cargo under
the terms specified thereunder and the wordings of the bill of
lading do not contradict each other. The terms of the contract
being conclusive upon the parties and judging from the

contemporaneous and subsequent actuations of petitioner, to


wit, personally receiving and signing the bill of lading and
paying the freight charges, there is no doubt that petitioner
must necessarily be charged with full knowledge and
unqualified acceptance of the terms of the bill of lading and
that it intended to be bound thereby.
Moreover, it is a well-known commercial usage that
transhipment of freight without legal excuse, however
competent and safe the vessel into which the transfer is made,
is a violation of the contract and an infringement of the right of
the shipper, and subjects the carrier to liability if the freight is
26
lost even by a cause otherwise excepted. It is highly
improbable to suppose that private respondents, having been
engaged in the shipping business for so long, would be
unaware of such a custom of the trade as to have undertaken
such transhipment without petitioner's consent and
unnecessarily expose themselves to a possible liability. Verily,
they could only have undertaken transhipment with the
shipper's permission, as evidenced by the signature of James
Cu.
Another ground for the refusal of acceptance of the cargo of
anahaw fans by Choju Co., Ltd. was that the bill of lading that
was issued was not an on board bill of lading, in clear violation
of the terms of the letter of credit issued in favor of petitioner.
On cross-examination, it was likewise established that
petitioner, through its aforesaid president, was aware of this
fact, thus:
Q If the container van, the
loaded container van, was
transported back to South
Harbor on June 27, 1980,
would you tell us, Mr. Cu,
when the Bill of Lading was
received by you?
A I received on June 30,
1980. I received at the same
time so then I gave the
check.
xxx xxx xxx
Q So that in exchange of the
Bill of Lading you issued
your check also dated June
30, 1980?
A Yes, sir.
Q And June 27, 1980 was
the date of the Bill of
Lading, did you notice that
the Bill of Lading states:
'Received
for
shipment'only? .
A Yes, sir.
Q What did you say?
A I requested to issue me
on board bill of lading.
Q When?
A In the same date of June
30.
Q What did they say?

A They said, they cannot.


xxx xxx xxx
Q Do you know the
difference
between
a
"received for shipment bill
of lading" and "on board bill
of lading"?
A Yes, sir.
Q What's the difference?
A Received for shipment,
you can receive the cargo
even you don't ship on
board, that is placed in the
warehouse; while on-board
bill of lading means that is
loaded on the vessel, the
goods.
xxx xxx xxx
Q In other words, it was not
yet on board the vessel?
A During that time, not yet.
xxx xxx xxx
Q Do you know, Mr. Cu,
that under the law, if your
shipment is received on
board a vessel you can
demand an on-board bill of
lading not only a received
for shipment bill of lading.?
A Yes sir.
Q And did you demand
from F.E. Zuellig the
substitution
of
that
received for shipment bill of
lading with an on-board bill
of lading?
A Of course, instead they
issue me a certification.
Q They give you a ... ?
A ... a certification that it
was loaded on board on
June 30.
xxx xxx xxx
Q Mr. Cu, are you aware of
the conditions of the Letter
of Credit to the effect that
there
should
be
no
transhipment and that it
should also get an on board
bill of lading.?
27
A Yes sir.
Undoubtedly, at the outset, petitioner knew that its buyer,
Choju Co., Ltd., particularly required that there be an on board
bill of lading, obviously due to the guaranty afforded by such a
bill of lading over any other kind of bill of lading. The buyer
could not have insisted on such a stipulation on a pure whim or
caprice, but rather because of its reliance on the safeguards to
the cargo that having an on board bill of lading ensured. Herein

petitioner cannot feign ignorance of the distinction between an


"on board" and a "received for shipment" bill of lading, as
manifested by James Cu's testimony. It is only to be expected
that those long engaged in the export industry should be
familiar with business usages and customs.
In its petition, MMMC avers that "when petitioner teamed of
what happened, it saw private respondent F.E. Zuellig which, in
turn, issued a certification that as of June 30, 1980, the Anahaw
fans were already on board MV Pacific Despatcher (which
means that the bill of lading is an on- board-bill of lading or
'shipped' bill of lading as distinguished from a 'received for
shipment'bill of lading as governed by Sec. 3, par. 7, Carriage of
28
Goods by Sea Act) ...." What the petitioner would suggest is
that said certification issued by F.E. Zuellig, Inc., dated July 19,
1980, had the effect of converting the original "received for
shipment only" bill of lading into an "on board" bill of lading as
required by the buyer and was, therefore, by substantial
compliance, not violative of the contract.
An on board bill of lading is one in which it is stated that the
goods have been received on board the vessel which is to carry
the goods, whereas a received for shipment bill of lading is one
in which it is stated that the goods have been received for
shipment with or without specifying the vessel by which the
goods are to be shipped. Received for shipment bills of lading
are issued whenever conditions are not normal and there is
29
insufficiency of shipping space. An on board bill of lading is
issued when the goods have been actually placed aboard the
ship with every reasonable expectation that the shipment is as
30
good as on its way. It is, therefore, understandable that a
party to a maritime contract would require an on board bill of
lading because of its apparent guaranty of certainty of shipping
as well as the seaworthiness of the vessel which is to carry the
goods.
It cannot plausibly be said that the aforestated certification of
F.E. Zuellig, Inc. can qualify the bill of lading, as originally
issued, into an on board bill of lading as required by the terms
of the letter of credit issued in favor of petitioner. For one, the
certification was issued only on July 19, 1980, way beyond the
expiry date of June 30, 1980 specified in the letter of credit for
the presentation of an on board bill of lading. Thus, even
assuming that by a liberal treatment of the certification it could
have the effect of converting the received for shipment bill of
lading into an on board of bill of lading, as petitioner would
have us believe, such an effect may be achieved only as of the
date of its issuance, that is, on July 19, 1980 and onwards.
The fact remains, though, that on the crucial date of June 30,
1980 no on board bill of lading was presented by petitioner in
compliance with the terms of the letter of credit and this
default consequently negates its entitlement to the proceeds
thereof. Said certification, if allowed to operate retroactively,
would render illusory the guaranty afforded by an on board bill
of lading, that is, reasonable certainty of shipping the loaded
cargo aboard the vessel specified, not to mention that it would
indubitably be stretching the concept of substantial compliance
too far.
Neither can petitioner escape hability by adverting to the bill of
lading as a contract of adhesion, thus warranting a more liberal
consideration in its favor to the extent of interpreting

ambiguities against private respondents as allegedly being the


parties who gave rise thereto. The bill of lading is clear on its
face. There is no occasion to speak of ambiguities or obscurities
whatsoever. All of its terms and conditions are plainly worded
and commonly understood by those in the business.
It will be recalled that petitioner entered into the contract with
Choju Co., Ltd. way back on May 20,1980 or over a month
before the expiry date of the letter of credit on June 30, 1980,
thus giving it more than ample time to find a carrier that could
comply with the requirements of shipment under the letter of
credit. It is conceded that bills of lading constitute a class of
contracts of adhesion. However, as ruled in the earlier case
31
of Ong Yiu vs. Court of Appeals, et al. and reiterated
32
in Servando, et al. vs. Philippine Steam Navigation Co., plane
tickets as well as bills of lading are contracts 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. The
respondent court correctly observed in the present case that
"when the appellant received the bill of lading, it was
tantamount to appellant's adherence to the terms and
33
conditions as embodied therein.
In sum, petitioner had full knowledge that the bill issued to it
contained terms and conditions clearly violative of the
requirements of the letter of credit. Nonetheless, perhaps in its
eagerness to conclude the transaction with its Japanese buyer
and in a race to beat the expiry date of the letter of credit,
petitioner took the risk of accepting the bill of lading even if it
did not conform with the indicated specifications, possibly
entertaining a glimmer of hope and imbued with a touch of
daring that such violations may be overlooked, if not
disregarded, so long as the cargo is delivered on time.
Unfortunately, the risk did not pull through as hoped for. Any
violation of the terms and conditions of the letter of credit as
would defeat its right to collect the proceeds thereof was,
therefore, entirely of the petitioner's making for which it must
bear the consequences. As finally averred by private
respondents, and with which we agree, "... the questions of
whether or not there was a violation of the terms and
conditions of the letter of credit, or whether or not such
violation was the cause or motive for the rejection by
petitioner's Japanese buyer should not affect private
respondents therein since they were not privies to the terms
and conditions of petitioner's letter of credit and cannot
therefore be held liable for any violation thereof by any of the
34
parties thereto."
II. Petitioner contends that respondent court erred in holding it
liable to private respondents for P52,102.45 despite its exercise
of its option to abandon the cargo. It will be recalled that the
trial court originally found petitioner liable for P298,150.93,
which amount consists of P51,271.02 for freight, demurrage
and other charges during the time that the goods were in Japan
and for its reshipment to Manila, P831.43 for charges paid to
the Manila International Port Terminal, and P246,043.43 for
demurrage in Manila from October 22, 1980 to June 18, 1981.
On appeal, the Court of Appeals limited petitioner's liability to
P52,102.45 when it ruled:
As regards the amount of P51,271.02, which
represents the freight charges for the return

shipment to Manila and the demurrage


charges in Japan, the same is supported by
appellant's own letter request (Exh. 2) for the
return of the shipment to Manila at its
(appellant's) expense, and hence, it should be
held liable therefor. The amount of P831.43
was paid to the Manila International Port
Terminal upon arrival of the shipment in
Manila for appellant's account. It should
35
properly be charged to said appellant.
However, respondent court modified the trial court's decision
by excluding the award for P246,043.43 for demurrage in
Manila from October 22, 1980 to June 18, 1981.
Demurrage, in its strict sense, is the compensation provided for
in the contract of affreightment for the detention of the vessel
beyond the time agreed on for loading and unloading.
Essentially, demurrage is the claim for damages for failure to
accept delivery. In a broad sense, every improper detention of
a vessel may be considered a demurrage. Liability for
demurrage, using the word in its strictly technical sense, exists
only when expressly stipulated in the contract. Using the term
in its broader sense, damages in the nature of demurrage are
recoverable for a breach of the implied obligation to load or
unload the cargo with reasonable dispatch, but only by the
party to whom the duty is owed and only against one who is a
36
party to the shipping contract. Notice of arrival of vessels or
conveyances, or of their placement for purposes of unloading is
often a condition precedent to the right to collect demurrage
charges.
Private respondents, admittedly, have adopted the common
practice of requiring prior notice of arrival of the goods shipped
before the shipper can be held liable for demurrage, as
declared by Wilfredo Hans, head of the accounting department
of F.E. Zuellig, Inc., on cross-examination as a witness for
private respondents:
Q ... you will agree with me
that before one could be
charged with demurrage
the shipper should be
notified of the arrival of the
shipment?
A Yes sir.
Q Without such notification,
there is no way by which
the shipper would know (of)
such arrival?
A Yes.
Q And no charges of
demurrage before the
arrival of the cargo?
37
A Yes sir.
Accordingly, on this score, respondent court ruled:
However, insofar as the demurrage charges
of P246,043.43 from October up to May
1980, arriv(al) in Manila, are concerned, We
are of the view that appellant should not be
made to shoulder the same, as it was not at
fault nor was it responsible for said

demurrage charges. Appellee's own witness


(Mabazza) testified that while the goods
arrived in Manila in October 1980, appellant
was notified of said arrival only in March
1981. No explanation was given for the delay
in notifying appellant. We agree with
appellant that before it could be charged for
demurrage charges it should have been
notified of the arrival of the goods first.
Without such notification it could not- be so
charged because there was no way by which
it would know that the goods had already
arrived for it to take custody of them.
Considering that it was only in March 1981
(Exh. K) that appellant was notified of the
arrival of the goods, although the goods had
actually arrived in October 1980 (tsn, Aug. 14,
1986, pp. 10-14), appellant cannot be
charged for demurrage from October 1980 to
38
March 1981. ...
While being satisfied with the exclusion of demurrage charges
in Manila for the period from October 22,1980 to June 18,1981,
petitioner nevertheless assails the Court of Appeals' award of
P52,102.43 in favor of private respondents, consisting of
P51,271.01 as freight and demurrage charges in Japan and
P831.43 for charges paid at the Manila International Port
Termninal.
Petitioner asserts that by virtue of the exercise of its option to
abandon the goods so as to allow private respondents to sell
the same at a public auction and to apply the proceeds thereof
as payment for the shipping and demurrage charges, it was
released from liability for the sum of P52,102.43 since such
amount represents the shipping and demurrage charges from
which it is considered to have been released due to the
abandonment of goods. It further argues that the shipping and
demurrage charges from which it was released by the exercise
of the option to abandon the goods in favor of private
respondents could not have referred to the demurrage charges
in Manila because respondent court ruled that the same were
not chargeable to petitioner. Private respondents would rebut
this contention by saying in their memorandum that the
abandonment of goods by petitioner was too late and made in
39
bad faith.
On this point, we agree with petitioner. Ordinarily, the shipper
is liable for freightage due to the fact that the shipment was
made for its benefit or under its direction and, correspondingly,
the carrier is entitled to collect charges for its shipping services.
This is particularly true in this case where the reshipment of the
goods was made at the instance of petitioner in its letter of
40
August 29, 1980.
41
However, in a letter dated March 20, 1981, private
respondents belatedly informed petitioner of the arrival of its
goods from Japan and that if it wished to take delivery of the
cargo it would have to pay P51,271.02, but with the last
paragraph thereof stating as follows:
Please can you advise within 15 days of
receipt of this letter whether you intend to
take delivery of this shipment, as alternatively

we will have to take legal proceedings in


order to have the cargo auctioned to recover
the costs involved, as well as free the
container which are (sic) urgently required for
export cargoes.
Clearly, therefore, private respondents unequivocally offered
petitioner the option of paying the shipping and demurrage
charges in order to take delivery of the goods or of abandoning
the same so that private respondents could sell them at public
auction and thereafter apply the proceeds in payment of the
shipping and other charges.
Responding thereto, in a letter dated April 3, 1981, petitioner
seasonably communicated its decision to abandon to the goods
in favor of private respondents with the specific instruction
that any excess of the proceeds over the legal costs and
charges be turned over to petitioner. Receipt of said letter was
acknowledged by private respondents, as revealed by the
testimony of Edwin Mabazza, a claim officer of F.E. Zuellig, Inc.,
42
on cross-examination.
Despite petitioner's exercise of the option to abandon the
cargo, however, private respondents sent a demand letter on
43
June 22, 1981 insisting that petitioner should pay the entire
amount of P298,150.93 and, in another letter dated Apiril 30,
44
1981, they stated that they win not accept the abandonment
of the goods and demanded that the outstanding account be
settled. The testimony of said Edwin Mabazza definitely admits
45
and bears this out.
Now, there is no dispute that private respondents expressly
and on their own volition granted petitioner an option with
respect to the satisfaction of freightage and demurrage
charges. Having given such option, especially since it was
accepted by petitioner, private respondents are estopped from
reneging thereon. Petitioner, on its part, was well within its
right to exercise said option. Private respondents, in giving the
option, and petitioner, in exercising that option, are concluded
by their respective actions. To allow either of them to
unilaterally back out on the offer and on the exercise of the
option would be to countenance abuse of rights as an order of
the day, doing violence to the long entrenched principle of
mutuality of contracts.
It will be remembered that in overland transportation, an
unreasonable delay in the delivery of transported goods is
sufficient ground for the abandonment of goods. By analogy,
this can also apply to maritime transportation. Further, with
much more reason can petitioner in the instant case properly
abandon the goods, not only because of the unreasonable
delay in its delivery but because of the option which was
categorically granted to and exercised by it as a means of
settling its liability for the cost and expenses of reshipment.
And, said choice having been duly communicated, the same is
binding upon the parties on legal and equitable considerations
of estoppel.
WHEREFORE, the judgment of respondent Court of Appeals is
AFFIRMED with the MODIFICATION that petitioner is likewise
absolved of any hability and the award of P52,102.45 with legal
interest granted by respondent court on private respondents'
counterclaim is SET ASIDE, said counterclaim being hereby
DISMISSED, without pronouncement as to costs.

SO ORDERED.
Melencio-Herrera (Chairperson), Paras and Padilla, JJ., concur.
Sarmiento, J., is on leave.

G.R. No. L-28028


November 25, 1927
JUAN
YSMAEL
&
CO.,
INC., plaintiff-appellee,
vs.
GABINO BARRETTO & CO., LTD., ET AL., defendants. ANDRES
H. LIMGENGCO and VICENTE JAVIER,appellants.
Gibbs
and
McDonough
for
appellants.
Felipe Ysmael and Grey & Encarnacion for appellee.
STATEMENT
In this action plaintiff, a domestic corporation, seeks to recover
from the defendants P9,940.95 the alleged value of four cases
of merchandise which it delivered to the steamship Andres on
October 25, 1922, at Manila to be shipped to Surigao, but
which were never delivered to Salomon Sharuff, the consignee,
or returned to the plaintiff. The original complaint was
amended to include Gabino Barretto and P. E. Soon as
members of the limited partnership of Gabino Barretto &
Company, Limited.
In their amended answers defendants make a specific denial of
all of the material allegations of the complaint, and as special
defense allege that the four cases of merchandise in question
were never delivered to them, and that under the provisions of
paragraph the provisions of paragraph 7 of the printed
conditions appearing on the back of the bill of lading, plaintiff's
right of action is barred for the reason that it was not brought
within sixty days from the time the cause of action accrued.
The defendant Soon did not answer the complaint, and the
defendants further alleged:
I. That under and by virtue of provision 12 of the bill of
lading referred to in plaintiff's amended complaint,
the defendants are not liable in excess of three
hundred pesos (P300) for any package of silk unless
the value and contents of such packages are correctly
declared in the bill of lading at the time of shipment,
etc.
The evidence was taken upon such issues, and the lower court
rendered judgment for the plaintiff for the full amount of its
claim, from which the defendants Andres H. Limgengco and
Vicente Javier appeal and assign the following errors:
I. The lower court erred in finding that one hundred
sixty-four cases of goods were delivered to and loaded
on the steamship Andres.
II. The lower court erred in holding that appellee was
not bound by the terms of the bills of lading of
covering the shipments.
III. The trial court erred in failing to take into
consideration appellants' special defense based on
clause 12 of the bills of lading.
IV. The lower court erred in rendering judgment
against appellants in the sum of P9,940.95.
JOHNS, J.:
The only question involved in the first assignment of error is
one of fact upon which in its decision the trial court said:

With regard to the first question, plaintiff's testimony,


together with the manifest (Exhibit D), signed by "G.
Barretto, Agents," for Andres Heras Limgengco
covering the shipment of the merchandise in question,
wherein 165 cases of merchandise appear as
belonging to the plaintiff corporation and the bills of
lading, Exhibits I, J and K, signed by the second officer,
Claro Galleros for the shipment of the 165 cases, and
Exhibits H, which is a triplicate copy of the bill of lading
No. 62, on which the first officer of the
steamerAndres, Francisco Masingsong, made a note
that among the merchandise discharged in Surigao
were the four cases in question, clearly shows that the
defendants received from the plaintiff corporation 164
cases of merchandise, and delivered at Surigao only
160 cases of such merchandise, and that defendants
failed to deliver the said four cases in Surigao when
plaintiff's representative took delivery of the cargo at
that port, and that the original figure "1" and the word
"bulto" appearing on the back of Exhibit 1 were
changed by Galleros to read "5" and "bultos." The said
Galleros admitted as a witness that he had Exhibit 1 in
his possession from Manila until the cargo was
recounted in Surigao in the presence of the first
officer, Francisco Masingsong, Salomon Sharuff,
the bodeguero and himself (Galleros). lawphil.net
The testimony of Claro Galleros to the effect that,
according to the tallies made by him on the back of
Exhibit 1 during the course of loading, only 160 cases
were loaded, on board the steamer Andres stands
uncorroborated, and it is not supported by the tallies
themselves, as these tallies give a total of 161 cases.
Mr. Galleros, testified that he had shown the
annotation on the back of Exhibit 1 reading `5 bultos
en duda de menos' to Salamon Sharuff, and that
Salomon Sharuff gave his conformity to the shortage,
and that on this occasion, among others, were present
the first officer Francisco Masingsong, and
thebodeguero in Surigao. Upon this point, besides the
testimony of Salomon Sharuff, who denied
emphatically the assertion of Galleros just mentioned,
we have the note made and signed by the first officer
on the face of Exhibit H that all the merchandise
therein was discharged in Surigao. The said
Masingsong certainly would not have made such
annotation after the delivery in Surigao, if Salomon
Sharuff had in fact agreed to the shortage as testified
by Galleros, especially when we considered that the
four cases, the value of which is claimed by plaintiff,
were included in said Exhibit H, and the fact that said
Claro Galleros, in an affidavit signed by him before the
Notary Public Fernando Viola with regard to the lost of
the four cases, did not mention the conformity of
Salomon Sharuff to the said annotation of "5 bultos en
duda de menos." The defendants, without showing
any legal reason therefor, did not present as witnesses
the first officer, Francisco Masingsong, and the
helmsman
of
the
steamer Andres and

the bodeguero in Surigao to corroborate the testimony


of Claro Galleros.
There is ample evidence to support that finding. In fact it is
sustained by a preponderance of the evidence.
The second assignment of error upon which appellants rely is
founded upon paragraph 7 of the bill of lading, which is as
follows:
All claims for shortage or damage must be made at the
time of delivery to consignee or his agent, if the
packages or containers show exterior signs of damage;
otherwise to be made in writing to the carrier within
twenty-four hours from the time of delivery. Claims
for nondelivery or shipment must be presented in
writing to the carrier within thirty days from the date
of accrual. Suits based upon claims arising from
shortage, damage, or nondelivery of shipment shall be
instituted within sixty days from date of accrual of the
right of action. Failure to make claims or to institute
judicial proceedings as herein provided shall constitute
a waiver of the claim or right of action.
The goods in question were shipped from Manila on October
25, 1922, to be delivered to Salomon Sharuff in Surigao,
Plaintiff's original complaint was filed on April 17, 1923, or a
little less than six months after the shipment was made.
Appellants cite and rely upon section 505 C, Corpus Juris, vol.
10, pp. 343-344, which is as follows:
Contractual Limitations As to Time For Bringing Suit.
1. In General. In the absence of any express
statutory prohibition, according to the great weight of
authority, it is competent for the parties to a contract
of shipment to agree on a limitation of time shorter
than the statutory limitation, within which action for
breach of the contract shall be brought, and such a
limitation will be enforced if reasonable, although
there is some authority to the contrary. Nevertheless
to be effective such limitation must be reasonable;
and it has been said that the only limitations as to the
validity of such contract are that they must be
reasonable, and that there must be prompt action on
the part of the carrier in denying its liability, to the end
that the shipper may be duly apprised of the fact that
suit will be necessary. Stipulations of this character are
not opposed to public policy, and do not operate as a
restriction on the common-law liability of the carrier.
Also Ruling Case Law, volume 4, pp. 798-799, which reads:
256. Stipulations Limiting Time for Bringing Suit.
Similar in character to the stipulations just considered
prescribing a certain time within which notice of loss
must be given are the provisions frequently met with
in bills of lading which require that any action to
recover for loss or damage to the article shipped
should be begun within a specified period. The parties
may, if they see fit, fix by agreement a shorter time for
the bringing of suit on the contract than that provided
by the statute of limitations, and if the period therein
limited is reasonable, suit must brought within that
time or the shipper's right of action will be barred.
Such a provision is prohibited by no rule of law nor by

any consideration of public policy. Nor is it all affected


by the existence within the jurisdiction of a statutory
or constitutional prohibition against carriers limiting or
restricting their common law liability, since it is held
that such a stipulation 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. But the limitation must be reasonable, and
if the period of time specified is such that under the
facts of the particular case the shipper could not with
reasonable diligence be enabled to bring suit before it
expired, the attempted limitation is void. Thus, a
provision that suit must be brought within thirty days
after the loss or damage occurred has been held
unreasonable where it appeared that the transit might
reasonably consume the whole of that time. A period
of forty days has on the other hand been held to be a
reasonable limitation.
Upon that question the trial court said:
Assuming, however, that the above quoted conditions
came to the knowledge of the plaintiff, the Supreme
court of the Philippine Islands, has held that such
stipulations in the bill of lading are not reasonable,
and therefore, do not bar an action.
And it also said:
Granting, without deciding, that said conditions
appearing on the back of the originals might have legal
effect, the court is of the opinion that in view of the
fact that said conditions are not printed on the
triplicate copies which were delivered to the plaintiff,
such conditions are not binding upon the plaintiff.
It appears that the plaintiff made its claim of loss within seven
days after receipt of information that 160 cases only were
delivered. Its second claim was made on December 29, 1922, in
which it said that, if the claim was not paid before January 3,
1923, it would be placed in the hands of attorneys for
collection. On January 3, 1923, Gabino Barretto & Company
advised the plaintiff that it would not pay the claim, and on
April seventeenth plaintiff filed its complaint.
1
In the case of Aguinaldo vs. Daza (G. R. No. 25961), in which
the printed conditions on the bill of lading were identical with
those in the instant case, the action was not commenced for
more than year after the delivery of the goods by the plaintiff
and the receipt of the bill of lading, and it was there held that:
We are of the opinion that, having regard to the
situation involved in this shipment, and the slowness
of communication between Manila and Catbalogan,
the contractual limitation stated in this bill of lading
with respect to the time for presentation of the
written claim was insufficient. The same
considerations are necessarily decisive with respect to
the time required for the institution of judicial action.
It results that the stipulations relied upon by the
defendant-appellee constitute no obstacle to the
maintenance of the present action.

All things considered, we are clearly of the opinion that the


action was brought with a "reasonable time" as those words
are specified and defined in the authorities cited. It is true that
both the plaintiff and the defendants are residents of the City
of Manila, but it is also true that Surigao where the goods in
question were to be delivered is one of the most distant places
from Manila in the Philippine Islands. In the very nature of
things, plaintiff would not want to commence its action until
such time as it had made a full and careful investigation of all of
the material facts and even the law of the case, so as to
determine whether or not defendants were liable for its loss.
In its third assignment of error, appellants rely on clause 12 of
the bill of lading, which is as follows:
It is expressly understood that carrier shall not be
liable for loss or damage from any cause or for any
reason to an amount exceeding three hundred pesos
(P300) Philippine currency for any single package of
silk or other valuable cargo, nor for an amount
exceeding one hundred pesos (P100) Philippine
currency for any single package of other cargo, unless
the value and contents of such packages are correctly
declared in this bill of lading at the time of shipment
and freight paid in accord with the actual
measurement or weight of the cargo shipped.
That condition is printed on the back of the bill of lading.
In disposing of that question, the lower court points out that
the conditions in question "are not printed on the triplicate
copies which were delivered to the plaintiff," and that by
reason thereof they "are not binding upon the plaintiff." The
clause in question provides that the carrier shall not be liable
for loss or damage from any cause or for any reason to an
amount in excess of P300 "for any single package of silk or
other valuable cargo."
The ship in question was a common carrier and, as such, must
have been operated as a public utility. It is a matter of common
knowledge that large quantities of silk are imported in the
Philippine Islands, and that after being imported, they are sold
by the merchants in Manila and other large seaports, and then
shipped to different points and places in the Islands. Hence,
there is nothing unusual about the shipment of silk. In truth
and in fact, it is a matter of usual and ordinary business. There
was no fraud or concealment in the shipment in question.
Clause 12 above quoted places a limit of P300 "for any single
package of silk." The evidence shows that 164 "cases" were
shipped, and that the value of each case was very near P2,500.
In this situation, the limit of defendants' liability for each case
of silk "for loss or damage from any cause or for any reason"
would put it in the power of the defendants to have taken the
whole cargo of 164 cases of silk at a valuation of P300 for each
case, or less than one-eight of its actual value. If that rule of
law should be sustained, no silk would ever be shipped from
one island to another in the Philippines. Such a limitation of
value is unconscionable and void as against public policy.
Corpus Juris, volume 10, p. 154, says:
PAR. 194. 6. Reasonable of Limitation. The validity
of stipulations limiting the carriers liability is to be
determined by their reasonableness and their
conformity to the sound public policy, in accordance

with which the obligations of the carrier to the public


are settled. It cannot lawfully stipulate for exemption
from liability, unless such exemption is just and
reasonable, and unless the contract is freely and fairly
made. No contractual limitation is reasonable which is
subversive of public policy.
PAR. 195. 7. What Limitations of Liability Permissible.

a.
Negligence (1) Rule in America (a) In Absence of
Organic or Statutory Provisions Regulating Subject
aa. Majority Rule. In the absence of statute, it is
settled by the weight of authority in the United States,
that whatever limitations against its common-law
liability are permissible to a carrier, it cannot limit its
liability for injury to or loss of goods shipped, where
such injury or loss is caused by its own negligence. This
is the common-law doctrine and it makes no
difference that there is no statutory prohibition
against contracts of this character.
PAR. 196. bb. Considerations on Which Rule Based.
The rule, it is said, rests on considerations of public
policy. The undertaking is to carry the goods, and to
relieve the shipper from all liability for loss or damage
arising from negligence in performing its contract is to
ignore the contract itself. The natural effect of a
limitation of liability against negligence is to induce
want of care on the part of the carrier in the
performance of its duty. The shipper and the common
carrier are not on equal terms; the shipper must send
his freight by the common carrier, or not at all; he is
therefore entirely at the mercy of the carrier, unless
protected by the higher power of the law against
being forced into contracts limiting the carrier's
liability. Such contracts are wanting in the element of
voluntary assent.
PAR. 197. cc. Application and Extent of Rule
(aa) Negligence of Servants. The rule prohibiting
limitation of liability for negligence is often stated as a
prohibition of any contract relieving the carrier from
loss or damage caused by its own negligence or
misfeasance, or that of its servants; and it has been
specifically decided in many cases that no contract
limitation will relieve the carrier from responsibility for
the negligence, unskillfulness, or carelessness of its
employees.
Based upon the findings of fact of the trial court which are
sustained by the evidence, the plaintiff delivered to the
defendants 164 cases of silk consigned and to be delivered by
the defendants to Salomon Sharuff in Surigao. Four of such
cases were never delivered, and the evidence shows that their
value is the alleged in the complaint.
There is no merit in the appeal. The judgment of the lower
court is affirmed, with costs.
Avancea, C.J., Street, Malcolm, Villamor, Ostrand and VillaReal, JJ., concur.

G.R. No. L-20099


July 7, 1966
PARMANAND
SHEWARAM, plaintiff
and
appellee,
vs.
PHILIPPINE AIR LINES, INC., defendant and appellant.
Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendant
and
appellant.
Climaco and Associates for plaintiff and appellee.
ZALDIVAR, J.:
Before the municipal court of Zamboanga City, plaintiffappellee Parmanand Shewaram instituted an action to recover
damages suffered by him due to the alleged failure of
defendant-appellant Philippines Air Lines, Inc. to observe
extraordinary diligence in the vigilance and carriage of his
luggage. After trial the municipal court of Zamboanga City
rendered judgment ordering the appellant to pay appellee
P373.00 as actual damages, P100.00 as exemplary damages,
P150.00 as attorney's fees, and the costs of the action.
Appellant Philippine Air Lines appealed to the Court of First
Instance of Zamboanga City. After hearing the Court of First
Instance of Zamboanga City modified the judgment of the
inferior court by ordering the appellant to pay the appellee
only the sum of P373.00 as actual damages, with legal interest
from May 6, 1960 and the sum of P150.00 as attorney's fees,
eliminating the award of exemplary damages.
From the decision of the Court of First Instance of Zamboanga
City, appellant appeals to this Court on a question of law,
assigning two errors allegedly committed by the lower court a
quo, to wit:
1. The lower court erred in not holding that plaintiffappellee was bound by the provisions of the tariff
regulations filed by defendant-appellant with the civil
aeronautics board and the conditions of carriage
printed at the back of the plane ticket stub.
2. The lower court erred in not dismissing this case or
limiting the liability of the defendant-appellant to
P100.00.
The facts of this case, as found by the trial court, quoted from
the decision appealed from, are as follows:
That Parmanand Shewaram, the plaintiff herein, was
on November 23, 1959, a paying passenger with ticket
No. 4-30976, on defendant's aircraft flight No.
976/910 from Zamboanga City bound for Manila; that
defendant is a common carrier engaged in air line
transportation in the Philippines, offering its services
to the public to carry and transport passengers and
cargoes from and to different points in the Philippines;
that on the above-mentioned date of November 23,
1959, he checked in three (3) pieces of baggages a
suitcase and two (2) other pieces; that the suitcase
was mistagged by defendant's personnel in
Zamboanga City, as I.G.N. (for Iligan) with claim check
No. B-3883, instead of MNL (for Manila). When
plaintiff Parmanand Shewaram arrived in Manila on
the date of November 23, 1959, his suitcase did not
arrive with his flight because it was sent to Iligan. So,
he made a claim with defendant's personnel in Manila
airport and another suitcase similar to his own which
was the only baggage left for that flight, the rest

having been claimed and released to the other


passengers of said flight, was given to the plaintiff for
him to take delivery but he did not and refused to take
delivery of the same on the ground that it was not his,
alleging that all his clothes were white and the
National transistor 7 and a Rollflex camera were not
found inside the suitcase, and moreover, it contained
a pistol which he did not have nor placed inside his
suitcase; that after inquiries made by defendant's
personnel in Manila from different airports where the
suitcase in question must have been sent, it was found
to have reached Iligan and the station agent of the PAL
in Iligan caused the same to be sent to Manila for
delivery to Mr. Shewaram and which suitcase
belonging to the plaintiff herein arrived in Manila
airport on November 24, 1959; that it was also found
out that the suitcase shown to and given to the
plaintiff for delivery which he refused to take delivery
belonged to a certain Del Rosario who was bound for
Iligan in the same flight with Mr. Shewaram; that
when the plaintiff's suitcase arrived in Manila as
stated above on November 24, 1959, he was informed
by Mr. Tomas Blanco, Jr., the acting station agent of
the Manila airport of the arrival of his suitcase but of
course minus his Transistor Radio 7 and the Rollflex
Camera; that Shewaram made demand for these two
(2) items or for the value thereof but the same was
not complied with by defendant.
xxx
xxx
xxx
It is admitted by defendant that there was mistake in
tagging the suitcase of plaintiff as IGN. The tampering
of the suitcase is more apparent when on November
24, 1959, when the suitcase arrived in Manila,
defendant's personnel could open the same in spite of
the fact that plaintiff had it under key when he
delivered the suitcase to defendant's personnel in
Zamboanga City. Moreover, it was established during
the hearing that there was space in the suitcase where
the two items in question could have been placed. It
was also shown that as early as November 24, 1959,
when plaintiff was notified by phone of the arrival of
the suitcase, plaintiff asked that check of the things
inside his suitcase be made and defendant admitted
that the two items could not be found inside the
suitcase. There was no evidence on record sufficient
to show that plaintiff's suitcase was never opened
during the time it was placed in defendant's
possession and prior to its recovery by the plaintiff.
However, defendant had presented evidence that it
had authority to open passengers' baggage to verify
and find its ownership or identity. Exhibit "1" of the
defendant would show that the baggage that was
offered to plaintiff as his own was opened and the
plaintiff denied ownership of the contents of the
baggage. This proven fact that baggage may and could
be opened without the necessary authorization and
presence of its owner, applied too, to the suitcase of
plaintiff which was mis-sent to Iligan City because of

mistagging. The possibility of what happened in the


baggage of Mr. Del Rosario at the Manila Airport in his
absence could have also happened to plaintiffs
suitcase at Iligan City in the absence of plaintiff.
Hence, the Court believes that these two items were
really in plaintiff's suitcase and defendant should be
held liable for the same by virtue of its contract of
carriage.
It is clear from the above-quoted portions of the decision of the
trial court that said court had found that the suitcase of the
appellee was tampered, and the transistor radio and the
camera contained therein were lost, and that the loss of those
articles was due to the negligence of the employees of the
appellant. The evidence shows that the transistor radio cost
P197.00 and the camera cost P176.00, so the total value of the
two articles was P373.00.
1
There is no question that the appellant is a common carrier. As
such common carrier the appellant, from the nature of its
business and for reasons of public policy, is bound to observe
extraordinary diligence in the vigilance over the goods and for
the safety of the passengers transported by it according to the
circumstances of each case. 2 It having been shown that the
loss of the transistor radio and the camera of the appellee,
costing P373.00, was due to the negligence of the employees of
the appellant, it is clear that the appellant should be held liable
3
for the payment of said loss.
It is, however, contended by the appellant that its liability
should be limited to the amount stated in the conditions of
carriage printed at the back of the plane ticket stub which was
issued to the appellee, which conditions are embodied in
Domestic Tariff Regulations No. 2 which was filed with the Civil
Aeronautics Board. One of those conditions, which is pertinent
to the issue raised by the appellant in this case provides as
follows:
The liability, if any, for loss or damage to checked
baggage or for delay in the delivery thereof is limited
to its value and, unless the passenger declares in
advance a higher valuation and pay an additional
charge therefor, the value shall be conclusively
deemed not to exceed P100.00 for each ticket.
The appellant maintains that in view of the failure of the
appellee to declare a higher value for his luggage, and pay the
freight on the basis of said declared value when he checked
such luggage at the Zamboanga City airport, pursuant to the
abovequoted condition, appellee can not demand payment
from the appellant of an amount in excess of P100.00.
The law that may be invoked, in this connection is Article 1750
of the New Civil Code which provides as follows:
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 accordance with the above-quoted provision of Article 1750
of the New Civil Code, the pecuniary liability of a common
carrier may, by contract, be limited to a fixed amount. It is
required, however, that the contract must be "reasonable and

just under the circumstances and has been fairly and freely
agreed upon."
The requirements provided in Article 1750 of the New Civil
Code must be complied with before a common carrier can
claim a limitation of its pecuniary liability in case of loss,
destruction or deterioration of the goods it has undertaken to
transport. In the case before us We believe that the
requirements of said article have not been met. It can not be
said that the appellee had actually entered into a contract with
the appellant, embodying the conditions as printed at the back
of the ticket stub that was issued by the appellant to the
appellee. The fact that those conditions are printed at the back
of the ticket stub in letters so small that they are hard to read
would not warrant the presumption that the appellee was
aware of those conditions such that he had "fairly and freely
agreed" to those conditions. The trial court has categorically
stated in its decision that the "Defendant admits that
passengers do not sign the ticket, much less did plaintiff herein
sign his ticket when he made the flight on November 23, 1959."
We hold, therefore, that the appellee is not, and can not be,
bound by the conditions of carriage found at the back of the
ticket stub issued to him when he made the flight on
appellant's plane on November 23, 1959.
The liability of the appellant in the present case should be
governed by the provisions of Articles 1734 and 1735 of the
New Civil Code, which We quote as follows:
ART. 1734. Common carries are responsible for the
loss, destruction, or deterioration of the goods, unless
the same is due to any of the following causes only:
(1) Flood, storm, earthquake, or other natural disaster
or calamity;
(2) Act of the public enemy in war, whether
international or civil;
(3) Act or omission of the shipper or owner of the
goods;
(4) The character of the goods or defects in the
packing or in the containers;
(5) Order or
act of competent public
authority.1wph1.t
ART. 1735. In all cases other than those mentioned in
Nos. 1, 2, 3, 4 and 5 of the preceding article, if the
goods are lost, destroyed or deteriorated, common
carriers are presumed to have been at fault or to have
acted negligently, unless they prove that they
observed extraordinary diligence as required in Article
1733.
It having been clearly found by the trial court that the
transistor radio and the camera of the appellee were lost as a
result of the negligence of the appellant as a common carrier,
the liability of the appellant is clear it must pay the appellee
the value of those two articles.
In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by
the trial court in support of its decision, this Court had laid
down the rule that the carrier can not limit its liability for injury
to or loss of goods shipped where such injury or loss was
caused by its own negligence.
Corpus Juris, volume 10, p. 154, says:

"Par. 194, 6. Reasonableness of Limitations. The


validity of stipulations limiting the carrier's liability is
to be determined by their reasonableness and their
conformity to the sound public policy, in accordance
with which the obligations of the carrier to the public
are settled. It cannot lawfully stipulate for exemption
from liability, unless such exemption is just and
reasonable, and unless the contract is freely and fairly
made. No contractual limitation is reasonable which is
subversive of public policy.
"Par. 195. 7. What Limitations of Liability Permissible.
a. Negligence (1) Rule in America (a) In
Absence of Organic or Statutory Provisions Regulating
Subject aa. Majority Rule. In the absence of
statute, it is settled by the weight of authority in the
United States, that whatever limitations against its
common-law liability are permissible to a carrier, it
cannot limit its liability for injury to or loss of goods
shipped, where such injury or loss is caused by its own
negligence. This is the common law doctrine and it
makes no difference that there is no statutory
prohibition against contracts of this character.
"Par. 196. bb. Considerations on which Rule Based.
The rule, it is said, rests on considerations of public
policy. The undertaking is to carry the goods, and to
relieve the shipper from all liability for loss or damage
arising from negligence in performing its contract is to
ignore the contract itself. The natural effect of a
limitation of liability against negligence is to induce
want of care on the part of the carrier in the
performance of its duty. The shipper and the common
carrier are not on equal terms; the shipper must send
his freight by the common carrier, or not at all; he is
therefore entirely at the mercy of the carrier unless
protected by the higher power of the law against
being forced into contracts limiting the carrier's
liability. Such contracts are wanting in the element of
voluntary assent.
"Par. 197. cc. Application and Extent of Rule
(aa) Negligence of Servants. The rule prohibiting
limitation of liability for negligence is often stated as a
prohibition of any contract relieving the carrier from
loss or damage caused by its own negligence or
misfeasance, or that of its servants; and it has been
specifically decided in many cases that no contract
limitation will relieve the carrier from responsibility for
the negligence, unskillfulness, or carelessness of its
employer." (Cited in Ysmael and Co. vs. Barreto, 51
Phil. 90, 98, 99).
In view of the foregoing, the decision appealed from is
affirmed, with costs against the appellant.
Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala,
Makalintal, Bengzon, J.P. and Sanchez, JJ., concur.

G.R. No. L-40597 June 29, 1979

AGUSTINO
B.
ONG
YIU, petitioner,
vs.
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES,
INC., respondents.
MELENCIO-HERRERA, J.:
In this Petition for Review by Certiorari, petitioner, a practicing
lawyer and businessman, seeks a reversal of the Decision of the
Court of Appeals in CA-G.R. No. 45005-R, which reduced his
claim for damages for breach of contract of transportation.
The facts are as follows:
On August 26, 1967, petitioner was a fare paying passenger of
respondent Philippine Air Lines, Inc. (PAL), on board Flight No.
463-R, from Mactan Cebu, bound for Butuan City. He was
scheduled to attend the trial of Civil Case No. 1005 and Spec.
Procs. No. 1125 in the Court of First Instance, Branch II,
thereat, set for hearing on August 28-31, 1967. As a passenger,
he checked in one piece of luggage, a blue "maleta" for which
he was issued Claim Check No. 2106-R (Exh. "A"). The plane left
Mactan Airport, Cebu, at about 1:00 o'clock P.M., and arrived
at Bancasi airport, Butuan City, at past 2:00 o'clock P.M., of the
same day. Upon arrival, petitioner claimed his luggage but it
could not be found. According to petitioner, it was only after
reacting indignantly to the loss that the matter was attended to
by the porter clerk, Maximo Gomez, which, however, the latter
denies, At about 3:00 o'clock P.M., PAL Butuan, sent a message
to PAL, Cebu, inquiring about the missing luggage, which
message was, in turn relayed in full to the Mactan Airport
teletype operator at 3:45 P.M. (Exh. "2") that same afternoon.
It must have been transmitted to Manila immediately, for at
3:59 that same afternoon, PAL Manila wired PAL Cebu advising
that the luggage had been over carried to Manila aboard Flight
No. 156 and that it would be forwarded to Cebu on Flight No.
345 of the same day. Instructions were also given that the
luggage be immediately forwarded to Butuan City on the first
available flight (Exh. "3"). At 5:00 P.M. of the same afternoon,
PAL Cebu sent a message to PAL Butuan that the luggage would
be forwarded on Fright No. 963 the following day, August 27,
196'(. However, this message was not received by PAL Butuan
as all the personnel had already left since there were no more
incoming flights that afternoon.
In the meantime, petitioner was worried about the missing
luggage because it contained vital documents needed for trial
the next day. At 10:00 o'clock that evening, petitioner wired
PAL Cebu demanding the delivery of his baggage before noon
the next day, otherwise, he would hold PAL liable for damages,
and stating that PAL's gross negligence had caused him undue
inconvenience, worry, anxiety and extreme embarrassment
(Exh. "B"). This telegram was received by the Cebu PAL
supervisor but the latter felt no need to wire petitioner that his
luggage had already been forwarded on the assumption that by
the time the message reached Butuan City, the luggage would
have arrived.
Early in the morning of the next day, August 27, 1967,
petitioner went to the Bancasi Airport to inquire about his
luggage. He did not wait, however, for the morning flight which
arrived at 10:00 o'clock that morning. This flight carried the
missing luggage. The porter clerk, Maximo Gomez, paged

petitioner, but the latter had already left. A certain Emilio


Dagorro a driver of a "colorum" car, who also used to drive for
petitioner, volunteered to take the luggage to petitioner. As
Maximo Gomez knew Dagorro to be the same driver used by
petitioner whenever the latter was in Butuan City, Gomez took
the luggage and placed it on the counter. Dagorro examined
the lock, pressed it, and it opened. After calling the attention of
Maximo Gomez, the "maleta" was opened, Gomez took a look
at its contents, but did not touch them. Dagorro then delivered
the "maleta" to petitioner, with the information that the lock
was open. Upon inspection, petitioner found that a folder
containing certain exhibits, transcripts and private documents
in Civil Case No. 1005 and Sp. Procs. No. 1126 were missing,
aside from two gift items for his parents-in-law. Petitioner
refused to accept the luggage. Dagorro returned it to the
porter clerk, Maximo Gomez, who sealed it and forwarded the
same to PAL Cebu.
Meanwhile, petitioner asked for postponement of the hearing
of Civil Case No. 1005 due to loss of his documents, which was
granted by the Court (Exhs. "C" and "C-1"). Petitioner returned
to Cebu City on August 28, 1967. In a letter dated August 29,
1967 addressed to PAL, Cebu, petitioner called attention to his
telegram (Exh. "D"), demanded that his luggage be produced
intact, and that he be compensated in the sum of P250,000,00
for actual and moral damages within five days from receipt of
the letter, otherwise, he would be left with no alternative but
to file suit (Exh. "D").
On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all
of PAL Cebu, went to petitioner's office to deliver the "maleta".
In the presence of Mr. Jose Yap and Atty. Manuel Maranga the
contents were listed and receipted for by petitioner (Exh. "E").
On September 5, 1967, petitioner sent a tracer letter to PAL
Cebu inquiring about the results of the investigation which
Messrs. de Leon, Navarsi, and Agustin had promised to conduct
to pinpoint responsibility for the unauthorized opening of the
"maleta" (Exh. "F").
The following day, September 6, 1967, PAL sent its reply
hereinunder quoted verbatim:
Dear Atty. Ong Yiu:
This is with reference to your September 5,
1967, letter to Mr. Ricardo G. Paloma, Acting
Manager, Southern Philippines.
First of all, may we apologize for the delay in
informing you of the result of our
investigation since we visited you in your
office last August 31, 1967. Since there are
stations other than Cebu which are involved
in your case, we have to communicate and
await replies from them. We regret to inform
you that to date we have not found the
supposedly lost folder of papers nor have we
been able to pinpoint the personnel who
allegedly pilferred your baggage.
You must realize that no inventory was taken
of the cargo upon loading them on any plane.
Consequently, we have no way of knowing
the real contents of your baggage when same
was loaded.

We realized the inconvenience you


encountered of this incident but we trust that
you will give us another opportunity to be of
better service to you.

(Exhibit G, Folder of Exhibits)


On September 13, 1967, petitioner filed a Complaint against
PAL for damages for breach of contract of transportation with
the Court of First Instance of Cebu, Branch V, docketed as Civil
Case No. R-10188, which PAL traversed. After due trial, the
lower Court found PAL to have acted in bad faith and with
malice and declared petitioner entitled to moral damages in
the sum of P80,000.00, exemplary damages of P30,000.00,
attorney's fees of P5,000.00, and costs.
Both parties appealed to the Court of Appeals petitioner in
so far as he was awarded only the sum of P80,000.00 as moral
damages; and defendant because of the unfavorable judgment
rendered against it.
On August 22, 1974, the Court of Appeals,* finding that PAL
was guilty only of simple negligence, reversed the judgment of
the trial Court granting petitioner moral and exemplary
damages, but ordered PAL to pay plaintiff the sum of P100.00,
the baggage liability assumed by it under the condition of
carriage printed at the back of the ticket.
Hence, this Petition for Review by Certiorari, filed on May 2,
1975, with petitioner making the following Assignments of
Error:

I. THE HONORABLE
I COURT OF APPEALS
ERRED IN HOLDINGARESPONDENT PAL GUILTY
ONLY OF SIMPLE NEGLIGENCE
S
AND NOT BAD
FAITH IN THE BREACH OF ITS CONTRACT OF
TRANSPORTATION WITH
S
PETITIONER.
II. THE HONORABLE
.
COURT OF APPEALS
MISCONSTRUED THE EVIDENCE AND THE
LAW WHEN IT REVERSED
A
THE DECISION OF
THE LOWER COURT
G
AWARDING TO
PETITIONER MORAL
U DAMAGES IN THE
AMOUNT OF P80,000.00,
S
EXEMPLARY
DAMAGES OF P30,000.00,
T
AND P5,000.00
REPRESENTING ATTORNEY'S
I
FEES, AND
ORDERED
RESPONDENT
N
PAL
TO
COMPENSATE PLAINTIFF
B
THE SUM OF
P100.00 ONLY, CONTRARY
r
TO THE EXPLICIT
PROVISIONS OF ARTICLES
a
2220, 2229, 2232
AND 2234 OF THE
n CIVIL CODE OF THE
PHILIPPINES.
c
On July 16, 1975, this Court gave due hcourse to the Petition.
There is no dispute that PAL incurred in delay in the delivery of
petitioner's luggage. The questionS is the correctness of
respondent Court's conclusion that
u there was no gross
negligence on the part of PAL and
p that it had not acted
fraudulently or in bad faith as to entitle
e petitioner to an award
of moral and exemplary damages. r
From the facts of the case, we agree
v with respondent Court
that PAL had not acted in bad faith. iBad faith means a breach
2
of a known duty through some motive
s of interest or ill will. It
was the duty of PAL to look for petitioner's
o
luggage which had
been miscarried. PAL exerted due diligence
r
in complying with
such duty.
C
As aptly stated by the appellate Court:e
We do not find anyb evidence of bad faith in
this. On the contrary,
u
We find that the
defendant had exerted diligent effort to
locate plaintiff's baggage. The trial court saw
evidence of bad faith because PAL sent the
telegraphic message to Mactan only at 3:00
o'clock that same afternoon, despite
plaintiff's indignation for the non-arrival of his
baggage. The message was sent within less
than one hour after plaintiff's luggage could
not be located. Efforts had to be exerted to
locate plaintiff's maleta. Then the Bancasi
airport had to attend to other incoming
passengers and to the outgoing passengers.
Certainly, no evidence of bad faith can be
inferred from these facts. Cebu office
immediately wired Manila inquiring about the
missing baggage of the plaintiff. At 3:59 P.M.,
Manila station agent at the domestic airport
wired Cebu that the baggage was over carried
to Manila. And this message was received in
Cebu one minute thereafter, or at 4:00 P.M.
The baggage was in fact sent back to Cebu
City that same afternoon. His Honor stated
that the fact that the message was sent at

3:59 P.M. from Manila and completely


relayed to Mactan at 4:00 P.M., or within one
minute, made the message appear spurious.
This is a forced reasoning. A radio message of
about 50 words can be completely
transmitted in even less than one minute
depending upon atmospheric conditions.
Even if the message was sent from Manila or
other distant places, the message can be
received within a minute. that is a scientific
3
fact which cannot be questioned.
Neither was the failure of PAL Cebu to reply to petitioner's rush
telegram indicative of bad faith, The telegram (Exh. B) was
dispatched by petitioner at around 10:00 P.M. of August 26,
1967. The PAL supervisor at Mactan Airport was notified of it
only in the morning of the following day. At that time the
luggage was already to be forwarded to Butuan City. There was
no bad faith, therefore, in the assumption made by said
supervisor that the plane carrying the bag would arrive at
Butuan earlier than a reply telegram. Had petitioner waited or
caused someone to wait at the Bancasi airport for the arrival of
the morning flight, he would have been able to retrieve his
luggage sooner.
In the absence of a wrongful act or omission or of fraud or bad
faith, petitioner is not entitled to moral damages.
Art. 2217. Moral damages include physical
suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded
feelings, moral shock, social humiliation, and
similar injury. Though incapable of pecuniary
computation, moral damages may be
recovered if they are the proximate result of
the defendant's wrongful act of omission.
Art. 2220. Willful injury to property may be a
legal ground for awarding moral damages if
the court should find that, under the
circumstances, such damages are justly due.
The same rule applies to breaches of contract
where the defendant acted fraudulently or in
bad faith.
Petitioner is neither entitled to exemplary damages. In
contracts, as provided for in Article 2232 of the Civil Code,
exemplary damages can be granted if the defendant acted in a
wanton, fraudulent, reckless, oppressive, or malevolent
manner, which has not been proven in this case.
Petitioner further contends that respondent Court committed
grave error when it limited PAL's carriage liability to the
amount of P100.00 as stipulated at the back of the ticket. In
this connection, respondent Court opined:
As a general proposition, the plaintiff's
maleta having been pilfered while in the
custody of the defendant, it is presumed that
the defendant had been negligent. The
liability, however, of PAL for the loss, in
accordance with the stipulation written on
the back of the ticket, Exhibit 12, is limited to
P100.00 per baggage, plaintiff not having
declared a greater value, and not having

called the attention of the defendant on its


true value and paid the tariff therefor. The
validity of this stipulation is not questioned
by the plaintiff. They are printed in
reasonably and fairly big letters, and are
easily readable. Moreover, plaintiff had been
a frequent passenger of PAL from Cebu to
Butuan City and back, and he, being a lawyer
and businessman, must be fully aware of
4
these conditions.
We agree with the foregoing finding. The pertinent Condition
of Carriage printed at the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of
the Carrier for lost or damaged baggage of
the passenger is LIMITED TO P100.00 for each
ticket unless a passenger declares a higher
valuation in excess of P100.00, but not in
excess, however, of a total valuation of
P1,000.00 and additional charges are paid
pursuant to Carrier's tariffs.
There is no dispute that petitioner did not declare any higher
value for his luggage, much less did he pay any additional
transportation charge.
But petitioner argues that there is nothing in the evidence to
show that he had actually entered into a contract with PAL
limiting the latter's liability for loss or delay of the baggage of
its passengers, and that Article 1750* of the Civil Code has not
been complied with.
While it may be true that petitioner had not signed the plane
ticket (Exh. "12"), he is nevertheless bound by the provisions
thereof. "Such provisions have been held to be a part of the
contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the
5
regulation". It is what is known as a contract of "adhesion", in
regards which it has been said that contracts of adhesion
wherein one party imposes a ready made form of contract on
the other, as the plane ticket in the case at bar, are contracts
not entirely prohibited. The one who adheres to the contract is
in reality free to reject it entirely; if he adheres, he gives his
6
consent. And as held in Randolph v. American Airlines, 103
Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World
Airlines, Inc., 349 S.W. 2d 483, "a contract limiting liability upon
an agreed valuation does not offend against the policy of the
law forbidding one from contracting against his own
negligence.
Considering, therefore, that petitioner had failed to declare a
higher value for his baggage, he cannot be permitted a
recovery in excess of P100.00.Besides, passengers are advised
not to place valuable items inside their baggage but "to avail of
our V-cargo service " (Exh. "1"). I t is likewise to be noted that
there is nothing in the evidence to show the actual value of the
goods allegedly lost by petitioner.
There is another matter involved, raised as an error by PAL
the fact that on October 24, 1974 or two months after the
promulgation of the Decision of the appellate Court,
petitioner's widow filed a Motion for Substitution claiming that
petitioner died on January 6, 1974 and that she only came to
know of the adverse Decision on October 23, 1974 when

petitioner's law partner informed her that he received copy of


the Decision on August 28, 1974. Attached to her Motion was
an Affidavit of petitioner's law partner reciting facts
constitutive of excusable negligence. The appellate Court
noting that all pleadings had been signed by petitioner himself
allowed the widow "to take such steps as she or counsel may
deem necessary." She then filed a Motion for Reconsideration
over the opposition of PAL which alleged that the Court of
Appeals Decision, promulgated on August 22, 1974, had
already become final and executory since no appeal had been
interposed therefrom within the reglementary period.
Under the circumstances, considering the demise of petitioner
himself, who acted as his own counsel, it is best that
technicality yields to the interests of substantial justice.
Besides, in the 'last analysis, no serious prejudice has been
caused respondent PAL.
In fine, we hold that the conclusions drawn by respondent
Court from the evidence on record are not erroneous.
WHEREFORE, for lack of merit, the instant Petition is hereby
denied, and the judgment sought to be reviewed hereby
affirmed in toto.
No costs.
SO ORDERED.

G.R. No. 89757 August 6, 1990


ABOITIZ
SHIPPING
CORPORATION, petitioner,
vs.
COURT OF APPEALS AND GENERAL ACCIDENT FIRE AND LIFE
ASSURANCE CORPORATION, LTD.,respondents.
Sycip, Salazar, Hernandez & Gatmaitan for petitioner.
Dollete, Blanco, Ejercito & Associates for private respondent.
GANCAYCO, J.:
The extent of the liability of a carrier of goods is again brought
to the fore in this case.
On October 28, 1980, the vessel M/V "P. Aboitiz" took on
board in Hongkong for shipment to Manila some cargo
consisting of one (1) twenty (20)-footer container holding 271
rolls of goods for apparel covered by Bill of Lading No. 515-M
and one (1) forty (40)-footer container holding four hundred
forty- seven (447) rolls, ten (10) bulk and ninety-five (95)
cartons of goods for apparel covered by Bill of Lading No. 505M. The total value, including invoice value, freightage,
customs duties, taxes and similar imports amounts to
US$39,885.85 for the first shipment while that of the second
shipment amounts to US$94,190.55. Both shipments were
consigned to the Philippine Apparel, Inc. and insured with the
General Accident Fire and Life Assurance Corporation, Ltd.
(GAFLAC for short). The vessel is owned and operated by
Aboitiz Shipping Corporation (Aboitiz for short).
On October 31, 1980 on its way to Manila the vessel sunk and
it was declared lost with all its cargoes. GAFLAC paid the
consignee the amounts US$39,885.85 or P319,086.80 and
US$94,190.55 or P753,524.40 for the lost cargo. As GAFLAC
was subrogated to all the rights, interests and actions of the
consignee against Aboitiz, it filed an action for damages

against Aboitiz in the Regional Trial Court of Manila alleging


that the loss was due to the fault and negligence of Aboitiz
and the master and crew of its vessel in that they did not
observe the extraordinary diligence required by law as
regards common carriers.
After the issues were joined and the trial on the merits a
decision was rendered by the trial court on June 29, 1985, the
dispositive part of which reads as follows:
PREMISES CONSIDERED, the Court finds in
favor of the plaintiff and against the
defendant, ordering the latter to pay the
former actual damages in the sum of
P1,072,611.20 plus legal interest from the
date of the filing of the complaint on
October 28, 1981, until full payment thereof,
attorney's fees in the amount of 20% of the
total claim and to pay the costs.
1
SO ORDERED.
Not satisfied therewith, Aboitiz appealed to the Court of
Appeals wherein in due course a decision was rendered on
March 9, 1989 affirming in toto the appealed decision, with
2
costs against defendant Aboitiz .
A motion for reconsideration of said decision filed by Aboitiz
was denied in a resolution dated August 15, 1989.
Hence the herein petition for review alleging that the Court of
Appeals decided the case not in accordance with law when
1. The Court of Appeals held that "findings
of administrative bodies are not always
binding on court . This is especially so in the
case at bar where GAFLAC was not a party in
the BMI proceedings and which proceedings
was not adversary in characther." This ruling
is contrary to the principle established
in Vasquez vs. Court of Appeals (138 SCRA
559), where it was held that since the BMI
possesses the required expertise in shipping
matters and is imbued with quasi-judicial
powers, its factual findings are conclusive
and binding on the court. Likewise, the case
of Timber Export Inc. vs. Retla Steamship
Co. (CA-G.R. No. 66143-R) also established
the rule that decision of BMI must be given
"great materiality and weight to the
determination and resolution of the case."
2. The Court of Appeals also held that the
trial court did not err when it fixed the
liability of Aboitiz not on the basis of the
stipulation in the bills of lading at US$500.00
per package/container but on the actual
value of the shipment lost notwithstanding
the long line of cases decided by this
Honorable Supreme Court holding a contrary
opinion, as shown below.
3. The Court of Appeals also held that the
trial court did not abuse its discretion in
granting GAFLAC's motion for execution
pending appeal notwithstanding the

absence of reasonable and justifiable


3
grounds to support the same.
Under the first issue petitioner state that the sinking of the
vessel M/V "P. Aboitiz" was the subject of an administrative
investigation conducted by the Board of Marine Inquiry (BMI)
whereby in a decision dated December 26, 1984, it was found
that the sinking of the vessel may be attributed to force
majeure on account of a typhoon. Petitioner contends that
these findings are conclusive on the courts.
In rejecting the evidence offered by the petitioner the
appellate court ruled
But over and above all these considerations,
the trial court did not err in not giving
weight to the finding of the BMI that the
vessel sank due to a fortuitous event.
Findings of administrative bodies are not
always binding on courts. This is especially
so in the case at bar where plaintiff was not
a party in the BMI proceedings and which
4
proceeding was not adversary in character.
As a general rule, administrative findings of facts are not
disturbed by the courts when supported by substantial
evidence unless it is tainted with unfairness or arbitrariness
that would amount to abuse of discretion or lack of
5
6
jurisdiction. Even in Vasquez vs. Court of Appeals, which is
cited by petitioner, this Court ruled that We nevertheless
disagree with the conclusion of the BMI exonerating the
captain from any negligence "since it obviously had not taken
into account the legal responsibility of a common carrier
towards the security of the passengers involved."
This case was brought to court on October 28, 1981. The trial
court was never informed of a parallel administrative
investigation that was being conducted by the BMI in any of
the pleadings of the petitioner. It was only on March 22, 1985
when petitioner revealed to the trial court the decision of the
BMI dated December 26, 1984 (one day after Christmas
7
day). The said decision appears to have been rendered over
three (3) years after the case was brought to court.
Moreover, said administrative investigation was conducted
unilaterally. Private respondent GAFLAC was not notified or
given an opportunity to participate therein. It cannot thereby
be bound by said findings and conclusions of the BMI.
The trial court and the appellate court found that the sinking
of the M/V "P. Aboitiz" was not due to the waves caused by
tropical storm "Yoning" but due to the fault and negligence of
petitioner, its master and crew. The court reproduces with
approval said findings
xxx xxx xxx
After a careful examination of the evidence,
the Court is convinced in the plaintiffs claim
that the M/V "Aboitiz" and its cargo were
not lost due to fortuitous event or force
majeure.
To begin with, paragraph 4 of the marine
protest (Exh. "4", also Exhibit "M"), which is
defendant's own evidence, shows that the
wind force when the ill-fated ship foundered
was 10 to 15 knots. According to the

Beaufort Scale (Exhibit "I"), which is


admittedly an accurate reference for
measuring wind velocity, the wind force of
10 to 15 knots is classified as scale No. 4 and
described as "moderate breeze," small
waves, becoming longer, fairly frequent
white horses. Meteorologist Justo Iglesias,
Jr. himself affirms the above description of a
wind force of 10 to 15 knots and adds that
the weather condition prevailing under said
wind force is usual and forseeable. Thus
Iglesias, Jr. testified:
Q. In the marine protest of
the master of the vessel of
Aboitiz, there is reference
to wind force from ten to
15 knots. In this Beaufort
Scale, will you be able to
clarify what this wind force
of 10 to 15 as stated in the
marine protest?
A. It will be under Force 4
of the Beaufort Scale.
Q. What is the basis of your
answer?
A. 10 to 15 falls within this
scale of the Beaufort Scale,
Force 4.
Atty. Dollete:
May I read into the
records, Your Honor. Force
4,
descriptive
term
moderate breeze. Near
velocity in knots 11-16
meters per second, 5.5-7.9
in kilometers per hour to
20 to 28 kilometers per
hour and 13 to 18 miles per
hour. Sea the description of
this will be small waves
becoming longer fairly
frequent white horse (sic).
Q. In the layman's language
how do you interpret this
white horses?
A. It means white forms. At
the top of the crest they
were beginning to form
white foams.
Q.
How
about
this
moderate
breeze
as
described under this Force
4 of the Beaufort Scale,
how will you interpret
that?
A. Moderate breeze will
only give winds of 29
kilometers per hour which

is equivalent to just
extending your hand out of
a running car at that speed.
Q. This weather condition
between October 28 and
November 1, 1980, will you
classify
this
as
extraordinary or ordinary?
A. It was ordinary.
Q. When you said ordinary,
was it usual or unusual?
A. It is usual.
Q. When you said it is usual
it is foreseeable and
predictable?
A. For an experienced
meteorologist like a ship
captain, it is foreseeable.
Q. When it is foreseeable,
necessarily it follows that
the weather could be
predicted based on the
weather bulletin or report?
A. Yes, sir.
Q. And usually the bulletin
states the condition in
other words, this weather
condition
which
you
testified to and reflected in
your Exhibit "7" is an
ordinary occurrence within
that area of Philippine
responsibility?
A. Yes, sir.
Q. And in fact this weather
condition
is
to
be
anticipated at that time of
the year with respect to
weather condition which is
reflected in Exhibit "7"?
A. It is a regular
occurrence.
xxx xxx xxx
Moreover, Capt. Racines
again admitted in Court
that his ill-fated vessel was
200 miles away from the
storm 'Yoning when it
sank. Said Capt. Racines:
Q. How far were you from
this depression or weather
disturbance on October 30,
1980?
A. Two hundred miles.
xxx xxx xxx
Q. In other words, this
depression was far from
your route because it took

a
northern
approach
whereas you were towards
the south approach?
A. As I have said, I was 200
miles away from the
disturbance.
xxx xxx xxx
Considering the foregoing reasons, the Court
holds that the vessel M/V "Aboitiz" and its
cargo were not lost due to fortuitous event
or force majeure.
In accordance with Article 1732 of the Civil
Code, the defendant common carrier, from
the nature of its business and for reasons of
public policy, is bound to observe
extraordinary diligence in the vigilance over
the goods and for the safety of the
passengers transported by it according to all
the circumstances of each case. While the
goods are in the possession of the carrier, it
is but fair that it exercise extra ordinary
diligence in protecting them from loss or
damage, and if its occurs the law presumes
that it was due to the carrier's fault or
negligence; that is necessary to protect the
interest of the shipper which is at the mercy
of the carrier (Article 1756, Civil Code;
Anuran vs. Puno, 17 SCRA 224; Nocum vs.
Laguna Tayabas Bus Co., 30 SCRA 69;
Landigan vs. Pangasinan Transportation
Company, 88 SCRA 284). In the case at bar,
the defendant failed to prove that the loss of
the subject cargo was not due to its fault or
8
negligence.
The said factual findings of the appellate court and the trial
court are finding on this Court. Its conclusion as to the
negligence of the petitioner is supported by the evidence.
The second issue raised to the effect that the liability of the
petitioner
should
be
fixed
at
US$500.00
per
package/container, as stipulated in the bill of lading and not
at the actual value of the cargo, should be resolved against
petitioner.
While it is true that in the bill of lading there is such
stipulation that the liability of the carrier is US$500.00 per
package/container/customary freight, there is an exception,
that is, when the nature and value of such goods have been
declared by the shipper before shipment and inserted in the
bill of lading. This is provided for in Section 4(5) of the
Carriage of Goods by Sea Act to wit
(5) 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 of 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 inserted in the bill of


lading. This declaration, if embodied in the
bill of lading, shall be prima facie evidence,
but shall not be conclusive on the carrier.
By agreement between the carrier, master
or agent of the carrier, and the shipper
another maximum amount than that
mentioned in this paragraph may be fixed:
Provided, that such maximum shall not be
less than the figure above named. In no
event shall the carrier be liable for more
than the amount of damage actually
sustained.
Neither the carrier nor the ship shall be
responsible in any event for loss or damage
to or in connection with the transportation
of the goods if the nature or value thereof
has been knowingly and fraudulently misstated by the shipper in the bill of lading.
(Emphasis supplied.)
In this case the description of the nature and the value of the
goods shipped are declared and reflected in the bills of lading.
Thus, it is the basis of the liability of the carrier as the actual
value of the loss.
Moreover, it is absurd to interpret "container," as provided in
the bill of lading to be valued at US$500.00 each, to refer to
the container which is the modern substitute for the hold of
9
the vessel. The package/container contemplated by the law
to limit the liability of the carrier should be sensibly related to
the unit in which the shipper packed the goods and described
them, not a large metal object, functionally a part of the ship,
10
in which the carrier used them to be contained. Such
"container" must be given the same meaning and
classification as a "package" and "customary freight unit."
The appellate court in disposing this issue quoted its decision
in Allied Guarantee Insurance Co. Inc. vs. Aboitiz Shipping
Corporation, CA GR. CV No. 04121, March 23, 1987, viz;
Third. Still it is contended that the carrier's
liability is limited to $500.00, pursuant to
section 8 of the Bill of Lading which provides
that 'The liability of the Carrier for any loss
or damage to the goods shall in no case
exceed the sum of U.S. $500.00 per
package/container/customary freight unit,
unless the value of the goods has been
correctly declared and extra freight paid,
prior to the shipment and a signed
declaration to this effect appears in the bill
of lading, duly confirmed by the Carrier. ... It
is contended that the Bill of Lading does not
indicate the value of the goods. Nor was the
corresponding freight ... paid prior to
shipment.
Generally speaking a stipulation, limiting the
common carrier's liability to the value of the
goods appearing in the bill of lading, unless
the shipper or owner declares a greater
value, is valid. (Civil Code, Art. 1749). Such

stipulation, however, must be reasonable


and just under the circumstances and must
have been fairly and freely agreed upon. (St.
Paul Fire & Marine Insurance Co. vs.
Macondray Co., 70 SCRA 122, 126-127 (1976)
In the case at bar, the goods shipped on the
M/V "P. Aboitiz" were insured for
P278,530.50, which may be taken as their
value. To limit the liability of the carrier to
$500.00 would obviously put it in its power
to have taken the whole cargo. In
Juan Ysmael & Co. vs. Gabino Barreto & Co.,
51 Phil. 90 (1927), it was held that a
stipulation limiting the carrier's liability to
$500.00 per package of silk when the value
of such package was P2,500.00 unless the
true value had been declared and the
corresponding freight paid was "void as
against public policy." That ruling applies to
this case.
Moreover, by the weight of modern
authority, a carrier cannot limit its liability
for injury or loss of goods shipped where
such injury or loss was caused by its own
negligence. (Juan Ysmael & Co. v. Gabino
Barreto & Co., supra) Here to limit the
liability of Aboitiz Shipping to $500.00 would
nullify the policy of the law imposing on
common carriers the duty to observe
extraordinary diligence in the carriage of
goods.
Indeed, it is even doubtful whether the word
"container" in section 8 of the Bill of Lading
includes containers which are a substitute
for the hold of a vessel. This provision limits
the carrier's liability to "the sum of
US$500.00
per package
/container
customary freight unit."By the rule
of noscitur a sociis the word "container"
must be given the same meaning as package
and customary freight unit and therefore
cannot possibly refer to modern containers
which are used for shipment of goods in
11
bulk.
In the same light, the third issue questioning the order of
execution pending appeal of the trial court must be resolved
against petitioner as well.
The averments in the motion for execution pending appeal
dated December 8, 1985 are as follows
Aside from the fact that petitioner can easily
post a supersedeas bond to stay execution,
still other circumstances are present peculiar
in the incident of the sinking of M/V P.
Aboitiz which would justify the issuance of
execution pending appeal. There are other
decided cases adjudging petitioner liable in
the lower court in the same incident. Other
cases are on appeal, upcoming and about to

be decided. The value of cargo loss caused


by the sinking of petitioner's vessel is in the
tune of no less than fifty million pesos
inclusive of interests fees and all claims. Its
insurer has gone bankrupt and petitioner
alone must face and answer for all these
claims. In one branch of the Regional Trial
Court of Manila alone there are twenty five
(25) cases pending against petitioner
involving the same loss of cargoes aboard
M/V "P. Aboitiz" as per certification
herewith attached as Annex "A". This claim
do not include others, pending in various
courts in Metro Manila which would have to
be satisfied ultimately by petitioner, it being
a common carrier which failed to exercise
extraordinary diligence over the goods lost.
The judgment sought to be enforced may
indeed be rendered imminently ineffectual
in the ultimate analysis.
The purpose of Sec. 2 Rule 39 would not be
achieved or execution pending appeal would
not be achieved if insolvency would still be
awaited. The remedy is available to
petitioner under Sec. 3 Rule 39 of the Rules
of Court but to place insolvency as a
condition to issuance of a writ of execution
pending appeal would render it illusory and
ineffectual.
Justice and equity therefore dictates, that as
a consequence of the bond posted by private
respondent and there being several other
cases against petitioner, decided as well as
pending, the totality of which claims may
render the appealed decision imminently
ineffectual and the further fact that the
appeal being interposed is evidently for
delay as a consequence of the several
adverse decisions against it as a common
carrier in the lower court, a reconsideration
of the decision dated November 25, 1985 of
the Honorable Court will be in consonance
with law, jurisprudence and equity.
In order to erase all apprehensions that the
aforesaid judgment award will wind up
ineffectual when not immediately executed,
it is most respectfully prayed that herein
respondent be required to post a
supersedeas
bond.
The
statutory
undertaking of posting a bond will then
achieve a three-pronged direction of justice,
(1) it will cast no doubt on the solvency of
the herein petitioner; (2) it will not defeat or
render phyrric a just resolution of the case
whichever party prevails in the end or in the
main case on appeal, since both of their
claims are secured by their corresponding
bonds; and (3) it will put to equitable

operation Sec. 3 Rule 39 of the Revised Rules


12
of Court.
The foregoing allegations which were not traversed that
petitioner is facing many law suits arising from said sinking of
its vessel involving cargo loss of no less than 50 million pesos,
in some cases of which judgment had been rendered against
Aboitiz, and considering that its insurer is now bankrupt,
leaving Aboitiz alone to face and answer the suits, which may
render any judgment for GAFLAC ineffectual, that the appeal
is interposed manifestly for delay and the willingness of
GAFLAC to put up a bond certainly are cogent bases for the
issuance of an order of execution pending appeal.
Finally, in a similar case for damages arising from the same
incident entitled Aboitiz Shipping Corporation vs. Honorable
Court of Appeals and Allied Guaranteed Insurance Company,
Inc., G.R. No. 88159, this Court in a resolution dated
November 13, 1989 dismissed the petition for lack of merit.
Therein this Court held in part
The appellate court affirmed the decision of
the lower court based on its findings that the
cause of sinking of the vessel was due to its
unseaworthiness and the failure of its crew
and the master to exercise extraordinary
diligence.
The petitioner, however, contends that the
appellate court erred on this matter and
insists that the contrary findings of the
Board of Marine Inquiry (BMI), which
conducted a separate investigation to the
effect that the proximate cause of the
sinking of the vessel was due toforce
majeure and that the officers and crew had
exhausted all preventive measures to save
the vessel and her cargo but to no avail,
should prevail. This, according to the
petitioner is based on the doctrine of
primary administrative jurisdiction.
This argument is untenable.
A cursory reading of the decision and
resolution of the appellate court shows that
the same took into consideration not only
the findings of the lower court but also the
findings of the BMI. Thus, the appellate
court stated:
Indeed, the decision of the
Board was based simply on
its
finding
that
the
Philippine Coast Guard had
certified the vessel to be
seaworthy and that it sank
because it was exposed
later to an oncoming
typhoon plotted within the
radius where the vessel
was
positioned.
This
generalization
certainly
cannot prevail over the
detailed explanation of the

trial court in this case as


basis for its contrary
conclusion. (Rollo, at p. 42)
We find no cogent reason to deviate from
the factual findings of the appellate court
and rule that the doctrine of primary
administrative jurisdiction is not applicable
in the case at bar.
The other issue raised is whether or not the
carrier's liability is limited to $500.00
pursuant to section 8 of the Bill of Lading.
The petitioner claims that the appellate
court erred in disregarding the limitation of
liability stipulated in the bill of lading. It
argues that the consignee agreed to this
amount (and) therefore is bound by this rate
and that there is no basis for the appellate
court's finding that the rate is unreasonable.
The argument is not well-taken. As aptly stated by the
appellate court:
Generally speaking any stipulation, limiting
the common carrier's liability to the value of
the goods appearing in the bill of lading,
unless the shipper or owner declares a
greater value is valid. (Civil Code, Art. 1749)
Such stipulation, however, must be
reasonable and just under the circumstances
and must have been fairly and freely agreed
upon. (St. Paul Fire & Marine Insurance Co.
v. Macondray & Co., 70 SCRA 122, 126-127
[1976] In the case at bar, the goods shipped
on the M/V "P. Aboitiz" were insured for
P278,536.50, which may be taken as their
value. To limit the liability of the carrier to
$500.00 would obviously put in its power to
have taken the whole cargo. In Juan Ysmael
& Co. v. Gabino Barretto & Co., 51 Phil. 90
[1927], it was held that a stipulation limiting
the carrier's liability to P300.00 per package
of silk, when the value of such package was
P2,500.00, unless the true value had been
declared and the corresponding freight paid;
was void as against public policy. That ruling
applies to this case.
As argued by the respondent, a limitation of
liability in this case would render
inefficacious the extraordinary diligence
13
required by law of common carriers.
The motion for reconsideration of said resolution filed by
petitioner was denied with finality in a resolution dated
January 8, 1990. Said resolution of the case had become final
and executory, entry of judgment having been made and the
records remanded for execution on March 22, 1990.
Said case is now the law of the case applicable to the present
petition.
WHEREFORE, the petition is dismissed with costs against
petitioner.
SO ORDERED.

G.R. No. 75118 August 31, 1987


SEA-LAND
SERVICE,
INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and PAULINO CUE, doing
business under the name and style of "SEN HIAP
HING," respondents.
NARVASA, J.:
The main issue here is whether or not the consignee of
seaborne freight is bound by stipulations in the covering bill of
lading limiting to a fixed amount the liability of the carrier for
loss or damage to the cargo where its value is not declared in
the bill.
The factual antecedents, for the most part, are not in dispute.
On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land
for brevity), a foreign shipping and forwarding company
licensed to do business in the Philippines, received from
Seaborne Trading Company in Oakland, California a shipment
consigned to Sen Hiap Hing the business name used by Paulino
Cue in the wholesale and retail trade which he operated out of
an establishment located on Borromeo and Plaridel Streets,
Cebu City.
The shipper not having declared the value of the shipment, no
value was indicated in the bill of lading. The bill described the
shipment only as "8 CTNS on 2 SKIDS-FILES. 1 Based on volume
measurements Sea-land charged the shipper the total amount
2
of US$209.28 for freight age and other charges. The shipment
was loaded on board the MS Patriot, a vessel owned and
operated by Sea-Land, for discharge at the Port Of Cebu.
The shipment arrived in Manila on February 12, 1981, and
there discharged in Container No. 310996 into the custody of
the arrastre contractor and the customs and port
3
authorities. Sometime between February 13 and 16, 1981,
after the shipment had been transferred, along with other
cargoes to Container No. 40158 near Warehouse 3 at Pier 3 in
South Harbor, Manila, awaiting trans-shipment to Cebu, it was
4
stolen by pilferers and has never been recovered.
On March 10, 1981, Paulino Cue, the consignee, made formal
claim upon Sea-Land for the value of the lost shipment
5
allegedly amounting to P179,643.48. Sea-Land offered to
settle for US$4,000.00, or its then Philippine peso equivalent of
P30,600.00. asserting that said amount represented its
maximum liability for the loss of the shipment under the
6
package limitation clause in the covering bill of lading. Cue
rejected the offer and thereafter brought suit for damages
against Sea-Land in the then Court of First Instance of Cebu,
7
Branch X. Said Court, after trial, rendered judgment in favor of
Cue, sentencing Sea-Land to pay him P186,048.00 representing
the Philippine currency value of the lost cargo, P55,814.00 for
unrealized profit with one (1%) percent monthly interest from
the filing of the complaint until fully paid, P25,000.00 for
8
attorney's fees and P2,000.00 as litigation expenses.
9
Sea-Land appealed to the Intermediate Appellate Court. That
Court however affirmed the decision of the Trial Court xxx in all
its parts ... . 10 Sea-Land thereupon filed the present petition

for review which, as already stated, poses the question of


whether, upon the facts above set forth, it can be held liable
for the loss of the shipment in any amount beyond the limit of
US$600.00 per package stipulated in the bill of lading.
To begin with, there is no question of the right, in principle, of
a consignee in a bill of lading to recover from the carrier or
shipper for loss of, or damage to, goods being transported
under said bill ,although that document may have been as in
practice it oftentimes is drawn up only by the consignor and
the
carrier without
the
intervention
of
the consignee. In Mendoza vs. Philippine Air Lines, Inc. 11 the
Court delved at some length into the reasons behind this when,
upon a claim made by the consignee of a motion picture film
shipped by air that he was never a party to the contract of
transportation and was a complete stranger thereto, it said:
But appellant now contends that he is not
suing on a breach of contract but on a tort as
provided for in Art. 1902 of the Civil Code.
We are a little perplexed as to this new
theory of the appellant. First, he insists that
the articles of the Code of Commerce should
be applied: that he invokes the provisions of
aid Code governing the obligations of a
common carrier to make prompt delivery of
goods given to it under a contract of
transportation. Later, as already said, he says
that he was never a party to the contract of
transportation and was a complete stranger
to it, and that he is now suing on a tort or a
violation of his rights as a stranger (culpa
aquiliana) If he does not invoke the contract
of carriage entered into with the defendant
company, then he would hardly have any leg
to stand on. His right to prompt delivery of
the can of film at the Phil. Air Port stems and
is derived from the contract of carriage under
which contract, the PAL undertook to carry
the can of film safely and to deliver it to him
promptly. Take away or ignore that contract
and the obligation to carry and to deliver and
right to prompt delivery disappear. Common
carriers are not obligated by law to carry and
to deliver merchandise, and persons are not
vested with the right to prompt delivery,
unless such common carriers previously
assume the obligation. Said rights and
obligations are created by a specific contract
entered into by the parties. In the present
case, the findings of the trial court which as
already stated, are accepted by the parties
and which we must accept are to the effect
that the LVN Pictures Inc. and Jose Mendoza
on one side, and the defendant company on
the other, entered into a contract of
transportation (p. 29, Rec. on Appeal). One
interpretation of said finding is that the LVN
Pictures Inc. through previous agreement
with Mendoza acted as the latter's agent.

When he negotiated with the LVN Pictures


Inc. to rent the film "Himala ng Birhen" and
show it during the Naga town fiesta, he most
probably authorized and enjoined the Picture
Company to ship the film for him on the PAL
on September 17th. Another interpretation is
that even if the LVN Pictures Inc. as consignor
of its own initiative, and acting independently
of Mendoza for the time being, made
Mendoza as consignee, a stranger to the
contract if that is possible, nevertheless when
he, Mendoza appeared at the Phil Air Port
armed with the copy of the Air Way Bill (Exh.
1) demanding the delivery of the shipment to
him, he thereby made himself a party to the
contract of transportation. The very citation
made by appellant in his memorandum
supports this view. Speaking of the possibility
of a conflict between the order of the shipper
on the one hand and the order of the
consignee on the other, as when the shipper
orders the shipping company to return or
retain the goods shipped while the consignee
demands their delivery, Malagarriga in his
book Codigo de Comercio Comentado, Vol. 1,
p. 400, citing a decision of the Argentina
Court of Appeals on commercial matters,
cited by Tolentino in Vol. II of his book
entitled "Commentaries and Jurisprudence on
the Commercial Laws of the Philippines" p.
209, says that the right of the shipper to
countermand the shipment terminates when
the consignee or legitimate holder of the bill
of lading appears with such big of lading
before the carrier and makes himself a party
to the contract. Prior to that time he is a
stranger to the contract.
Still another view of this phase of the case is
that contemplated in Art. 1257, paragraph 2,
of the old Civil Code (now Art, 1311, second
paragraph) which reads thus:
Should the contract contain
any stipulation in favor of a
third person, he may
demand
its
fulfillment
provided he has given
notice of his acceptance to
the person bound before
the stipulation has been
revoked.
Here, the contract of carriage between the
LVN Pictures Inc. and the defendant carrier
contains the stipulations of delivery to
Mendoza as consignee. His demand for the
delivery of the can of film to him at the Phil
Air Port may be regarded as a notice of his
acceptance of the stipulation of the delivery
in his favor contained in the contract of

carriage and delivery. In this case he also


made himself a party to the contract, or at
least has come to court to enforce it. His
cause of action must necessarily be founded
on its breach.
Since the liability of a common carrier for loss of or damage to
goods transported by it under a contract of carriage is
governed by the laws of the country of destination 12 and the
goods in question were shipped from the United States to the
Philippines, the liability of petitioner Sea-Land to the
respondent consignee is governed primarily by the Civil Code,
and as ordained by the said Code, suppletorily, in all matters
not determined thereby, by the Code of Commerce and special
laws. 13 One of these suppletory special laws is the Carriage of
Goods by Sea Act, U.S. Public Act No. 521 which was made
applicable to all contracts for the carriage of goods by sea to
and from Philippine ports in foreign trade by Commonwealth
Act No. 65, approved on October 22, 1936. Sec. 4(5) of said Act
in part reads:
(5) 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 not be conclusive on the carrier.
By agreement between the carrier, master, or
agent of the carrier, and the shipper another
maximum amount than that mentioned in
this paragraph may be fixed: Provided, That
such maximum shall not be less than the
figure above named. In no event shall the
carrier be liable for more than the amount of
damage actually sustained.
xxx xxx xxx
Clause 22, first paragraph, of the long form bill of lading
customarily issued by Sea-Land to its shipping clients 14is a
virtual copy of the first paragraph of the foregoing provision. It
says:
22. VALUATION. In the event of any loss,
damage or delay to or in connection with
goods exceeding in actual value $500 per
package, lawful money of the United States,
or in case of goods not shipped in packages,
per customary freight unit, the value of the
goods shall be deemed to be $500 per
package or per customary freight unit, as the
case may be, and the carrier's liability, if any,
shall be determined on the basis of a value of
$500 per package or customary freight unit,
unless the nature and a higher value shall be

declared by the shipper in writing before


shipment and inserted in this Bill of Lading.
And in its second paragraph, the bill states:
If a value higher than $500 shag have been
declared in writing by the shipper upon
delivery to the carrier and inserted in this bill
of lading and extra freight paid, if required
and in such case if the actual value of the
goods per package or per customary freight
unit shall exceed such declared value, the
value shall nevertheless be deemed to be
declared value and the carrier's liability, if
any, shall not exceed the declared value and
any partial loss or damage shall be adjusted
pro rata on the basis of such declared value.
Since, as already pointed out, Article 1766 of the Civil Code
expressly subjects the rights and obligations of common
carriers to the provisions of the Code of Commerce and of
special laws in matters not regulated by said (Civil) Code, the
Court fails to fathom the reason or justification for the
Appellate Court's pronouncement in its appealed Decision that
the Carriage of Goods by Sea Act " ... has no application
whatsoever in this case. 15 Not only is there nothing in the Civil
Code which absolutely prohibits agreements between shipper
and carrier limiting the latter's liability for loss of or damage to
cargo shipped under contracts of carriage; it is also quite clear
that said Code in fact has agreements of such character in
contemplation in providing, in its Articles 1749 and 1750, that:
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.
Nothing contained in section 4(5) of the Carriage of Goods by
Sea Act already quoted is repugnant to or inconsistent with any
of the just-cited provisions of the Civil Code. Said section
merely gives more flesh and greater specificity to the rather
general terms of Article 1749 (without doing any violence to
the plain intent thereof) and of Article 1750, to give effect to
just agreements limiting carriers' liability for loss or damage
which are freely and fairly entered into.
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 justice and
fairness of that law itself, and this the private respondent does
not pretend to do. But over and above that consideration, the

lust and reasonable character of such stipulation is implicit in it


giving the shipper or owner the option of avoiding acrrual 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. And since the shipper here has not been
heard to complaint of having been "rushed," imposed upon or
deceived in any significant way into agreeing to ship the cargo
under a bill of lading carrying such a stipulation in fact, it
does not appear that said party has been heard from at all
insofar as this dispute is concerned there is simply no ground
for assuming that its agreement thereto was not as the law
would require, freely and fairly sought and given.
The private respondent had no direct part or intervention in
the execution of the contract of carriage between the shipper
and the carrier as set forth in the bill of lading in question. As
pointed out in Mendoza vs. PAL, supra, the right of a party in
the same situation as respondent here, to recover for loss of a
shipment consigned to him under a bill of lading drawn up only
by and between the shipper and the carrier, springs from either
a relation of agency that may exist between him and the
shipper or consignor, or his status as a stranger in whose favor
some stipulation is made in said contract, and who becomes a
party thereto when he demands fulfillment of that stipulation,
in this case the delivery of the goods or cargo shipped. In
neither capacity can he assert personally, in bar to any
provision of the bill of lading, the alleged circumstance that fair
and free agreement to such provision was vitiated by its being
in such fine print as to be hardly readable. Parenthetically, it
may be observed that in one comparatively recent
case 16 where this Court found that a similar package limitation
clause was "(printed in the smallest type on the back of the bill
of lading, it nonetheless ruled that the consignee was bound
thereby on the strength of authority holding that such
provisions on liability limitation are as much a part of a bill of
lading as though physically in it and as though placed therein by
agreement of the parties.
There can, therefore, be no doubt or equivocation about the
validity and enforceability of freely-agreed-upon stipulations in
a contract of carriage or bill of lading limiting the liability of the
carrier to an agreed valuation unless the shipper declares a
higher value and inserts it into said contract or bill. This pro
position, moreover, rests upon an almost uniform weight of
authority. 17
The issue of alleged deviation is also settled by Clause 13 of the
bill of lading which expressly authorizes trans-shipment of the
goods at any point in the voyage in these terms:
13. THROUGH CARGO AND TRANSSHIPMENT.
The carrier or master, in the exercise of its or
his discretion and although transshipment or
forwarding of the goods may not have been
contemplated or provided for herein, may at
port of discharge or any other place
whatsoever transship or forward the goods or
any part thereof by any means at the risk and
expense of the goods and at any time,
whether before or after loading on the ship
named herein and by any route, whether
within or outside the scope of the voyage or

beyond the port of discharge or destination


of the goods and without notice to the
shipper or consignee. The carrier or master
may delay such transshipping or forwarding
for any reason, including but not limited to
awaiting a vessel or other means of
transportation whether by the carrier or
others.
Said provision obviates the necessity to offer any other
justification for offloading the shipment in question in Manila
for transshipment to Cebu City, the port of destination
stipulated in the bill of lading. Nonetheless, the Court takes
note of Sea-Land's explanation that it only directly serves the
Port of Manila from abroad in the usual course of voyage of its
carriers, hence its maintenance of arrangements with a local
forwarder. Aboitiz and Company, for delivery of its imported
cargo to the agreed final point of destination within the
Philippines, such arrangements not being prohibited, but in fact
recognized, by law. 18
Furthermore, this Court has also ruled 19 that the Carriage of
Goods by Sea Act is applicable up to the final port of
destination and that the fact that transshipment was made on
an interisland vessel did not remove the contract of carriage of
goods from the operation of said Act.
Private respondent also contends that the aforecited Clauses
22 and 13 of the bill of lading relied upon by petitioner Sea
Land form no part of the short-form bill of lading attached to
his complaint before the Trial Court and appear only in the long
form of that document which, he claims. SeaLand offered (as
its Exhibit 2) as an unused blank form with no entries or
signatures therein. He, however, admitted in the Trial Court
that several times in the past shipments had been delivered to
20
him through Sea-Land, from which the assumption may fairly
follow that by the time of the consignment now in question, he
was already reasonably apprised of the usual terms covering
contracts of carriage with said petitioner.
At any rate, as observed earlier, it has already been held that
the provisions of the Carriage of Goods by Sea Act on package
limitation [sec 4(5) of the Act hereinabove referred to] are as
much a part of a bill of lading as though actually placed therein
21
by agreement of the parties.
Private respondent, by making claim for loss on the basis of the
bill of lading, to all intents and purposes accepted said bill.
Having done so, he
... becomes bound by all stipulations
contained therein whether on the front or
the back thereof. Respondent cannot elude
its provisions simply because they prejudice
him and take advantage of those that are
beneficial. Secondly, the fact that respondent
shipped his goods on board the ship of
petitioner and paid the corresponding freight
thereon shows that he impliedly accepted the
bill of lading which was issued in connection
with the shipment in question, and so it may
be said that the same is finding upon him as if
it had been actually signed by him or by any
22
other person in his behalf. ... .

There is one final consideration. The private respondent


23
admits that as early as on April 22, 1981, Sea-Land had
offered to settle his claim for US$4,000.00, the limit of said
carrier's liability for loss of the shipment under the bill of
lading. This Court having reached the conclusion that said sum
is all that is justly due said respondent, it does not appear just
or equitable that Sea-Land, which offered that amount in good
faith as early as six years ago, should, by being made to pay at
the current conversion rate of the dollar to the peso, bear for
its own account all of the increase in said rate since the time of
the offer of settlement. The decision of the Regional Trial Court
awarding the private respondent P186,048.00 as the peso
value of the lost shipment is clearly based on a conversion rate
of P8.00 to US$1.00, said respondent having claimed a dollar
24
value of $23,256.00 for said shipment. All circumstances
considered, it is just and fair that Sea-Land's dollar obligation
be convertible at the same rate.
WHEREFORE, the Decision of the Intermediate Appellate Court
complained of is reversed and set aside. The stipulation in the
questioned bill of lading limiting Sea-Land's liability for loss of
or damage to the shipment covered by said bill to US$500.00
per package is held valid and binding on private respondent.
There being no question of the fact that said shipment
consisted of eight (8) cartons or packages, for the loss of which
Sea-Land is therefore liable in the aggregate amount of
US$4,000.00, it is the judgment of the Court that said
petitioner discharge that obligation by paying private
respondent the sum of P32,000.00, the equivalent in Philippine
currency of US$4,000.00 at the conversion rate of P8.00 to
$1.00. Costs against private respondent.
SO ORDERED.
Teehankee, C.J., Cruz, Paras and Gancayco, JJ., concur.

G.R. No. 88092 April 25, 1990


CITADEL
LINES,
INC., petitioner,
vs.
COURT OF APPEALS * and MANILA WINE MERCHANTS,
INC., respondents.
Del Rosario & Del Rosario Law Offices for petitioner.
Limqueco and Macaraeg Law Office for private respondent.
REGALADO, J.:
Through this petition, we are asked to review the decision of
the Court of Appeals dated December 20, 1988, in CA-G.R. No.
1
CV-10070, which affirmed the August 30, 1985 decision of the
Regional Trial Court of Manila, Branch 27, in Civil Case No.
126415, entitled Manila Wine Merchants, Inc. vs. Citadel
Lines, Inc. and E. Razon, Inc., with a modification by deleting
the award of attorney's fees and costs of suit.
The following recital of the factual background of this case is
culled from the findings in the decision of the courta quo and
adopted by respondent court based on the evidence of record.
Petitioner Citadel Lines, Inc. (hereafter referred to as the
CARRIER) is the general agent of the vessel "Cardigan Bay/Strait
Enterprise," while respondent Manila Wine Merchants, Inc.

(hereafter, the CONSIGNEE) is the importer of the subject


shipment of Dunhill cigarettes from England.
On or about March 17, 1979, the vessel "Cardigan Bay/Strait
Enterprise" loaded on board at Southampton, England, for
carriage to Manila, 180 Filbrite cartons of mixed British
manufactured cigarettes called "Dunhill International Filter"
and "Dunhill International Menthol," as evidenced by Bill of
2
3
Lading No. 70621374 and Bill of Lading No. 70608680 of the
Ben Line Containers Ltd. The shipment arrived at the Port of
Manila Pier 13, on April 18, 1979 in container van No. BENU
204850-9. The said container was received by E. Razon, Inc.
(later known as Metro Port Service, Inc. and referred to herein
as the ARRASTRE) under Cargo Receipt No. 71923 dated April
4
18, 1979.
On April 30, 1979, the container van, which contained two
shipments was stripped. One shipment was delivered and the
other shipment consisting of the imported British
manufactured cigarettes was palletized. Due to lack of space at
the Special Cargo Coral, the aforesaid cigarettes were placed in
two containers with two pallets in container No. BENU 2048509, the original container, and four pallets in container No. BENU
201009-9, with both containers duly padlocked and sealed by
the representative of the CARRIER.
In the morning of May 1, 1979, the CARRIER'S headchecker
discovered that container van No. BENU 201009-9 had a
different padlock and the seal was tampered with. The matter
was reported to Jose G. Sibucao, Pier Superintendent, Pier 13,
and upon verification, it was found that 90 cases of imported
British manufactured cigarettes were missing. This was
confirmed in the report of said Superintendent Sibucao to
Ricardo Cosme, Assistant Operations Manager, dated May 1,
5
1979 and the Official Report/Notice of Claim of Citadel Lines,
6
Inc. to E. Razon, Inc. dated May 8, 1979. Per investigation
conducted by the ARRASTRE, it was revealed that the cargo in
question was not formally turned over to it by the CARRIER but
was kept inside container van No. BENU 201009-9 which was
padlocked and sealed by the representatives of the CARRIER
without any participation of the ARRASTRE.
When the CONSIGNEE learned that 90 cases were missing, it
7
filed a formal claim dated May 21, 1979, with the CARRIER,
demanding the payment of P315,000.00 representing the
market value of the missing cargoes. The CARRIER, in its reply
8
letter dated May 23, 1979, admitted the loss but alleged that
the same occurred at Pier 13, an area absolutely under the
control of the ARRASTRE. In view thereof, the CONSIGNEE filed
9
a formal claim, dated June 4, 1979, with the ARRASTRE,
demanding payment of the value of the goods but said claim
was denied.
After trial, the lower court rendered a decision on August 30,
1985, exonerating the ARRASTRE of any liability on the ground
that the subject container van was not formally turned over to
its custody, and adjudging the CARRIER liable for the principal
amount of P312,480.00 representing the market value of the
lost shipment, and the sum of P30,000.00 as and for attorney's
fees and the costs of suit.
As earlier stated, the court of Appeals affirmed the decision of
the court a quo but deleted the award of attorney's fees and
costs of suit.

The two main issues for resolution are:


1. Whether the loss occurred while the cargo in question was in
the custody of E. Razon, Inc. or of Citadel Lines, Inc; and
2. Whether the stipulation limiting the liability of the carrier
contained in the bill of lading is binding on the consignee.
The first issue is factual in nature. The Court of Appeals
declared in no uncertain terms that, on the basis of the
evidence presented, the subject cargo which was placed in a
container van, padlocked and sealed by the representative of
the CARRIER was still in its possession and control when the
loss occurred, there having been no formal turnover of the
cargo to the ARRASTRE. Besides, there is the categorical
admission made by two witnesses, namely, Atty. Lope M.
Velasco and Ruben Ignacio, Claims Manager and Head Checker,
10
respectively, of the CARRIER, that for lack of space the
containers were not turned over to and as the responsibility of
E. Razon Inc. The CARRIER is now estopped from claiming
otherwise.
Common carriers, from the nature of their business and for
reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods and for the safety of
the passengers transported by them, according to all the
11
circumstances of each case. If the goods are lost, destroyed
or deteriorated, common carriers are presumed to have been
at fault or to have acted negligently, unless they prove that
they observed extra ordinary diligence as required in Article
12
1733 of the Civil Code. The duty of the consignee is to prove
merely that the goods were lost. Thereafter, the burden is
shifted to the carrier to prove that it has exercised the
extraordinary diligence required by law. And, its extraordinary
responsibility lasts from the time the goods are unconditionally
placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or
constructively, by the carrier to the consignee or to the person
13
who has the right to receive them.
Considering, therefore, that the subject shipment was lost
while it was still in the custody of herein petitioner CARRIER,
and considering further that it failed to prove that the loss was
occasioned by an excepted cause, the inescapable conclusion is
that the CARRIER was negligent and should be held liable
therefor.
The cases cited by petitioner in support of its allegations to the
contrary do not find proper application in the case at bar
simply because those cases involve a situation wherein the
shipment was turned over to the custody and possession of the
arrastre operator.
We, however, find the award of damages in the amount of
P312,800.00 for the value of the goods lost, based on the
alleged market value thereof, to be erroneous. It is clearly and
expressly provided under Clause 6 of the aforementioned bills
of lading issued by the CARRIER that its liability is limited to
$2.00 per kilo. Basic is the rule, long since enshrined as a
statutory provision, that a stipulation limiting the liability of the
carrier to the value of the goods appearing in the bill of lading,
unless the shipper or owner declares a greater value, is
14
binding. Further, 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
15
upon.
The CONSIGNEE itself admits in its memorandum that the value
of the goods shipped does not appear in the bills of
16
lading. Hence, the stipulation on the carrier's limited liability
applies. There is no question that the stipulation is just and
reasonable under the circumstances and have been fairly and
freely agreed upon. In Sea-land Service, Inc.vs. Intermediate
17
Appellate Court, et al. we there explained what is a just and
reasonable, and a fair and free, stipulation, in this wise:
. . . That said stipulation is just and reasonable
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
justice and fairness of that law itself, and this
the private respondent does not pretend to
do. 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. And since the shipper here has not
been heard to complain of having been
"rushed," imposed upon or deceived in any
significant way into agreeing to ship the cargo
under a bill of lading carrying such a
stipulation in fact, it does not appear, that
said party has been heard from at all insofar
as this dispute is concerned there is simply
no ground for assuming that its agreement
thereto was not as the law would require,
freely and fairly sought and well.
The bill of lading shows that 120 cartons weigh 2,978 kilos or
24.82 kilos per carton. Since 90 cartons were lost and the
weight of said cartons is 2,233.80 kilos, at $2.00 per kilo the
CARRIER's liability amounts to only US$4,467.60.
WHEREFORE, the judgment of respondent court is hereby
MODIFIED and petitioner Citadel Lines, Inc. is ordered to pay
private respondent Manila Wine Merchants, Inc. the sum of
US$4,465.60. or its equivalent in Philippine currency at the
exchange rate obtaining at the time of payment thereof. In all
other respects, said judgment of respondent Court is
AFFIRMED.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Sarmiento, JJ., concur.

EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF


APPEALS
and
HERNANDEZ
TRADING
CO.
INC., respondents.
DECISION
MARTINEZ, J.:

Petitioner Everett Steamship Corporation, through this


[1]
petition for review, seeks the reversal of the decision of the
Court of Appeals, dated June 14, 1995, in CA-G.R. No. 428093,
which affirmed the decision of the Regional Trial Court of
Kalookan City, Branch 126, in Civil Case No. C-15532, finding
petitioner liable to private respondent Hernandez Trading Co.,
Inc. for the value of the lost cargo.
Private respondent imported three crates of bus spare
parts marked as MARCO C/No. 12, MARCO C/No. 13
and MARCO C/No. 14, from its supplier, Maruman Trading
Company, Ltd. (Maruman Trading), a foreign corporation based
in Inazawa, Aichi, Japan. The crates were shipped from
Nagoya, Japan to Manila on board ADELFAEVERETTE, a
vessel owned by petitioners principal, Everett Orient
Lines. The said crates were covered by Bill of Lading No.
NGO53MN.
Upon arrival at the port of Manila, it was discovered that
the crate marked MARCO C/No. 14 was missing. This was
confirmed and admitted by petitioner in its letter of January 13,
1992 addressed to private respondent, which thereafter made
a formal claim upon petitioner for the value of the lost cargo
amounting to One Million Five Hundred Fifty Two Thousand
Five Hundred (Y1,552,500.00) Yen, the amount shown in an
Invoice No. MTM-941, dated November 14, 1991. However,
petitioner offered to pay only One Hundred Thousand
(Y100,000.00) Yen, the maximum amount stipulated under
Clause 18 of the covering bill of lading which limits the liability
of petitioner.
Private respondent rejected the offer and thereafter
instituted a suit for collection docketed as Civil Case No. C15532, against petitioner before the Regional Trial Court of
Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that
they have no testimonial evidence to offer and agreed instead
to file their respective memoranda.
[2]
On July 16, 1993, the trial court rendered judgment in
favor of private respondent, ordering petitioner to pay: (a)
Y1,552,500.00; (b) Y20,000.00 or its peso equivalent
representing the actual value of the lost cargo and the material
and packaging cost; (c) 10% of the total amount as an award for
and as contingent attorneys fees; and (d) to pay the cost of the
suit. The trial court ruled:
Considering defendants categorical admission of
loss and its failure to overcome the presumption of
negligence and fault, the Court conclusively finds
defendant liable to the plaintiff. The next point of
inquiry the Court wants to resolve is the extent of the
liability of the defendant. As stated earlier, plaintiff
contends that defendant should be held liable for the
whole value for the loss of the goods in the amount
of Y1,552,500.00 because the terms appearing at the
back of the bill of lading was so written in fine prints
and that the same was not signed by plaintiff or
shipper thus, they are not bound by the clause stated
in paragraph 18 of the bill of lading. On the other
hand, defendant merely admitted that it lost the
shipment but shall be liable only up to the amount of
Y100,000.00.

The Court subscribes to the provisions of Article


1750 of the New Civil Code 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.
It is required, however, that the contract must be
reasonable and just under the circumstances and has
been fairly and freely agreed upon. The
requirements provided in Art. 1750 of the New Civil
Code must be complied with before a common
carrier can claim a limitation of its pecuniary liability
in case of loss, destruction or deterioration of the
goods it has undertaken to transport.
In the case at bar, the Court is of the view that the
requirements of said article have not been met. The
fact that those conditions are printed at the back of
the bill of lading in letters so small that they are hard
to read would not warrant the presumption that the
plaintiff or its supplier was aware of these conditions
such that he had fairly and freely agreed to these
conditions. It can not be said that the plaintiff had
actually entered into a contract with the defendant,
embodying the conditions as printed at the back of
the bill of lading that was issued by the defendant to
plaintiff.
On appeal, the Court of Appeals deleted the award of
attorneys fees but affirmed the trial courts findings with the
additional observation that private respondent can not be
bound by the terms and conditions of the bill of lading because
it was not privy to the contract of carriage. It said:
As to the amount of liability, no evidence appears
on record to show that the appellee (Hernandez
Trading Co.) consented to the terms of the Bill of
Lading. The shipper named in the Bill of Lading is
Maruman Trading Co., Ltd. whom the appellant
(Everett Steamship Corp.) contracted with for the
transportation of the lost goods.
Even assuming arguendo that the shipper Maruman
Trading Co., Ltd. accepted the terms of the bill of
lading when it delivered the cargo to the appellant,
still it does not necessarily follow that appellee
Hernandez Trading Company as consignee is bound
thereby considering that the latter was never privy to
the shipping contract.
xxx xxx xxx
Never having entered into a contract with the
appellant, appellee should therefore not be bound by
any of the terms and conditions in the bill of lading.
Hence, it follows that the appellee may recover the
full value of the shipment lost, the basis of which is
not the breach of contract as appellee was never a
privy to the any contract with the appellant, but is
based on Article 1735 of the New Civil Code, there
being no evidence to prove satisfactorily that the

appellant has overcome the presumption of


negligence provided for in the law.
Petitioner now comes to us arguing that the Court of
Appeals erred (1) in ruling that the consent of the consignee to
the terms and conditions of the bill of lading is necessary to
make such stipulations binding upon it; (2) in holding that the
carriers limited package liability as stipulated in the bill of
lading does not apply in the instant case; and (3) in allowing
private respondent to fully recover the full alleged value of its
lost cargo.
We shall first resolve the validity of the limited liability
clause in the bill of lading.
A stipulation in the bill of lading limiting the common
carriers 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 which provide:
ART. 1749. A stipulation that the common carriers
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 freely and fairly agreed upon.
Such limited-liability clause has also been consistently
[3]
upheld by this Court in a number of cases. Thus, in Sea Land
[4]
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, and this the private respondent does
not pretend to do. 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..
Pursuant to the afore-quoted provisions of law, it is
required that the stipulation limiting the common carriers
liability for loss must be reasonable and just under the
circumstances, and has been freely and fairly agreed upon.
The bill of lading subject of the present controversy
specifically provides, among others:
18. All claims for which the carrier may be liable
shall be adjusted and settled on the basis of the
shippers net invoice cost plus freight and insurance
premiums, if paid, and in no event shall the carrier be
liable for any loss of possible profits or any
consequential loss.

The carrier shall not be liable for any loss of or any


damage to or in any connection with, goods in an
amount exceeding One Hundred Thousand Yen in
Japanese Currency (Y100,000.00) or its equivalent in
any other currency per package or customary freight
unit (whichever is least) unless the value of the goods
higher than this amount is declared in writing by the
shipper before receipt of the goods by the carrier
and inserted in the Bill of Lading and extra freight is
paid as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and
just. In the bill of lading, the carrier made it clear that its
liability would only be up to One Hundred Thousand
(Y100,000.00) Yen. However, the shipper, Maruman
Trading, had the option to declare a higher valuation if the
value of its cargo was higher than the limited liability of the
carrier. Considering that the shipper did not declare a higher
valuation, it had itself to blame for not complying with the
stipulations.
The trial courts ratiocination that private respondent
could not have fairly and freely agreed to the limited liability
clause in the bill of lading because the said conditions were
printed in small letters does not make the bill of lading invalid.
[5]
We ruled in PAL, Inc. vs. Court of Appeals that the
jurisprudence on the matter reveals the consistent holding of
the court that contracts of adhesion are not invalid per se and
that it has on numerous occasions upheld the binding effect
thereof. Also, in Philippine American General Insurance Co.,
[6]
Inc. vs. Sweet Lines , Inc. this Court , speaking through the
learned Justice Florenz D. Regalado, held:
x x x Ong Yiu vs. Court of Appeals, et.al., instructs us
that contracts of adhesion wherein one party
imposes a ready-made form of contract on the other
x x x are contracts 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. In the
present case, not even an allegation of ignorance of a
party excuses non-compliance with the contractual
stipulations since the responsibility for ensuring full
comprehension of the provisions of a contract of
carriage devolves not on the carrier but on the
owner, shipper, or consignee as the case may
be. (Emphasis supplied)
It was further explained in Ong Yiu vs Court of
[7]
Appeals that stipulations in contracts of adhesion are valid
and binding.
While it may be true that petitioner had not signed
the plane ticket x x, he is nevertheless bound by the
provisions thereof. Such provisions have been held
to be a part of the contract of carriage, and valid and
binding upon the passenger regardless of the latters
lack of knowledge or assent to the regulation. It is
what is known as a contract of adhesion, in regards
which it has been said that contracts of adhesion
wherein one party imposes a ready-made form of
contract on the other, as the plane ticket in the case
at bar, are contracts 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. x x x ,


a contract limiting liability upon an agreed valuation
does not offend against the policy of the law
forbidding one from contracting against his own
negligence. (Emphasis supplied)
Greater vigilance, however, is required of the courts when
dealing with contracts of adhesion in that the said contracts
must be carefully scrutinized in order to shield the unwary (or
weaker party) from deceptive schemes contained in ready[8]
made covenants, such as the bill of lading in question. The
stringent requirement which the courts are enjoined to observe
is in recognition of Article 24 of the Civil Code which mandates
that (i)n all contractual, property or other relations, when one
of the parties is at a disadvantage on account of his moral
dependence, ignorance, indigence, mental weakness, tender
age or other handicap, the courts must be vigilant for his
protection.
The shipper, Maruman Trading, we assume, has been
extensively engaged in the trading business. It can not be said
to be ignorant of the business transactions it entered into
involving the shipment of its goods to its customers. The
shipper could not have known, or should know the stipulations
in the bill of lading and there it should have declared a higher
valuation of the goods shipped. Moreover, Maruman Trading
has not been heard to complain that it has been deceived or
rushed into agreeing to ship the cargo in petitioners vessel. In
fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private
respondent, as consignee, who is not a signatory to the bill of
lading is bound by the stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate
Appellate Court (supra), we held that even if the consignee
was not a signatory to the contract of carriage between the
shipper and the carrier, the consignee can still be bound by the
contract. Speaking through Mr. Chief Justice Narvasa,
we ruled:
To begin with, there is no question of the right, in
principle, of a consignee in a bill of lading to recover
from the carrier or shipper for loss of, or damage to
goods being transported under said bill, although
that document may have been- as in practice it
oftentimes is-drawn up only by the consignor and
the carrier without the intervention of the
consignee. x x x.
x x x the right of a party in the same situation as
respondent here, to recover for loss of a shipment
consigned to him under a bill of lading drawn up
only by and between the shipper and the carrier,
springs from either a relation of agency that may
exist between him and the shipper or consignor, or
his status as stranger in whose favor some
stipulation is made in said contract, and who
becomes a party thereto when he demands
fulfillment of that stipulation, in this case the
delivery of the goods or cargo shipped. In neither
capacity can he assert personally, in bar to any
provision of the bill of lading, the alleged
circumstance that fair and free agreement to such

provision was vitiated by its being in such fine print


as to be hardly readable. Parenthetically, it may be
observed that in one comparatively recent case
(Phoenix Assurance Company vs. Macondray & Co.,
Inc., 64 SCRA 15) where this Court found that a
similar package limitation clause was printed in the
smallest type on the back of the bill of lading, it
nonetheless ruled that the consignee was bound
thereby on the strength of authority holding that
such provisions on liability limitation are as much a
part of a bill of lading as though physically in it and
as though placed therein by agreement of the
parties.
There can, therefore, be no doubt or equivocation
about the validity and enforceability of freely-agreedupon stipulations in a contract of carriage or bill of
lading limiting the liability of the carrier to an agreed
valuation unless the shipper declares a higher value
and inserts it into said contract or bill. This
proposition, moreover, rests upon an almost uniform
weight of authority. (Underscoring supplied)
When
private
respondent formally
claimed
reimbursement for the missing goods from petitioner and
subsequently filed a case against the latter based on the very
same bill of lading, it (private respondent) accepted the
provisions of the contract and thereby made itself a party
[9]
thereto, or at least has come to court to enforce it. Thus,
private respondent cannot now reject or disregard the carriers
limited liability stipulation in the bill of lading. In other words,
private respondent is bound by the whole stipulations in the
bill of lading and must respect the same.
Private respondent, however, insists that the carrier
should be liable for the full value of the lost cargo in the
amount of Y1,552,500.00, considering that the shipper,
Maruman Trading, had "fully declared the shipment x x x, the
contents of each crate, the dimensions, weight and value of the
[10]
contents," as shown in the commercial Invoice No. MTM941.
This claim was denied by petitioner, contending that it did
not know of the contents, quantity and value of "the shipment
which consisted of three pre-packed crates described in Bill of
[11]
Lading No. NGO-53MN merely as 3 CASES SPARE PARTS.
The bill of lading in question confirms petitioners
contention. To defeat the carriers limited liability, the
aforecited Clause 18 of the bill of lading requires that the
shipper should have declared in writing a higher valuation of
its goods before receipt thereof by the carrier and insert the
said declaration in the bill of lading, with the extra freight
paid. These requirements in the bill of lading were never
complied with by the shipper, hence, the liability of the carrier
under the limited liability clause stands. The commercial
Invoice No. MTM-941 does not in itself sufficiently and
convincingly show that petitioner has knowledge of the value
of the cargo as contended by private respondent. No other
evidence was proffered by private respondent to support is
contention. Thus, we are convinced that petitioner should be
liable for the full value of the lost cargo.

In fine, the liability of petitioner for the loss of the cargo is


limited to One Hundred Thousand (Y100,000.00) Yen, pursuant
to Clause 18 of the bill of lading.
WHEREFORE, the decision of the Court of Appeals dated
June 14, 1995 in C.A.-G.R. CV No. 42803 is hereby REVERSED
and SET ASIDE.
SO ORDERED.

BRITISH AIRWAYS, petitioner, vs. COURT OF APPEALS, GOP


MAHTANI, and PHILIPPINE AIRLINES, respondents.
DECISION
ROMERO, J.:
In this appeal by certiorari, petitioner British Airways (BA)
seeks to set aside the decision of respondent Court of
[1]
Appeals promulgated on September 7, 1995, which affirmed
the award of damages and attorneys fees made by the
Regional Trial Court of Cebu, 7th Judicial Region, Branch 17, in
favor of private respondent GOP Mahtani as well as the
dismissal of its third-party complaint against Philippine Airlines
[2]
(PAL).
The material and relevant facts are as follows:
On April 16, 1989, Mahtani decided to visit his relatives in
Bombay, India. In anticipation of his visit, he obtained the
services of a certain Mr. Gumar to prepare his travel plans. The
latter, in turn, purchased a ticket from BA where the following
[3]
itinerary was indicated:
CARRIER
FLIGHT
DATE
TIME
STATUS
MANILA
MNL
PR
310Y
16
APR
1730
OK
HONGKONG
HKG
BA 20 M
16
APR
2100
OK
BOMBAY
BOM
BA 19 M
23
APR
0840
OK
MANILA
MNL"
Since BA had no direct flights from Manila to Bombay,
Mahtani had to take a flight to Hongkong via PAL, and upon
arrival in Hongkong he had to take a connecting flight to
Bombay on board BA.
Prior to his departure, Mahtani checked in at the PAL
counter in Manila his two pieces of luggage containing his
clothings and personal effects, confident that upon reaching
Hongkong, the same would be transferred to the BA flight
bound for Bombay.
Unfortunately, when Mahtani arrived in Bombay he
discovered that his luggage was missing and that upon inquiry
from the BA representatives, he was told that the same might
have been diverted to London. After patiently waiting for his
luggage for one week, BA finally advised him to file a claim by
[4]
accomplishing the Property Irregularity Report.
Back in the Philippines, specifically on June 11, 1990,
Mahtani filed his complaint for damages and attorneys
[5]
fees against BA and Mr. Gumar before the trial court,
docketed as Civil Case No. CEB-9076.
On September 4, 1990, BA filed its answer with counter
[6]
claim to the complaint raising, as special and affirmative

defenses, that Mahtani did not have a cause of action against


it. Likewise, on November 9, 1990, BA filed a third-party
[7]
complaint against PAL alleging that the reason for the nontransfer of the luggage was due to the latters late arrival in
Hongkong, thus leaving hardly any time for the proper transfer
of Mahtanis luggage to the BA aircraft bound for Bombay.
On February 25, 1991, PAL filed its answer to the thirdparty complaint, wherein it disclaimed any liability, arguing that
there was, in fact, adequate time to transfer the luggage to BA
facilities in Hongkong. Furthermore, the transfer of the luggage
to Hongkong authorities should be considered as transfer to
[8]
BA.
After appropriate proceedings and trial, on March 4,
1993, the trial court rendered its decision in favor of
[9]
Mahtani, the dispositive portion of which reads as follows:
WHEREFORE, premises considered, judgment is
rendered for the plaintiff and against the defendant
for which defendant is ordered to pay plaintiff the
sum of Seven Thousand (P7,000.00) Pesos for the
value of the two (2) suit cases; Four Hundred U.S.
($400.00) Dollars representing the value of the
contents of plaintiffs luggage; Fifty Thousand
(P50,000.00) Pesos for moral and actual damages
and twenty percent (20%) of the total amount
imposed against the defendant for attorneys fees
and costs of this action.
The Third-Party Complaint against third-party
defendant Philippine Airlines is DISMISSED for lack of
cause of action.
SO ORDERED.
Dissatisfied, BA appealed to the Court of Appeals, which
however, affirmed the trial courts findings. Thus:
WHEREFORE, in view of all the foregoing
considerations, finding the Decision appealed from to
be in accordance with law and evidence, the same is
hereby AFFIRMED in toto, with costs against
defendant-appellant.
[10]
SO ORDERED.
BA is now before us seeking the reversal of the Court of
Appeals decision.
In essence, BA assails the award of compensatory
damages and attorneys fees, as well as the dismissal of its
[11]
third-party complaint against PAL.
Regarding the first assigned issue, BA asserts that the
award of compensatory damages in the separate sum
of P7,000.00 for the loss of Mahtanis two pieces of luggage
[12]
was without basis since Mahtani in his complaint stated the
following as the value of his personal belongings:
8. On said travel, plaintiff took with him the
following items and its corresponding value, to wit:
1.
personal belonging - - - - - - - - - - - - - P10,000.00
2.
gifts for his parents and relatives - - - - $5,000.00
Moreover, he failed to declare a higher valuation with
respect to his luggage, a condition provided for in the ticket,
[13]
which reads:

Liability for loss, delay, or damage to baggage is


limited unless a higher value is declared in advance
and additional charges are paid:
1.
For most international travel (including
domestic corporations of international journeys) the
liability limit is approximately U.S. $9.07 per pound
(U.S. $20.00) per kilo for checked baggage and U.S.
$400 per passenger for unchecked baggage.
Before we resolve the issues raised by BA, it is needful to
state that the nature of an airlines contract of carriage
partakes of two types, namely: a contract to deliver a cargo or
merchandise to its destination and a contract to transport
passengers to their destination. A business intended to serve
the travelling public primarily, it is imbued with public interest,
hence, the law governing common carriers imposes an exacting
[14]
standard. Neglect or malfeasance by the carriers employees
[15]
could predictably furnish bases for an action for damages.
In the instant case, it is apparent that the contract of
carriage was between Mahtani and BA. Moreover, it is
indubitable that his luggage never arrived in Bombay on
[16]
time. Therefore, as in a number of cases we have assessed
the airlines culpability in the form of damages for breach of
contract involving misplaced luggage.
In determining the amount of compensatory damages in
this kind of cases, it is vital that the claimant satisfactorily prove
during the trial the existence of the factual basis of the
[17]
damages and its causal connection to defendants acts.
In this regard, the trial court granted the following award
as compensatory damages:
Since plaintiff did not declare the value of the
contents in his luggage and even failed to show
receipts of the alleged gifts for the members of his
family in Bombay, the most that can be expected for
compensation of his lost luggage (2 suit cases) is
Twenty U.S. Dollars ($20.00) per kilo, or a combined
value of Four Hundred ($400.00) U.S. Dollars for
Twenty kilos representing the contents plus Seven
Thousand (P7,000.00) Pesos representing the
purchase price of the two (2) suit cases.
However, as earlier stated, it is the position of BA that
there should have been no separate award for the luggage and
the contents thereof since Mahtani failed to declare a separate
[18]
higher valuation for the luggage, and therefore, its liability is
limited, at most, only to the amount stated in the ticket.
Considering the facts of the case, we cannot assent to
such specious argument.
Admittedly, in a contract of air carriage a declaration by
the passenger of a higher value is needed to recover a greater
[19]
amount. Article 22(1) of the Warsaw Convention, provides as
follows:
x x x
xxx xxx
(2) In the transportation of checked baggage and
goods, the liability of the carrier shall be limited to a
sum of 250 francs per kilogram, unless the consignor
has made, at the time the package was handed over
to the carrier, a special declaration of the value at
delivery and has paid a supplementary sum if the
case so requires. In that case the carrier will be liable

to pay a sum not exceeding the declared sum, unless


he proves that the sum is greater than the actual
value to the consignor at delivery.
American jurisprudence provides that an air carrier is not
liable for the loss of baggage in an amount in excess of the
limits specified in the tariff which was filed with the proper
authorities, such tariff being binding on the passenger
regardless of the passengers lack of knowledge thereof or
[20]
assent thereto. This doctrine is recognized in this
[21]
jurisdiction.
Notwithstanding the foregoing, we have, nevertheless,
ruled against blind reliance on adhesion contracts where the
facts and circumstances justify that they should be
[22]
disregarded.
In addition, we have held that benefits of limited liability
are subject to waiver such as when the air carrier failed to raise
timely objections during the trial when questions and answers
regarding the actual claims and damages sustained by the
[23]
passenger were asked.
Given the foregoing postulates, the inescapable
conclusion is that BA had waived the defense of limited liability
when it allowed Mahtani to testify as to the actual damages he
incurred due to the misplacement of his luggage, without any
objection. In this regard, we quote the pertinent transcript of
[24]
stenographic notes of Mahtanis direct testimony:
Q How much are you going to ask from this court?
A P100,000.00.
Q What else?
A Exemplary damages.
Q How much?
A P100,000.00.
Q What else?
A The things I lost, $5,000.00 for the gifts I lost
and my
personal belongings, P10,000.00.
Q What about the filing of this case?
A The court expenses and attorneys fees is 30%.
Indeed, it is a well-settled doctrine that where the
proponent offers evidence deemed by counsel of the adverse
party to be inadmissible for any reason, the latter has the right
to object. However, such right is a mere privilege which can be
waived. Necessarily, the objection must be made at the
earliest opportunity, lest silence when there is opportunity to
[25]
speak may operate as a waiver of objections. BA has
precisely failed in this regard.
To compound matters for BA, its counsel failed, not only
to interpose a timely objection, but even conducted his own
[26]
cross-examination as well. In the early case of Abrenica v.
[27]
Gonda, we ruled that:
x x x (I)t has been repeatedly laid down as a rule of
evidence that a protest or objection against the
admission of any evidence must be made at the
proper time, and that if not so made it will be
understood to have been waived. The proper time to
make a protest or objection is when, from the
question addressed to the witness, or from the
answer thereto, or from the presentation of proof,

the inadmissibility of evidence is, or may be


inferred.
Needless to say, factual findings of the trial court, as
affirmed by the Court of Appeals, are entitled to great
[28]
respect. Since the actual value of the luggage involved
appreciation of evidence, a task within the competence of the
Court of Appeals, its ruling regarding the amount is assuredly a
[29]
question of fact, thus, a finding not reviewable by this Court.
As to the issue of the dismissal of BAs third-party
complaint against PAL, the Court of Appeals justified its ruling
[30]
in this wise, and we quote:
Lastly, we sustain the trial courts ruling dismissing
appellants third-party complaint against PAL.
The contract of air transportation in this case
pursuant to the ticket issued by appellant to plaintiffappellee was exclusively between the plaintiff
Mahtani and defendant-appellant BA. When plaintiff
boarded the PAL plane from Manila to Hongkong,
PAL was merely acting as a subcontractor or agent of
BA. This is shown by the fact that in the ticket issued
by appellant to plaintiff-appellee, it is specifically
provided on the Conditions of Contract, paragraph
4 thereof that:
4.
x x x carriage to be performed
hereunder by several successive carriers is
regarded as a single operation.
The rule that carriage by plane although performed
by successive carriers is regarded as a single
operation and that the carrier issuing the passengers
ticket is considered the principal party and the other
carrier merely subcontractors or agent, is a settled
issue.
We cannot agree with the dismissal of the thirdcomplaint.
In Firestone Tire and Rubber Company of the
[31]
Philippines v. Tempengko, we expounded on the nature of a
third-party complaint thus:
The third-party complaint is, therefore, a procedural
device whereby a third party who is neither a party
nor privy to the act or deed complained of by the
plaintiff, may be brought into the case with leave of
court, by the defendant, who acts as third-party
plaintiff to enforce against such third-party
defendant a right for contribution, indemnity,
subrogation or any other relief, in respect of the
plaintiffs claim. The third-party complaint is actually
independent of and separate and distinct from the
plaintiffs complaint. Were it not for this provision of
the Rules of Court, it would have to be filed
independently and separately from the original
complaint by the defendant against the thirdparty. But the Rules permit defendant to bring in a
third-party defendant or so to speak, to litigate his
separate cause of action in respect of plaintiffs claim
against a third-party in the original and principal case
with the object of avoiding circuitry of action and
unnecessary proliferation of law suits and of
disposing expeditiously in one litigation the entire

subject matter arising from one particular set of


facts.
Undeniably, for the loss of his luggage, Mahtani is entitled
to damages from BA, in view of their contract of carriage. Yet,
BA adamantly disclaimed its liability and instead imputed it to
PAL which the latter naturally denies. In other words, BA and
PAL are blaming each other for the incident.
In resolving this issue, it is worth observing that the
contract of air transportation was exclusively between Mahtani
and BA, the latter merely endorsing the Manila to Hongkong
leg of the formers journey to PAL, as its subcontractor or
agent. In fact, the fourth paragraph of the Conditions of
[32]
Contracts of the ticket issued by BA to Mahtani confirms
that the contract was one of continuous air transportation from
Manila to Bombay.
4. x x x carriage to be performed hereunder by
several successive carriers is regarded as a single
operation.
Prescinding from the above discussion, it is undisputed
that PAL, in transporting Mahtani from Manila to Hongkong
acted as the agent of BA.
Parenthetically, the Court of Appeals should have been
cognizant of the well-settled rule that an agent
is also responsible for any negligence in the performance of
[33]
its function and is liable for damages which the principal may
[34]
suffer by reason of its negligent act. Hence, the Court of
Appeals erred when it opined that BA, being the principal, had
no cause of action against PAL, its agent or sub-contractor.
Also, it is worth mentioning that both BA and PAL are
members of the International Air Transport Association (IATA),
wherein member airlines are regarded as agents of each other
in the issuance of the tickets and other matters pertaining to
[35]
their relationship. Therefore, in the instant case, the
contractual relationship between BA and PAL is one of agency,
the former being the principal, since it was the one which
issued the confirmed ticket, and the latter the agent.
Our pronouncement that BA is the principal is consistent
with our ruling in Lufthansa German Airlines v. Court of
[36]
Appeals. In that case, Lufthansa issued a confirmed ticket to
Tirso Antiporda covering five-leg trip aboard different
airlines. Unfortunately, Air Kenya, one of the airlines which
was to carry Antiporda to a specific destination bumped him
off.
An action for damages was filed against Lufthansa which,
however, denied any liability, contending that its responsibility
towards its passenger is limited to the occurrence of a mishap
on its own line. Consequently, when Antiporda transferred to
Air Kenya, its obligation as a principal in the contract of carriage
ceased; from there on, it merely acted as a ticketing agent for
Air Kenya.
In rejecting Lufthansas argument, we ruled:
In the very nature of their contract, Lufthansa is
clearly the principal in the contract of carriage with
Antiporda and remains to be so, regardless of those
instances when actual carriage was to be performed
by various carriers. The issuance of confirmed
Lufthansa ticket in favor of Antiporda covering his

entire five-leg trip aboard successive carriers


concretely attest to this.
Since the instant petition was based on breach of contract
of carriage, Mahtani can only sue BA alone, and not PAL, since
the latter was not a party to the contract. However, this is not
to say that PAL is relieved from any liability due to any of its
negligent acts. In China Air Lines, Ltd. v. Court of
[37]
Appeals, while not exactly in point, the case, however,
illustrates the principle which governs this particular
situation. In that case, we recognized that a carrier (PAL),
acting as an agent of another carrier, is also liable for its own
negligent acts or omission in the performance of its duties.
Accordingly, to deny BA the procedural remedy of filing a
third-party complaint against PAL for the purpose of ultimately
determining who was primarily at fault as between them, is
without legal basis. After all, such proceeding is in accord with
the doctrine against multiplicity of cases which would entail
receiving the same or similar evidence for both cases and
enforcing separate judgments therefor. It must be borne in
mind that the purpose of a third-party complaint is precisely to
avoid delay and circuity of action and to enable the controversy
[38]
to be disposed of in one suit. It is but logical, fair and
equitable to allow BA to sue PAL for indemnification, if it is
proven that the latters negligence was the proximate cause of
Mahtanis unfortunate experience, instead of totally absolving
PAL from any liability.
WHEREFORE, in view of the foregoing, the decision of the
Court of Appeals in CA-G.R. CV No. 43309 dated September 7,
1995 is hereby MODIFIED, reinstating the third-party complaint
filed by British Airways dated November 9, 1990 against
Philippine Airlines. No costs.
SO ORDERED.
Narvasa
C.J.,
(Chairman),
Melo,
Francisco, and Panganiban, JJ., concur.

G.R. No. L-16598


October 3, 1921
H.
E.
HEACOCK
COMPANY, plaintiff-appellant,
vs.
MACONDRAY & COMPANY, INC., defendant-appellant.
Fisher
&
DeWitt
for
plaintiff-appellant.
Wolfson, Wolfson & Schwarzkopf for defendant-appellant.
JOHNSON, J.:
This action was commenced in the Court of First Instance of the
City of Manila to recover the sum of P240 together with
interest thereon. The facts are stipulated by the parties, and
are, briefly, as follows:
(1) On or about the 5th day of June, 1919, the plaintiff
caused to be delivered on board of steamshipBolton
Castle, then in the harbor of New York, four cases of
merchandise one of which contained twelve (12) 8-day
Edmond clocks properly boxed and marked for
transportation to Manila, and paid freight on said
clocks from New York to Manila in advance. The said
steampship arrived in the port of Manila on or about
the 10th day of September, 1919, consigned to the

defendant herein as agent and representative of said


vessel in said port. Neither the master of said vessel
nor the defendant herein, as its agent, delivered to the
plaintiff the aforesaid twelve 8-day Edmond clocks,
although demand was made upon them for their
delivery.
(2) The invoice value of the said twelve 8-day Edmond
clocks in the city of New York was P22 and the market
value of the same in the City of Manila at the time
when they should have been delivered to the plaintiff
was P420.
(3) The bill of lading issued and delivered to the
plaintiff by the master of the said steamship Bolton
Castlecontained, among others, the following clauses:
1. It is mutually agreed that the value of the
goods receipted for above does not exceed
$500 per freight ton, or, in proportion for any
part of a ton, unless the value be expressly
stated herein and ad valorem freight paid
thereon.
9. Also, that in the event of claims for short
delivery of, or damage to, cargo being made,
the carrier shall not be liable for more than
the net invoice price plus freight and
insurance less all charges saved, and any loss
or damage for which the carrier may be liable
shall be adjusted pro rata on the said basis.
(4) The case containing the aforesaid twelve 8-day
Edmond clocks measured 3 cubic feet, and the freight
ton value thereof was $1,480, U. S. currency.
(5) No greater value than $500, U. S. currency, per
freight ton was declared by the plaintiff on the
aforesaid clocks, and no ad valorem freight was paid
thereon.
(6) On or about October 9, 1919, the defendant
tendered to the plaintiff P76.36, the proportionate
freight ton value of the aforesaid twelve 8-day
Edmond clocks, in payment of plaintiff's claim, which
tender plaintiff rejected.
The lower court, in accordance with clause 9 of the bill of lading
above quoted, rendered judgment in favor of the plaintiff
against the defendant for the sum of P226.02, this being the
invoice value of the clocks in question plus the freight and
insurance thereon, with legal interest thereon from November
20, 1919, the date of the complaint, together with costs. From
that judgment both parties appealed to this court.
The plaintiff-appellant insists that it is entitled to recover from
the defendant the market value of the clocks in question, to
wit: the sum of P420. The defendant-appellant, on the other
hand, contends that, in accordance with clause 1 of the bill of
lading, the plaintiff is entitled to recover only the sum of
P76.36, the proportionate freight ton value of the said clocks.
The claim of the plaintiff is based upon the argument that the
two clause in the bill of lading above quoted, limiting the
liability of the carrier, are contrary to public order and,
therefore, null and void. The defendant, on the other hand,
contends that both of said clauses are valid, and the clause 1

should have been applied by the lower court instead of clause


9.
I. The appeal of the plaintiff presents this question; May a
common carrier, by stipulations inserted in the bill of lading,
limit its liability for the loss of or damage to the cargo to an
agreed valuation of the latter? 1awph!l.net
Three kinds of stipulations have often been made in a bill of
lading. The first is one exempting the carrier from any and all
liability for loss or damage occasioned by its own negligence.
The second is one providing for an unqualified limitation of
such liability to an agreed valuation. And the third is one
limiting the liability of the carrier to an agreed valuation unless
the shipper declares a higher value and pays a higher rate of
freight. According to an almost uniform weight of authority, the
first and second kinds of stipulations are invalid as being
contrary to public policy, but the third is valid and enforceable.
The authorities relied upon by the plaintiff-appellant (the
Harter Act [Act of Congress of February 13, 1893]: Louisville Ry.
Co. vs. Wynn, 88 Tenn., 320; and Galt vs. Adams Express Co., 4
McAr., 124; 48 Am. Rep., 742) support the proposition that the
first and second stipulations in a bill of lading are invalid which
either exempt the carrier from liability for loss or damage
occasioned by its negligence, or provide for an unqualified
limitation of such liability to an agreed valuation.
A reading of clauses 1 and 9 of the bill of lading here in
question, however, clearly shows that the present case falls
within the third stipulation, to wit: That a clause in a bill of
lading limiting the liability of the carrier to a certain amount
unless the shipper declares a higher value and pays a higher
rate of freight, is valid and enforceable. This proposition is
supported by a uniform lien of decisions of the Supreme Court
of the United States rendered both prior and subsequent to the
passage of the Harter Act, from the case of
Hart vs.Pennsylvania R. R. Co. (decided Nov. 24, 1884; 112 U. S.,
331), to the case of the Union Pacific Ry. Co. vs.Burke (decided
Feb. 28, 1921, Advance Opinions, 1920-1921, p. 318).
In the case of Hart vs. Pennsylvania R. R. Co., supra, it was held
that "where a contract of carriage, signed by the shipper, is
fairly made with a railroad company, agreeing on a valuation of
the property carried, with the rate of freight based on the
condition that the carrier assumes liability only to the extent of
the agreed valuation, even in case of loss or damage by the
negligence of the carrier, the contract will be upheld as proper
and lawful mode of securing a due proportion between the
amount for which the carrier may be responsible and the
freight he receives, and protecting himself against extravagant
and fanciful valuations."
In the case of Union Pacific Railway Co. vs. Burke, supra, the
court said: "In many cases, from the decision in
Hart vs. Pennsylvania R. R. Co. (112 U. S. 331; 28 L. ed., 717; 5
Sup. Ct. Rep., 151, decided in 1884), to Boston and M. R.
Co. vs. Piper (246 U. S., 439; 62 L. ed., 820; 38 Sup. Ct. Rep.,
354; Ann. Cas. 1918 E, 469, decided in 1918), it has been
declared to be the settled Federal law that if a common carrier
gives to a shipper the choice of two rates, the lower of the
conditioned upon his agreeing to a stipulated valuation of his
property in case of loss, even by the carrier's negligence, if the
shipper makes such a choice, understandingly and freely, and

names his valuation, he cannot thereafter recover more than


the value which he thus places upon his property. As a matter
of legal distinction, estoppel is made the basis of this ruling,
that, having accepted the benefit of the lower rate, in common
honesty the shipper may not repudiate the conditions on which
it was obtained, but the rule and the effect of it are clearly
established."
The syllabus of the same case reads as follows: "A carrier may
not, by a valuation agreement with a shipper, limit its liability in
case of the loss by negligence of an interstate shipment to less
than the real value thereof, unless the shipper is given a choice
of rates, based on valuation."
A limitation of liability based upon an agreed value to
obtain a lower rate does not conflict with any sound
principle of public policy; and it is not conformable to
plain principles of justice that a shipper may
understate value in order to reduce the rate and then
recover a larger value in case of loss. (Adams Express
Co. vs. Croninger 226 U. S. 491, 492.) See also
Reid vs. Farbo (130 C. C. A., 285); Jennings vs.Smith (45
C. C. A., 249); George N. Pierce Co. vs. Wells, Fargo and
Co. (227 U. S., 278); Wells, Fargo & Co. vs. NeimanMarcus Co. (227 U. S., 469).
It seems clear from the foregoing authorities that the clauses (1
and 9) of the bill of lading here in question are not contrary to
public order. Article 1255 of the Civil Code provides that "the
contracting parties may establish any agreements, terms and
conditions they may deem advisable, provided they are not
contrary to law, morals or public order." Said clauses of the bill
of lading are, therefore, valid and binding upon the parties
thereto.
II. The question presented by the appeal of the defendant is
whether clause 1 or clause 9 of the bill of lading here in
question is to be adopted as the measure of defendant's
liability. Clause 1 provides as follows:
1. It is mutually agreed that the value of the goods
receipted for above does not exceed $500 per freight
ton, or, in proportion for any part of a ton, unless the
value be expressly stated herein and ad valorem
freight paid thereon. Clause 9 provides:
9. Also, that in the even of claims for short delivery of,
or damage to, cargo being made, the carrier shall not
be liable for more than the net invoice price plus
freight and insurance less all charges saved, and any
loss or damage for which the carrier may be liable
shall be adjusted pro rata on the said basis.
The defendant-appellant contends that these two clauses, if
construed together, mean that the shipper and the carrier
stipulate and agree that the value of the goods receipted for
does not exceed $500 per freight ton, but should the invoice
value of the goods be less than $500 per freight ton, then the
invoice value governs; that since in this case the invoice value is
more than $500 per freight ton, the latter valuation should be
adopted and that according to that valuation, the
proportionate value of the clocks in question is only P76.36
which the defendant is ready and willing to pay to the plaintiff.
It will be noted, however, that whereas clause 1 contains only
an implied undertaking to settle in case of loss on the basis of

not exceeding $500 per freight ton, clause 9 contains


an express undertaking to settle on the basis of the net invoice
price plus freight and insurance less all charges saved. "Any loss
or damage for which the carrier may be liable shall be
adjusted pro rata on the said basis," clause 9 expressly
provides. It seems to us that there is an irreconcilable conflict
between the two clauses with regard to the measure of
defendant's liability. It is difficult to reconcile them without
doing violence to the language used and reading exceptions
and conditions into the undertaking contained in clause 9 that
are not there. This being the case, the bill of lading in question
should be interpreted against the defendant carrier, which
drew said contract. "A written contract should, in case of
doubt, be interpreted against the party who has drawn the
contract." (6 R. C. L. 854.) It is a well-known principle of
construction that ambiguity or uncertainty in an agreement
must be construed most strongly against the party causing it. (6
R. C. L., 855.) These rules as applicable to contracts contained
in bills of lading. "In construing a bill of lading given by the
carrier for the safe transportation and delivery of goods
shipped by a consignor, the contract will be construed most
strongly against the carrier, and favorably to the consignor, in
case of doubt in any matter of construction." (Alabama, etc. R.
R. Co. vs. Thomas, 89 Ala., 294; 18 Am. St. Rep., 119.)
It follows from all of the foregoing that the judgment appealed
from should be affirmed, without any finding as to costs. So
ordered.
Araullo, street, Avancea and Villamor, JJ., concur.

G.R. No. L-37750 May 19, 1978


SWEET
LINES,
INC., petitioner,
vs.
HON. BERNARDO TEVES, Presiding Judge, CFI of Misamis
Oriental Branch VII, LEOVIGILDO TANDOG, JR., and ROGELIO
TIRO, respondents.
Filiberto Leonardo, Abelardo C. Almario & Samuel B. Abadiano
for petitioner.
Leovigildo Vallar for private respondents.
SANTOS, J.:
This is an original action for Prohibition with Pre Injunction filed
October 3, 1973 to restrain respondent Judge from proceeding
further with Civil Case No. 4091, entitled Leovigildo D. Tandog,
Jr. and Rogelio Tiro v. Sweet Lines, Inc." after he denied
petitioner's Motion to Dismiss the complaint, and the Motion
1
for Reconsideration of said order.
Briefly, the facts of record follow. Private respondents Atty.
Leovigildo Tandog and Rogelio Tiro, a contractor by
professions, bought tickets Nos. 0011736 and 011737 for
Voyage 90 on December 31, 1971 at the branch office of
petitioner, a shipping company transporting inter-island
passengers and cargoes, at Cagayan de Oro City. Respondents
were to board petitioner's vessel, M/S "Sweet Hope" bound for
Tagbilaran City via the port of Cebu. Upon learning that the
vessel was not proceeding to Bohol, since many passengers
were bound for Surigao, private respondents per advice, went

to the branch office for proper relocation to M/S "Sweet


Town". Because the said vessel was already filled to capacity,
they were forced to agree "to hide at the cargo section to avoid
inspection of the officers of the Philippine Coastguard." Private
respondents alleged that they were, during the trip," "exposed
to the scorching heat of the sun and the dust coming from the
ship's cargo of corn grits," and that the tickets they bought at
Cagayan de Oro City for Tagbilaran were not honored and they
were constrained to pay for other tickets. In view thereof,
private respondents sued petitioner for damages and for
breach of contract of carriage in the alleged sum of P10,000.00
before respondents Court of First Instance of Misamis
2
Oriental.
Petitioner moved to dismiss the complaint on the ground of
improper venue. This motion was premised on the condition
printed at the back of the tickets, i.e., Condition No. 14, which
reads:
14. It is hereby agreed and understood that
any and all actions arising out of the
conditions and provisions of this ticket,
irrespective of where it is issued, shall be filed
3
in the competent courts in the City of Cebu.
4
The motion was denied by the trial court. Petitioner moved to
5
reconnsider the order of denial, but no avail. Hence, this
instant petition for prohibition for preliminary injunction,
'alleging that the respondent judge has departed from the
accepted and usual course of judicial preoceeding" and "had
acted without or in excess or in error of his jurisdicton or in
6
gross abuse of discretion.
In Our resolution of November 20, 1973, We restrained
respondent Judge from proceeding further with the case and
7
required respondent to comment. On January 18, 1974, We
gave due course to the petition and required respondent to
8
answer. Thereafter, the parties submitted their respesctive
9
memoranda in support of their respective contentions.
Presented thus for Our resolution is a question is aquestion
which, to all appearances, is one of first impression, to wit Is
Condition No. 14 printed at the back of the petitioner's passage
tickets purchased by private respondents, which limits the
venue of actions arising from the contract of carriage to
theCourt of First Instance of Cebu, valid and enforceable?
Otherwise stated, may a common carrier engaged in interisland shipping stipulate thru condition printed at the back of
passage tickets to its vessels that any and all actions arising out
of the ocntract of carriage should be filed only in a particular
province or city, in this case the City of Cebu, to the exclusion
of all others?
Petitioner contends thaty Condition No. 14 is valid and
enforceable, since private respndents acceded to tit when they
purchased passage tickets at its Cagayan de Oro branch office
and took its vessel M/S "Sweet Town" for passage to
Tagbilaran, Bohol that the condition of the venue of actions
in the City of Cebu is proper since venue may be validly waived,
10
citing cases; that is an effective waiver of venue, valid and
binding as such, since it is printed in bold and capital letters
and not in fine print and merely assigns the place where the
action sing from the contract is institution likewise citing
11
cases; and that condition No. 14 is unequivocal and

mandatory, the words and phrases "any and all", "irrespective


of where it is issued," and "shag" leave no doubt that the
intention of Condition No. 14 is to fix the venue in the City of
Cebu, to the exclusion of other places; that the orders of the
respondent Judge are an unwarranted departure from
established jurisprudence governing the case; and that he
acted without or in excess of his jurisdiction in is the orders
12
complained of.
On the other hand, private respondents claim that Condition
No. 14 is not valid, that the same is not an essential element of
the contract of carriage, being in itself a different agreement
which requires the mutual consent of the parties to it; that they
had no say in its preparation, the existence of which they could
not refuse, hence, they had no choice but to pay for the tickets
and to avail of petitioner's shipping facilities out of necessity;
that the carrier "has been exacting too much from the public by
inserting impositions in the passage tickets too burdensome to
bear," that the condition which was printed in fine letters is an
imposition on the riding public and does not bind respondents,
13
citing cases; that while venue 6f actions may be transferred
from one province to another, such arrangement requires the
"written agreement of the parties", not to be imposed
unilaterally; and that assuming that the condition is valid, it is
not exclusive and does not, therefore, exclude the filing of the
14
action in Misamis Oriental,
There is no question that there was a valid contract of carriage
entered into by petitioner and private respondents and that
the passage tickets, upon which the latter based their
complaint, are the best evidence thereof. All the essential
elements of a valid contract, i.e., consent, cause or
consideration and object, are present. As held inPeralta de
15
Guerrero, et al. v. Madrigal Shipping Co., Inc.,
It is a matter of common knowledge that
whenever a passenger boards a ship for
transportation from one place to another he
is issued a ticket by the shipper which has all
the elements of a written contract, Namely:
(1) the consent of the contracting parties
manifested by the fact that the passenger
boards the ship and the shipper consents or
accepts him in the ship for transportation; (2)
cause or consideration which is the fare paid
by the passenger as stated in the ticket; (3)
object, which is the transportation of the
passenger from the place of departure to the
place of destination which are stated in the
ticket.
It should be borne in mind, however, that with respect to the
fourteen (14) conditions one of which is "Condition No. 14"
which is in issue in this case printed at the back of the
passage tickets, these are commonly known as "contracts of
adhesion," the validity and/or enforceability of which will have
to be determined by the peculiar circumstances obtaining in
each case and the nature of the conditions or terms sought to
be enforced. For, "(W)hile generally, stipulations in a contract
come about after deliberate drafting by the parties thereto, ...
there are certain contracts almost all the provisions of which
have been drafted only by one party, usually a corporation.

Such contracts are called contracts of adhesion, because the


only participation of the party is the signing of his signature or
his 'adhesion' thereto. Insurance contracts, bills of lading,
contracts of make of lots on the installment plan fall into this
16
category"
By the peculiar circumstances under which contracts of
adhesion are entered into namely, that it is drafted only by
one party, usually the corporation, and is sought to be
accepted or adhered to by the other party, in this instance the
passengers, private respondents, who cannot change the same
and who are thus made to adhere thereto on the "take it or
leave it" basis certain guidelines in the determination of
their validity and/or enforceability have been formulated in
order to that justice and fan play characterize the relationship
of the contracting parties. Thus, this Court speaking through
Justice J.B.L. Reyes in Qua Chee Gan v. Law Union and Rock
17
Insurance Co., and later through Justice Fernando
18
in Fieldman Insurance v. Vargas, held
The courts cannot ignore that nowadays,
monopolies, cartels and concentration of
capital endowed with overwhelm economic
power, manage to impose upon parties d
with them y prepared 'agreements' that the
weaker party may not change one whit his
participation in the 'agreement' being
reduced to the alternative 'to take it or leave
it,' labelled since Raymond Saleilles 'contracts
by adherence' (contracts d' adhesion) in
contrast to those entered into by parties
bargaining on an equal footing. Such
contracts (of which policies of insurance and
international bill of lading are prime
examples) obviously cap for greater strictness
and vigilance on the part of the courts of
justice with a view to protecting the weaker
party from abuses and imposition, and
prevent their becoming traps for the unwary.
To the same effect and import, and, in recognition of the
character of contracts of this kind, the protection of the
disadvantaged is expressly enjoined by the New Civil Code
In all contractual property or other relations,
when one of the parties is at a disadvantage
on account of his moral dependence,
ignorance indigence, mental weakness,
tender age and other handicap, the courts
must
be
vigilant
for
his
19
protection.
Considered in the light Of the foregoing norms and in the
context Of circumstances Prevailing in the inter-island ship.
ping industry in the country today, We find and hold that
Condition No. 14 printed at the back of the passage tickets
should be held as void and unenforceable for the following
reasons first, under circumstances obligation in the inter-island
ship. ping industry, it is not just and fair to bind passengers to
the terms of the conditions printed at the back of the passage
tickets, on which Condition No. 14 is Printed in fine letters, and
second, Condition No. 14 subverts the public policy on transfer
of venue of proceedings of this nature, since the same will

prejudice rights and interests of innumerable passengers in


different s of the country who, under Condition No. 14, will
have to file suits against petitioner only in the City of Cebu.
1. It is a matter of public knowledge, of which We can take
judicial notice, that there is a dearth of and acute shortage in
inter- island vessels plying between the country's several
islands, and the facilities they offer leave much to be desired.
Thus, even under ordinary circumstances, the piers are
congested with passengers and their cargo waiting to be
transported. The conditions are even worse at peak and/or the
rainy seasons, when Passengers literally scramble to whatever
accommodations may be availed of, even through circuitous
routes, and/or at the risk of their safety their immediate
concern, for the moment, being to be able to board vessels
with the hope of reaching their destinations. The schedules are
as often as not if not more so delayed or altered. This was
precisely the experience of private respondents when they
were relocated to M/S "Sweet Town" from M/S "Sweet Hope"
and then any to the scorching heat of the sun and the dust
coming from the ship's cargo of corn grits, " because even the
latter was filed to capacity.
Under these circumstances, it is hardly just and proper to
expect the passengers to examine their tickets received from
crowded/congested counters, more often than not during rush
hours, for conditions that may be printed much charge them
with having consented to the conditions, so printed, especially
if there are a number of such conditions m fine print, as in this
20
case.
Again, it should be noted that Condition No. 14 was prepared
solely at the ms of the petitioner, respondents had no say in its
preparation. Neither did the latter have the opportunity to take
the into account prior to the purpose chase of their tickets. For,
unlike the small print provisions of contracts the common
example of contracts of adherence which are entered into
by the insured in his awareness of said conditions, since the
insured is afforded the op to and co the same, passengers of
inter-island v do not have the same chance, since their alleged
adhesion is presumed only from the fact that they purpose
chased the tickets.
It should also be stressed that slapping companies are franchise
holders of certificates of public convenience and therefore,
posses a virtual monopoly over the business of transporting
passengers between the ports covered by their franchise. This
being so, shipping companies, like petitioner, engaged in interisland shipping, have a virtual monopoly of the business of
transporting passengers and may thus dictate their terms of
passage, leaving passengers with no choice but to buy their
tickets and avail of their vessels and facilities. Finally, judicial
notice may be taken of the fact that the bulk of those who
board these inter-island vested come from the low-income
groups and are less literate, and who have little or no choice
but to avail of petitioner's vessels.
2. Condition No. 14 is subversive of public policy on transfers of
venue of actions. For, although venue may be changed or
transferred from one province to another by agreement of the
parties in writing t to Rule 4, Section 3, of the Rules of Court,
such an agreement will not be held valid where it practically
negates the action of the claimants, such as the private

respondents herein. The philosophy underlying the provisions


on transfer of venue of actions is the convenience of the
21
plaintiffs as well as his witnesses and to promote the ends of
justice. Considering the expense and trouble a passenger
residing outside of Cebu City would incur to prosecute a claim
in the City of Cebu, he would most probably decide not to file
the action at all. The condition will thus defeat, instead of
enhance, the ends of justice. Upon the other hand, petitioner
has branches or offices in the respective ports of call of its
vessels and can afford to litigate in any of these places. Hence,
the filing of the suit in the CFI of Misamis Oriental, as was done
in the instant case, will not cause inconvenience to, much less
prejudice, petitioner.
Public policy is ". . . that principle of the law which holds that
no subject or citizen can lawfully do that which has a tendency
to be injurious to the public or against the public good
22
... Under this principle" ... freedom of contract or private
23
dealing is restricted by law for the good of the public. Clearly,
Condition No. 14, if enforced, will be subversive of the public
good or interest, since it will frustrate in meritorious cases,
actions of passenger cants outside of Cebu City, thus placing
petitioner company at a decided advantage over said persons,
who may have perfectly legitimate claims against it. The said
condition should, therefore, be declared void and
unenforceable, as contrary to public policy to make the
courts accessible to all who may have need of their services.
WHEREFORE, the petition for prohibition is DISMISS. ED. The
restraining order issued on November 20, 1973, is hereby
LIFTED and SET ASIDE. Costs against petitioner.
Fernando (Chairman), Aquino, Concepcion, Jr., JJ., concur.
Antonio, J., reserves his vote.

FIRST DIVISION
[G.R. No. 71929 : December 4, 1990.]
192 SCRA 9
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT
and FELIPA E. PABLO, Respondents.
DECISION
NARVASA, J.:
Dr. Felipa Pablo an associate professor in the University of
the Philippines, 1 and a research grantee of the Philippine
Atomic Energy Agency was invited to take part at a meeting
of the Department of Research and Isotopes of the Joint FAOIAEA Division of Atomic Energy in Food and Agriculture of the
United Nations in Ispra, Italy. 2 She was invited in view of her
specialized knowledge in "foreign substances in food and the
agriculture environment." She accepted the invitation, and was
then scheduled by the organizers, to read a paper on "The Fate
of Radioactive Fusion Products Contaminating Vegetable
Crops." 3 The program announced that she would be the
second speaker on the first day of the meeting. 4 To fulfill this
engagement, Dr. Pablo booked passage on petitioner airline,
ALITALIA.

She arrived in Milan on the day before the meeting in


accordance with the itinerary and time table set for her by
ALITALIA. She was however told by the ALITALIA personnel
there at Milan that her luggage was "delayed inasmuch as the
same . . . (was) in one of the succeeding flights from Rome to
Milan." 5 Her luggage consisted of two (2) suitcases: one
contained her clothing and other personal items; the other, her
scientific papers, slides and other research material. But the
other flights arriving from Rome did not have her baggage on
board.
By then feeling desperate, she went to Rome to try to locate
her bags herself. There, she inquired about her suitcases in the
domestic and international airports, and filled out the forms
prescribed by ALITALIA for people in her predicament.
However, her baggage could not be found. Completely
distraught and discouraged, she returned to Manila without
attending the meeting in Ispra, Italy. : nad
Once back in Manila she demanded that ALITALIA make
reparation for the damages thus suffered by her. ALITALIA
offered her "free airline tickets to compensate her for any
alleged damages. . . ." She rejected the offer, and forthwith
commenced the action 6 which has given rise to the present
appellate proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and
forwarded to Ispra, 7 Italy, but only on the day after her
scheduled appearance and participation at the U.N. meeting
there. 8 Of course Dr. Pablo was no longer there to accept
delivery; she was already on her way home to Manila. And for
some reason or other, the suitcases were not actually restored
to Prof. Pablo by ALITALIA until eleven (11) months later, and
four (4) months after institution of her action. 9
After appropriate proceedings and trial, the Court of First
Instance rendered judgment in Dr. Pablo's favor: 10
"(1) Ordering the defendant (ALITALIA) to pay . . . (her)
the sum of TWENTY THOUSAND PESOS (P20,000.00),
Philippine Currency, by way of nominal damages;
(2) Ordering the defendant to pay . . . (her) the sum of
FIVE THOUSAND PESOS (P5,000.00), Philippine
Currency, as and for attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the
suit."
ALITALIA appealed to the Intermediate Appellate Court but
failed to obtain a reversal of the judgment. 11 Indeed, the
Appellate Court not only affirmed the Trial Court's decision but
also increased the award of nominal damages payable by
ALITALIA to P40,000.00. 12 That increase it justified as follows:
13
"Considering the circumstances, as found by the Trial
Court and the negligence committed by defendant,
the amount of P20,000.00 under present inflationary
conditions as awarded . . . to the plaintiff as nominal
damages, is too little to make up for the plaintiff's
frustration and disappointment in not being able to
appear at said conference; and for the embarrassment
and humiliation she suffered from the academic
community for failure to carry out an official mission
for which she was singled out by the faculty to
represent her institution and the country. After

weighing carefully all the considerations, the amount


awarded to the plaintiff for nominal damages and
attorney's fees should be increased to the cost of her
round trip air fare or at the present rate of peso to the
dollar at P40,000,00."
ALITALIA has appealed to this Court on Certiorari. Here, it seeks
to make basically the same points it tried to make before the
Trial Court and the Intermediate Appellate Court, i.e.:
1) that the Warsaw Convention should have been
applied to limit ALITALIA'S liability; and
2) that there is no warrant in fact or in law for the
award to Dr. Pablo of nominal damages and attorney's
fees. 14
In addition, ALITALIA postulates that it was error for the
Intermediate Appellate Court to have refused to pass on all the
assigned errors and in not stating the facts and the law on
which its decision is based. 15
Under the Warsaw Convention, 16 an air carrier is made liable
for damages for:
1) the death, wounding or other bodily injury of a
passenger if the accident causing it took place on
board the aircraft or in the course of its operations of
embarking or disembarking; 17
2) the destruction or loss of, or damage to, any
registered luggage or goods, if the occurrence causing
it took place during the carriage by air;" 18 and
3) delay in the transportation by air of passengers,
luggage or goods. 19
In these cases, it is provided in the Convention that the "action
for damages, however, founded, can only be brought subject to
conditions and limits set out" therein. 20
The Convention also purports to limit the liability of the carriers
in the following manner: 21
1. In the carriage of passengers the liability of the
carrier for each passenger is limited to the sum of
250,000 francs . . . Nevertheless, by special contract,
the carrier and the passenger may agree to a higher
limit of liability.: nad
2. a) In the carriage of registered baggage and of
cargo, the liability of the carrier is limited to a sum of
250 francs per kilogramme, unless the passenger or
consignor has made, at the time when the package
was handed over to the carrier, a special declaration
of interest in delivery at destination and has paid a
supplementary sum if the case so requires. In that
case the carrier will be liable to pay a sum not
exceeding the declared sum, unless he proves that
sum is greater than the actual value to the consignor
at delivery.
b) In the case of loss, damage or delay of part of
registered baggage or cargo, or of any object
contained therein, the weight to be taken into
consideration in determining the amount to which the
carrier's liability is limited shall be only the total
weight of the package or packages concerned.
Nevertheless, when the loss, damage or delay of a part
of the registered baggage or cargo, or of an object
contained therein, affects the value of other packages

covered by the same baggage check or the same air


way bill, the total weight of such package or packages
shall also be taken into consideration in determining
the limit of liability.
3. As regards objects of which the passenger takes
charge himself the liability of the carrier is limited to
5000 francs per passenger.
4. The limits prescribed . . shall not prevent the court
from awarding, in accordance with its own law, in
addition, the whole or part of the court costs and of
the other expenses of litigation incurred by the
plaintiff. The foregoing provision shall not apply if the
amount of the damages awarded, excluding court
costs and other expenses of the litigation, does not
exceed the sum which the carrier has offered in
writing to the plaintiff within a period of six months
from the date of the occurrence causing the damage,
or before the commencement of the action, if that is
later.
The Warsaw Convention however denies to the carrier
availment "of the provisions which exclude or limit his liability,
if the damage is caused by his wilful misconduct or by such
default on his part as, in accordance with the law of the court
seized of the case, is considered to be equivalent to wilful
misconduct," or "if the damage is (similarly) caused . . by any
agent of the carrier acting within the scope of his
employment." 22 The Hague Protocol amended the Warsaw
Convention by removing the provision that if the airline took all
necessary steps to avoid the damage, it could exculpate itself
completely, 23 and declaring the stated limits of liability not
applicable "if it is proved that the damage resulted from an act
or omission of the carrier, its servants or agents, done with
intent to cause damage or recklessly and with knowledge that
damage would probably result." The same deletion was
effected by the Montreal Agreement of 1966, with the result
that a passenger could recover unlimited damages upon proof
of wilful misconduct. 24
The Convention does not thus operate as an exclusive
enumeration of the instances of an airline's liability, or as an
absolute limit of the extent of that liability. Such a proposition
is not borne out by the language of the Convention, as this
Court has now, and at an earlier time, pointed out. 25
Moreover, slight reflection readily leads to the conclusion that
it should be deemed a limit of liability only in those cases
where the cause of the death or injury to person, or
destruction, loss or damage to property or delay in its transport
is not attributable to or attended by any wilful misconduct, bad
faith, recklessness, or otherwise improper conduct on the part
of any official or employee for which the carrier is responsible,
and there is otherwise no special or extraordinary form of
resulting injury. The Convention's provisions, in short, do not
"regulate or exclude liability for other breaches of contract by
the carrier" 26 or misconduct of its officers and employees, or
for some particular or exceptional type of damage. Otherwise,
"an air carrier would be exempt from any liability for damages
in the event of its absolute refusal, in bad faith, to comply with
a contract of carriage, which is absurd." 27 Nor may it for a
moment be supposed that if a member of the aircraft

complement should inflict some physical injury on a passenger,


or maliciously destroy or damage the latter's property, the
Convention might successfully be pleaded as the sole gauge to
determine the carrier's liability to the passenger. Neither may
the Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and
preclude recovery therefor beyond the limits set by said
Convention. It is in this sense that the Convention has been
applied, or ignored, depending on the peculiar facts presented
by each case.:-cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for example,
the Warsaw Convention was applied as regards the limitation
on the carrier's liability, there being a simple loss of baggage
without any otherwise improper conduct on the part of the
officials or employees of the airline or other special injury
sustained by the passenger.
On the other hand, the Warsaw Convention has invariably been
held inapplicable, or as not restrictive of the carrier's liability,
where there was satisfactory evidence of malice or bad faith
attributable to its officers and employees. 29 Thus, an air
carrier was sentenced to pay not only compensatory but also
moral and exemplary damages, and attorney's fees, for
instance, where its employees rudely put a passenger holding a
first-class ticket in the tourist or economy section, 30 or ousted
a brown Asiatic from the plane to give his seat to a white
man, 31 or gave the seat of a passenger with a confirmed
reservation to another, 32 or subjected a passenger to
extremely rude, even barbaric treatment, as by calling him a
"monkey." 33
In the case at bar, no bad faith or otherwise improper conduct
may be ascribed to the employees of petitioner airline; and Dr.
Pablo's luggage was eventually returned to her, belatedly, it is
true, but without appreciable damage. The fact is,
nevertheless, that some special species of injury was caused to
Dr. Pablo because petitioner ALITALIA misplaced her baggage
and failed to deliver it to her at the time appointed a breach
of its contract of carriage, to be sure with the result that she
was unable to read the paper and make the scientific
presentation (consisting of slides, autoradiograms or films,
tables and tabulations) that she had painstakingly labored over,
at the prestigious international conference, to attend which
she had traveled hundreds of miles, to her chagrin and
embarrassment and the disappointment and annoyance of the
organizers. She felt, not unreasonably, that the invitation for
her to participate at the conference, extended by the Joint
FAO/IAEA Division of Atomic Energy in Food and Agriculture of
the United Nations, was a singular honor not only to herself,
but to the University of the Philippines and the country as well,
an opportunity to make some sort of impression among her
colleagues in that field of scientific activity. The opportunity to
claim this honor or distinction was irretrievably lost to her
because of Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo
underwent profound distress and anxiety, which gradually
turned to panic and finally despair, from the time she learned
that her suitcases were missing up to the time when, having
gone to Rome, she finally realized that she would no longer be

able to take part in the conference. As she herself put it, she
"was really shocked and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo
cannot under the circumstances be restricted to that
prescribed by the Warsaw Convention for delay in the
transport of baggage.
She is not, of course, entitled to be compensated for loss or
damage to her luggage. As already mentioned, her baggage
was ultimately delivered to her in Manila, tardily but safely. She
is however entitled to nominal damages which, as the law
says, is adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be
vindicated and recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered and this Court
agrees that the respondent Court of Appeals correctly set the
amount thereof at P40,000.00. As to the purely technical
argument that the award to her of such nominal damages is
precluded by her omission to include a specific claim therefor
in her complaint, it suffices to draw attention to her general
prayer, following her plea for moral and exemplary damages
and attorney's fees, "for such other and further just and
equitable relief in the premises," which certainly is broad
enough to comprehend an application as well for nominal
damages. Besides, petitioner should have realized that the
explicit assertion, and proof, that Dr. Pablo's right had been
violated or invaded by it absent any claim for actual or
compensatory damages, the prayer thereof having been
voluntarily deleted by Dr. Pablo upon the return to her of her
baggage necessarily raised the issue of nominal damages.: rd
This Court also agrees that respondent Court of Appeals
correctly awarded attorney's fees to Dr. Pablo, and the amount
of P5,000.00 set by it is reasonable in the premises. The law
authorizes recovery of attorney's fees inter alia where, as here,
"the defendant's act or omission has compelled the plaintiff to
litigate with third persons or to incur expenses to protect his
interest," 34 or "where the court deems it just and
equitable." 35
WHEREFORE, no error being perceived in the challenged
decision of the Court of Appeals, it appearing on the contrary
to be entirely in accord with the facts and the law, said decision
is hereby AFFIRMED, with costs against the petitioner.
SO ORDERED.
Cruz, Gancayco, Grio-Aquino and Medialdea, JJ., concur.

G.R. No. 70462 August 11, 1988


PAN AMERICAN WORLD AIRWAYS, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT, RENE V. PANGAN,
SOTANG
BASTOS
PRODUCTIONS
and
ARCHER
PRODUCTIONS, respondents.
Guerrero & Torres for petitioner.
Jose B. Layug for private respondents.
CORTES, J.:
Before the Court is a petition filed by an international air carrier
seeking to limit its liability for lost baggage, containing

promotional and advertising materials for films to be exhibited


in Guam and the U.S.A., clutch bags, barong tagalogs and
personal belongings, to the amount specified in the airline
ticket absent a declaration of a higher valuation and the
payment of additional charges.
The undisputed facts of the case, as found by the trial court and
adopted by the appellate court, are as follows:
On April 25, 1978, plaintiff Rene V. Pangan,
president and general manager of the
plaintiffs Sotang Bastos and Archer
Production while in San Francisco, Califonia
and Primo Quesada of Prime Films, San
Francisco, California, entered into an
agreement (Exh. A) whereby the former, for
and in consideration of the amount of US
$2,500.00 per picture, bound himself to
supply the latter with three films. 'Ang
Mabait, Masungit at ang Pangit,' 'Big
Happening with Chikiting and Iking,' and
'Kambal Dragon' for exhibition in the United
States. It was also their agreement that
plaintiffs would provide the necessary
promotional and advertising materials for
said films on or before May 30, 1978.
On his way home to the Philippines, plaintiff
Pangan visited Guam where he contacted Leo
Slutchnick of the Hafa Adai Organization.
Plaintiff Pangan likewise entered into a verbal
agreement with Slutchnick for the exhibition
of two of the films above-mentioned at the
Hafa Adai Theater in Guam on May 30, 1978
for the consideration of P7,000.00 per picture
(p. 11, tsn, June 20, 1979). Plaintiff Pangan
undertook to provide the necessary
promotional and advertising materials for
said films on or before the exhibition date on
May 30,1978.
By virtue of the above agreements, plaintiff
Pangan caused the preparation of the
requisite promotional handbills and still
pictures for which he paid the total sum of
P12,900.00 (Exhs. B, B-1, C and C1). Likewise
in preparation for his trip abroad to comply
with his contracts, plaintiff Pangan purchased
fourteen clutch bags, four capiz lamps and
four barong tagalog, with a total value of
P4,400.00 (Exhs. D, D-1, E, and F).
On May 18, 1978, plaintiff Pangan obtained
from defendant Pan Am's Manila Office,
through the Your Travel Guide, an economy
class airplane ticket with No. 0269207406324
(Exh. G) for passage from Manila to Guam on
defendant's Flight No. 842 of May 27,1978,
upon payment by said plaintiff of the regular
fare. The Your Travel Guide is a tour and
travel office owned and managed by plaintiffs
witness Mila de la Rama.

On May 27, 1978, two hours before


departure time plaintiff Pangan was at the
defendant's ticket counter at the Manila
International Airport and presented his ticket
and checked in his two luggages, for which he
was given baggage claim tickets Nos. 963633
and 963649 (Exhs. H and H-1). The two
luggages contained the promotional and
advertising materials, the clutch bags, barong
tagalog and his personal belongings.
Subsequently, Pangan was informed that his
name was not in the manifest and so he could
not take Flight No. 842 in the economy class.
Since there was no space in the economy
class, plaintiff Pangan took the first class
because he wanted to be on time in Guam to
comply with his commitment, paying an
additional sum of $112.00.
When plaintiff Pangan arrived in Guam on the
date of May 27, 1978, his two luggages did
not arrive with his flight, as a consequence of
which his agreements with Slutchnick and
Quesada for the exhibition of the films in
Guam and in the United States were
cancelled (Exh. L). Thereafter, he filed a
written claim (Exh. J) for his missing luggages.
Upon arrival in the Philippines, Pangan
contacted his lawyer, who made the
necessary representations to protest as to
the treatment which he received from the
employees of the defendant and the loss of
his two luggages (Exh. M, O, Q, S, and T).
Defendant Pan Am assured plaintiff Pangan
that his grievances would be investigated and
given its immediate consideration (Exhs. N, P
and R). Due to the defendant's failure to
communicate with Pangan about the action
taken on his protests, the present complaint
was filed by the plaintiff. (Pages 4-7, Record
On Appeal). [Rollo, pp. 27-29.]
On the basis of these facts, the Court of First Instance found
petitioner liable and rendered judgment as follows:
(1) Ordering defendant Pan American World
Airways, Inc. to pay all the plaintiffs the sum
of P83,000.00, for actual damages, with
interest thereon at the rate of 14% per
annum from December 6, 1978, when the
complaint was filed, until the same is fully
paid, plus the further sum of P10,000.00 as
attorney's fees;
(2) Ordering defendant Pan American World
Airways, Inc. to pay plaintiff Rene V. Pangan
the sum of P8,123.34, for additional actual
damages, with interest thereon at the rate of
14% per annum from December 6, 1978, until
the same is fully paid;

(3) Dismissing the counterclaim interposed by


defendant Pan American World Airways, Inc.;
and
(4) Ordering defendant Pan American World
Airways, Inc. to pay the costs of suit. [Rollo,
pp. 106-107.]
On appeal, the then Intermediate Appellate Court affirmed the
trial court decision.
Hence, the instant recourse to this Court by petitioner.
The petition was given due course and the parties, as required,
submitted their respective memoranda. In due time the case
was submitted for decision.
In assailing the decision of the Intermediate Appellate Court
petitioner assigned the following errors:
1. The respondent court erred as a matter of law in affirming
the trial court's award of actual damages beyond the limitation
of liability set forth in the Warsaw Convention and the contract
of carriage.
2. The respondent court erred as a matter of law in affirming
the trial court's award of actual damages consisting of alleged
lost profits in the face of this Court's ruling concerning special
or consequential damages as set forth in Mendoza v.
Philippine Airlines [90 Phil. 836 (1952).]
The assigned errors shall be discussed seriatim
1. The airline ticket (Exh. "G') contains the following conditions:
NOTICE
If the passenger's journey involves an
ultimate destination or stop in a country
other than the country of departure the
Warsaw Convention may be applicable and
the Convention governs and in most cases
limits the liability of carriers for death or
personal injury and in respect of loss of or
damage to baggage. See also notice headed
"Advice to International Passengers on
Limitation of Liability.
CONDITIONS OF CONTRACT
1. As used in this contract "ticket" means this
passenger ticket and baggage check of which
these conditions and the notices form part,
"carriage" is equivalent to "transportation,"
"carrier" means all air carriers that carry or
undertake to carry the passenger or his
baggage hereunder or perform any other
service incidental to such air carriage.
"WARSAW CONVENTION" means the
convention for the Unification of Certain
Rules Relating to International Carriage by Air
signed at Warsaw, 12th October 1929, or that
Convention as amended at The Hague, 28th
September 1955, whichever may be
applicable.
2. Carriage hereunder is subject to the rules
and limitations relating to liability established
by the Warsaw Convention unless such
carriage is not "international carriage" as
defined by that Convention.

3. To the extent not in conflict with the


foregoing carriage and other services
performed by each carrier are subject to: (i)
provisions contained in this ticket, (ii)
applicable tariffs, (iii) carrier's conditions of
carriage and related regulations which are
made part hereof (and are available on
application at the offices of carrier), except in
transportation between a place in the United
States or Canada and any place outside
thereof to which tariffs in force in those
countries apply.
xxx xxx xxx
NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage
is limited as follows unless a higher value is
declared in advance and additional charges
are paid: (1)for most international travel
(including domestic portions of international
journeys) to approximately $9.07 per pound
($20.00 per kilo) for checked baggage and
$400 per passenger for unchecked baggage:
(2) for travel wholly between U.S. points, to
$750 per passenger on most carriers (a few
have lower limits). Excess valuation may not
be declared on certain types of valuable
articles. Carriers assume no liability for fragile
or perishable articles. Further information
may be obtained from the carrier. [Emphasis
supplied.].
On the basis of the foregoing stipulations printed at the back of
the ticket, petitioner contends that its liability for the lost
baggage of private respondent Pangan is limited to $600.00
($20.00 x 30 kilos) as the latter did not declare a higher value
for his baggage and pay the corresponding additional charges.
To support this contention, petitioner cites the case of Ong Yiu
v. Court of Appeals [G.R. No. L-40597, June 29, 1979, 91 SCRA
223], where the Court sustained the validity of a printed
stipulation at the back of an airline ticket limiting the liability of
the carrier for lost baggage to a specified amount and ruled
that the carrier's liability was limited to said amount since the
passenger did not declare a higher value, much less pay
additional charges.
We find the ruling in Ong Yiu squarely applicable to the instant
case. In said case, the Court, through Justice Melencio Herrera,
stated:
Petitioner further contends that respondent
Court committed grave error when it limited
PAL's carriage liability to the amount of
P100.00 as stipulated at the back of the
ticket....
We agree with the foregoing finding. The
pertinent Condition of Carriage printed at the
back of the plane ticket reads:
8. BAGGAGE LIABILITY ...
The total liability of the
Carrier for lost or damage
baggage of the passenger is

LIMITED TO P100.00 for


each ticket unless a
passenger declares a higher
valuation in excess of
P100.00, but not in excess,
however,
of
a
total
valuation of Pl,000.00 and
additional charges are paid
pursuant to Carrier's tariffs.
There is no dispute that petitioner did not
declare any higher value for his luggage,
much less (lid he pay any additional
transportation charge.
But petitioner argues that there is nothing in
the evidence to show that he had actually
entered into a contract with PAL limiting the
latter's liability for loss or delay of the
baggage of its passengers, and that Article
1750 * of the Civil Code has not been
complied with.
While it may be true that petitioner had not
signed the plane ticket (Exh. "12"), he is
nevertheless bound by the provisions thereof.
"Such provisions have been held to be a part
of the contract of carriage, and valid and
binding upon the passenger regardless of the
latter's lack of knowledge or assent to the
regulation." [Tannebaum v. National Airline,
Inc., 13 Misc. 2d 450,176 N.Y.S. 2d 400;
Lichten v. Eastern Airlines, 87 Fed. Supp. 691;
Migoski v. Eastern Air Lines, Inc., Fla., 63 So.
2d 634.] It is what is known as a contract of
"adhesion," in regards which it has been said
that contracts of adhesion wherein one party
imposes a ready made form of contract on
the other, as the plane ticket in the case at
bar, are contracts 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,[Tolentino, Civil Code, Vol.
IV, 1962 ed., p. 462, citing Mr. Justice J.B.L.
Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49].
And as held in Randolph v. American Airlines,
103 Ohio App. 172,144 N.E. 2d 878;
Rosenchein v. Trans World Airlines, Inc., 349
S.W. 2d 483.] "a contract limiting liability
upon an agreed valuation does not offend
against the policy of the law forbidding one
from contracting against his own negligence."
Considering, therefore, that petitioner had
failed to declare a higher value for his
baggage, he cannot be permitted a recovery
in excess of P100.00....
On the other hand, the ruling in Shewaram v. Philippine Air
Lines, Inc. [G.R. No. L-20099, July 2, 1966, 17 SCRA 606], where
the Court held that the stipulation limiting the carrier's liability
to a specified amount was invalid, finds no application in the
instant case, as the ruling in said case was premised on the

finding that the conditions printed at the back of the ticket


were so small and hard to read that they would not warrant
the presumption that the passenger was aware of the
conditions and that he had freely and fairly agreed thereto. In
the instant case, similar facts that would make the case fall
under the exception have not been alleged, much less shown
to exist.
In view thereof petitioner's liability for the lost baggage is
limited to $20.00 per kilo or $600.00, as stipulated at the back
of the ticket.
At this juncture, in order to rectify certain misconceptions the
Court finds it necessary to state that the Court of Appeal's
reliance on a quotation from Northwest Airlines, Inc. v.
Cuenca [G.R. No. L-22425, August 31, 1965, 14 SCRA 1063] to
sustain the view that "to apply the Warsaw Convention which
limits a carrier's liability to US$9.07 per pound or US$20.00 per
kilo in cases of contractual breach of carriage ** is against
public policy" is utterly misplaced, to say the least. In said case,
while the Court, as quoted in the Intermediate Appellate
Court's decision, said:
Petitioner argues that pursuant to those
provisions, an air "carrier is liable only" in the
event of death of a passenger or injury
suffered by him, or of destruction or loss of,
or damages to any checked baggage or any
goods, or of delay in the transportation by air
of passengers, baggage or goods. This
pretense is not borne out by the language of
said Articles. The same merely declare the
carrier liable for damages in enumerated
cases, if the conditions therein specified are
present. Neither said provisions nor others in
the aforementioned Convention regulate or
exclude liability for other breaches of
contract by the carrier. Under petitioner's
theory, an air carrier would be exempt from
any liability for damages in the event of its
absolute refusal, in bad faith, to comply with
a contract of carriage, which is absurd.
it prefaced this statement by explaining that:
...The case is now before us on petition for
review by certiorari, upon the ground that
the lower court has erred: (1) in holding that
the Warsaw Convention of October 12, 1929,
relative to transportation by air is not in force
in the Philippines: (2) in not holding that
respondent has no cause of action; and (3) in
awarding P20,000 as nominal damages.
We deem it unnecessary to pass upon the
First assignment of error because the same is
the basis of the second assignment of error,
and the latter is devoid of merit, even if we
assumed
the
former
to
be
well
taken. (Emphasis supplied.)
Thus, it is quite clear that the Court never intended to, and in
fact never did, rule against the validity of provisions of the
Warsaw Convention. Consequently, by no stretch of the
imagination may said quotation from Northwestbe considered

as supportive of the appellate court's statement that the


provisions of the Warsaw Convention limited a carrier's liability
are against public policy.
2. The Court finds itself unable to agree with the decision of the
trial court, and affirmed by the Court of Appeals, awarding
private respondents damages as and for lost profits when their
contracts to show the films in Guam and San Francisco,
California were cancelled.
The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90
Phil. 836 (1952)] cannot be any clearer:
...Under Art.1107 of the Civil Code, a debtor in
good faith like the defendant herein, may be
held liable only for damages that were
foreseen or might have been foreseen at the
time the contract of transportation was
entered into. The trial court correctly found
that the defendant company could not have
foreseen the damages that would be suffered
by Mendoza upon failure to deliver the can of
film on the 17th of September, 1948 for the
reason that the plans of Mendoza to exhibit
that film during the town fiesta and his
preparations, specially the announcement of
said exhibition by posters and advertisement
in the newspaper, were not called to the
defendant's attention.
In our research for authorities we have found a case very
similar to the one under consideration. In the case of Chapman
vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New
York, delivered motion picture films to the defendant Fargo, an
express company, consigned and to be delivered to him in
Utica. At the time of shipment the attention of the express
company was called to the fact that the shipment involved
motion picture films to be exhibited in Utica, and that they
should be sent to their destination, rush. There was delay in
their delivery and it was found that the plaintiff because of his
failure to exhibit the film in Utica due to the delay suffered
damages or loss of profits. But the highest court in the State of
New York refused to award him special damages. Said
appellate court observed:
But before defendant could be held to special
damages, such as the present alleged loss of
profits on account of delay or failure of
delivery, it must have appeared that he had
notice at the time of delivery to him of the
particular circumstances attending the
shipment, and which probably would lead to
such special loss if he defaulted. Or, as the
rule has been stated in another form, in order
to purpose on the defaulting party further
liability than for damages naturally and
directly, i.e., in the ordinary course of things,
arising from a breach of contract, such
unusual or extraordinary damages must have
been brought within the contemplation of the
parties as the probable result of breach at the
time of or prior to contracting. Generally,
notice then of any special circumstances

which will show that the damages to be


anticipated from a breach would be enhanced
has been held sufficient for this effect.
As may be seen, that New York case is a stronger one than the
present case for the reason that the attention of the common
carrier in said case was called to the nature of the articles
shipped, the purpose of shipment, and the desire to rush the
shipment, circumstances and facts absent in the present case.
[Emphasis supplied.]
Thus, applying the foregoing ruling to the facts of the instant
case, in the absence of a showing that petitioner's attention
was called to the special circumstances requiring prompt
delivery of private respondent Pangan's luggages, petitioner
cannot be held liable for the cancellation of private
respondents' contracts as it could not have foreseen such an
eventuality when it accepted the luggages for transit.
The Court is unable to uphold the Intermediate Appellate
Court's disregard of the rule laid down in Mendoza and
affirmance of the trial court's conclusion that petitioner is liable
for damages based on the finding that "[tlhe undisputed fact is
that the contracts of the plaintiffs for the exhibition of the films
in Guam and California were cancelled because of the loss of
the two luggages in question." [Rollo, p. 36] The evidence
reveals that the proximate cause of the cancellation of the
contracts was private respondent Pangan's failure to deliver
the promotional and advertising materials on the dates agreed
upon. For this petitioner cannot be held liable. Private
respondent Pangan had not declared the value of the two
luggages he had checked in and paid additional charges.
Neither was petitioner privy to respondents' contracts nor was
its attention called to the condition therein requiring delivery
of the promotional and advertising materials on or before a
certain date.
3. With the Court's holding that petitioner's liability is limited to
the amount stated in the ticket, the award of attorney's fees,
which is grounded on the alleged unjustified refusal of
petitioner to satisfy private respondent's just and valid claim,
loses support and must be set aside.
WHEREFORE, the Petition is hereby GRANTED and the Decision
of the Intermediate Appellate Court is SET ASIDE and a new
judgment is rendered ordering petitioner to pay private
respondents damages in the amount of US $600.00 or its
equivalent in Philippine currency at the time of actual payment.
SO ORDERED.
Fernan, C.J., Feliciano and Bidin JJ., concur.
Gutierrez, Jr., J., took no part.

CHINA AIRLINES, petitioner, vs. DANIEL CHIOK, respondent.


DECISION
PANGANIBAN, J.:
A common carrier has a peculiar relationship with and an
exacting responsibility to its passengers. For reasons of public
interest and policy, the ticket-issuing airline acts as principal in
a contract of carriage and is thus liable for the acts and the
omissions of any errant carrier to which it may have endorsed
any sector of the entire, continuous trip.

The Case
Before the Court is a Petition for Review on
[1]
Certiorari under Rule 45 of the Rules of Court, seeking to
[2]
reverse the August 7, 2001 Decision and the February 7, 2002
[3]
Resolution of the Court of Appeals (CA) in CA-GR CV No.
45832. The challenged Decision disposed as follows:
WHEREFORE, premises considered, the assailed Decision
dated July 5, 1991 of Branch 31, Regional Trial Court, National
Capital Judicial Region, Manila, in Civil Case No. 82-13690, is
hereby MODIFIED by deleting that portion regarding
defendants-appellants liabilities for the payment of the actual
damages amounting to HK$14,128.80 and US$2,000.00 while
all other respects are AFFIRMED. Costs against defendants[4]
appellants.
The assailed Resolution denied Petitioners Motion for
Partial Reconsideration.
The Facts
[5]
The facts are narrated by the CA as follows:
On September 18, 1981, Daniel Chiok (hereafter referred to as
Chiok) purchased from China Airlines, Ltd. (CAL for brevity)
airline passenger ticket number 297:4402:004:278:5 for air
transportation covering Manila-Taipei-Hongkong-Manila. Said
ticket was exclusively endorseable to Philippine Airlines, Ltd.
(PAL for brevity).
Subsequently, on November 21, 1981, Chiok took his trip from
Manila to Taipei using [the] CAL ticket. Before he left for said
trip, the trips covered by the ticket were pre-scheduled and
confirmed by the former. When he arrived in Taipei, he went
to the CAL office and confirmed his Hongkong to Manila trip on
board PAL Flight No. PR 311. The CAL office attached a yellow
sticker appropriately indicating that his flight status was OK.
When Chiok reached Hongkong, he went to the PAL office and
sought to reconfirm his flight back to Manila. The PAL office
confirmed his return trip on board Flight No. PR 311 and
attached its own sticker. On November 24, 1981, Chiok
proceeded to Hongkong International Airport for his return trip
to Manila. However, upon reaching the PAL counter, Chiok saw
a poster stating that PAL Flight No. PR 311 was cancelled
because of a typhoon in Manila. He was then informed that all
the confirmed ticket holders of PAL Flight No. PR 311 were
automatically booked for its next flight, which was to leave the
next day. He then informed PAL personnel that, being the
founding director of the Philippine Polysterene Paper
Corporation, he ha[d] to reach Manila on November 25, 1981
because of a business option which he ha[d] to execute on said
date.
On November 25, 1981, Chiok went to the airport. Cathay
Pacific stewardess Lok Chan (hereafter referred to as Lok) ha[d]
taken and received Chioks plane ticket and his luggage. Lok
called the attention of Carmen Chan (hereafter referred to as
Carmen), PALs terminal supervisor, and informed the latter
that Chioks name was not in the computer list of
passengers. Subsequently, Carmen informed Chiok that his
name did not appear in PALs computer list of passengers and
therefore could not be permitted to board PAL Flight No. PR
307.
Meanwhile, Chiok requested Carmen to put into writing the
alleged reason why he was not allowed to take his flight. The

latter then wrote the following, to wit: PAL STAFF CARMEN


CHAN CHKD WITH R/C KENNY AT 1005H NO SUCH NAME IN
COMPUTER FOR 311/24 NOV AND 307/25 NOV. The latter
sought to recover his luggage but found only 2 which were
placed at the end of the passengers line. Realizing that his new
Samsonite luggage was missing, which contained cosmetics
worth HK$14,128.80, he complained to Carmen.
Thereafter, Chiok proceeded to PALs Hongkong office and
confronted PALs reservation officer, Carie Chao (hereafter
referred to as Chao), who previously confirmed his flight back
to Manila. Chao told Chiok that his name was on the list and
pointed to the latter his computer number listed on the PAL
confirmation sticker attached to his plane ticket, which number
was R/MN62.
Chiok then decided to use another CAL ticket with No.
297:4402:004:370:5 and asked Chao if this ticket could be used
to book him for the said flight. The latter, once again, booked
and confirmed the formers trip, this time on board PAL Flight
No. PR 311 scheduled to depart that evening. Later, Chiok
went to the PAL check-in counter and it was Carmen who
attended to him. As this juncture, Chiok had already placed his
travel documents, including his clutch bag, on top of the PAL
check-in counter.
Thereafter, Carmen directed PAL personnel to transfer
counters. In the ensuing commotion, Chiok lost his clutch bag
containing the following, to wit: (a) $2,000.00; (b)
HK$2,000.00; (c) Taipei $8,000.00; (d)P2,000.00; (e) a threepiece set of gold (18 carats) cross pens valued at P3,500; (f) a
Cartier watch worth about P7,500.00; (g) a tie clip with a
garnet birthstone and diamond worth P1,800.00; and (h) a [pair
of] Christian Dior reading glasses. Subsequently, he was placed
on stand-by and at around 7:30 p.m., PAL personnel informed
him that he could now check-in.
Consequently, Chiok as plaintiff, filed a Complaint on
November 9, 1982 for damages, against PAL and CAL, as
defendants, docketed as Civil Case No. 82-13690, with Branch
31, Regional Trial Court, National Capital Judicial Region,
Manila.
He alleged therein that despite several confirmations of his
flight, defendant PAL refused to accommodate him in Flight No.
307, for which reason he lost the business option
aforementioned. He also alleged that PALs personnel,
specifically Carmen, ridiculed and humiliated him in the
presence of so many people. Further, he alleged that
defendants are solidarily liable for the damages he suffered,
[6]
since one is the agent of the other.
The Regional Trial Court (RTC) of Manila held CAL and PAL
jointly and severally liable to respondent. It did not, however,
rule on their respective cross-claims. It disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff
and against the defendants to jointly and severally pay:
1.
Actual damages in the amount of
HK$14,128.80 or its equivalent in
Philippine Currency at the time of
the loss of the luggage consisting of
cosmetic products;

2.

US$2,000.00 or its equivalent at the


time of the loss of the clutch bag
containing the money;
3.
P200,000.00 by way of moral damages;
4.
P50,000.00 by way of exemplary
damages or corrective damages;
5.
Attorney*+s fees equivalent to 10% of
the amounts due and demandable
and awarded in favor of the plaintiff;
and
[7]
6.
The costs of this proceedings.
The two carriers appealed the RTC Decision to the CA.
Ruling of the Court of Appeals
Affirming the RTC, the Court of Appeals debunked
petitioners claim that it had merely acted as an issuing agent
for the ticket covering the Hong Kong-Manila leg of
respondents journey. In support of its Decision, the CA quoted
a purported ruling of this Court in KLM Royal Dutch Airlines v.
[8]
Court of Appeals as follows:
Article 30 of the Warsaw providing that in case of
transportation to be performed by various successive carriers,
the passenger can take action only against the carrier who
performed the transportation during which the accident or the
delay occurred presupposes the occurrence of either an
accident or delay in the course of the air trip, and does not
apply if the damage is caused by the willful misconduct on the
part of the carriers employee or agent acting within the scope
of his employment.
It would be unfair and inequitable to charge a passenger with
automatic knowledge or notice of a condition which
purportedly would excuse the carrier from liability, where the
notice is written at the back of the ticket in letters so small that
one has to use a magnifying glass to read the words. To
preclude any doubt that the contract was fairly and freely
agreed upon when the passenger accepted the passage ticket,
the carrier who issued the ticket must inform the passenger of
the conditions prescribed in the ticket or, in the very least,
ascertain that the passenger read them before he accepted the
passage ticket. Absent any showing that the carriers officials
or employees discharged this responsibility to the passenger,
the latter cannot be bound by the conditions by which the
carrier assumed the role of a mere ticket-issuing agent for
other airlines and limited its liability only to untoward
occurrences in its own lines.
Where the passage tickets provide that the carriage to be
performed thereunder by several successive carriers is to be
regarded as a single operation, the carrier which issued the
tickets for the entire trip in effect guaranteed to the passenger
that the latter shall have sure space in the various carriers
which would ferry him through the various segments of the
trip, and the ticket-issuing carrier assumes full responsibility for
the entire trip and shall be held accountable for the breach of
that guaranty whether the breach occurred in its own lines or
[9]
in those of the other carriers.
On PALs appeal, the appellate court held that the carrier
had reneged on its obligation to transport respondent when, in
spite of the confirmations he had secured for Flight PR 311, his
name did not appear in the computerized list of

passengers. Ruling that the airlines negligence was the


proximate cause of his excoriating experience, the appellate
court sustained the award of moral and exemplary damages.
The CA, however, deleted the RTCs award of actual
damages amounting to HK$14,128.80 and US$2,000.00,
because the lost piece of luggage and clutch bag had not
actually been checked in or delivered to PAL for
transportation to Manila.
On August 28, 2001, petitioner filed a Motion for Partial
Reconsideration, contending that the appellate court had
erroneously relied on a mere syllabus of KLM v. CA, not on the
actual ruling therein. Moreover, it argued that respondent was
fully aware that the booking for the PAL sector had been made
only upon his request; and that only PAL, not CAL, was liable for
the actual carriage of that segment. Petitioner likewise prayed
for a ruling on its cross-claim against PAL, inasmuch as the
latters employees had acted negligently, as found by the trial
court.
Denying the Motion, the appellate court ruled that
petitioner had failed to raise any new matter or issue that
would warrant a modification or a reversal of the Decision. As
to the alleged misquotation, the CA held that while the portion
it had cited appeared to be different from the wording of the
actual ruling, the variance was more apparent than real since
[10]
the difference *was+ only in form and not in substance.
CAL and PAL filed separate Petitions to assail the CA
Decision. In its October 3, 2001 Resolution, this Court denied
PALs appeal, docketed as GR No. 149544, for failure to serve
the CA a copy of the Petition as required by Section 3, Rule 45,
in relation to Section 5(d) of Rule 56 and paragraph 2 of
Revised Circular No. 1-88 of this Court. PALs Motion for
Reconsideration was denied with finality on January 21, 2002.
[11]
Only the appeal of CAL remains in this Court.
Issues
In its Memorandum, petitioner raises the following issues
for the Courts consideration:
1. The Court of Appeals committed judicial
misconduct in finding liability against the petitioner
on the basis of a misquotation from KLM Royal
Dutch Airlines vs. Court of Appeals, et al., 65 SCRA
237 and in magnifying its misconduct by denying the
petitioners Motion for Reconsideration on a mere
syllabus, unofficial at that.
2. The Court of Appeals committed an error of
law when it did not apply applicable precedents on
the case before it.
3. The Court of Appeals committed a non
sequitur when it did not rule on the cross-claim of
[12]
the petitioner.
The Courts Ruling
The Petition is not meritorious.
First Issue:
Alleged Judicial Misconduct
Petitioner charges the CA with judicial misconduct for
quoting from and basing its ruling against the two airlines on an
unofficial syllabus of this Courts ruling in KLM v.
CA. Moreover, such misconduct was allegedly aggravated
when the CA, in an attempt to justify its action, held that the

difference between the actual ruling and the syllabus was


[13]
more apparent than real.
We agree with petitioner that the CA committed a lapse
when it relied merely on the unofficial syllabus of our ruling
in KLM v. CA. Indeed, lawyers and litigants are mandated to
[14]
quote decisions of this Court accurately.
By the same token,
judges should do no less by strictly abiding by this rule when
they quote cases that support their judgments and decisions.
Canon 3 of the Code of Judicial Conduct enjoins them to
perform official duties diligently by being faithful to the law and
maintaining their professional competence.
However, since this case is not administrative in nature,
we cannot rule on the CA justices administrative liability, if
any, for this lapse. First, due process requires that in
administrative proceedings, the respondents must first be
given an opportunity to be heard before sanctions can be
imposed. Second, the present action is an appeal from the CAs
Decision, not an administrative case against the magistrates
concerned. These two suits are independent of and separate
from each other and cannot be mixed in the same proceedings.
By merely including the lapse as an assigned error here
without any adequate and proper administrative case therefor,
petitioner cannot expect the imposition of an administrative
sanction.
In the case at bar, we can only determine whether the
error in quotation would be sufficient to reverse or modify the
CA Decision.
Applicability of KLM v. CA
In KLM v. CA, the petitioner therein issued tickets to the
Mendoza spouses for their world tour. The tour included a
Barcelona-Lourdes route, which was serviced by the Irish airline
Aer Lingus. At the KLM office in Frankfurt, Germany, they
obtained a confirmation from Aer Lingus of their seat
reservations on its Flight 861. On the day of their departure,
however, the airline rudely off-loaded them.
When sued for breach of contract, KLM sought to be
excused for the wrongful conduct of Aer Lingus by arguing that
its liability for damages was limited only to occurrences on its
own sectors. To support its argument, it cited Article 30 of the
Warsaw Convention, stating that when transportation was to
be performed by various successive carriers, the passenger
could take action only against the carrier that had performed
the transportation when the accident or delay occurred.
In holding KLM liable for damages, we ruled as follows:
1. The applicability insisted upon by the KLM of article 30 of
the Warsaw Convention cannot be sustained. That article
presupposes the occurrence of either an accident or a delay,
neither of which took place at the Barcelona airport; what is
here manifest, instead, is that the Aer Lingus, through its
manager there, refused to transport the respondents to their
planned and contracted destination.
2. The argument that the KLM should not be held
accountable for the tortious conduct of Aer Lingus because of
the provision printed on the respondents' tickets expressly
limiting the KLM's liability for damages only to occurrences on
its own lines is unacceptable. As noted by the Court of Appeals
that condition was printed in letters so small that one would
have to use a magnifying glass to read the words. Under the

circumstances, it would be unfair and inequitable to charge the


respondents with automatic knowledge or notice of the said
condition so as to preclude any doubt that it was fairly and
freely agreed upon by the respondents when they accepted the
passage tickets issued to them by the KLM. As the airline which
issued those tickets with the knowledge that the respondents
would be flown on the various legs of their journey by different
air carriers, the KLM was chargeable with the duty and
responsibility of specifically informing the respondents of
conditions prescribed in their tickets or, in the very least, to
ascertain that the respondents read them before they accepted
their passage tickets. A thorough search of the record,
however, inexplicably fails to show that any effort was exerted
by the KLM officials or employees to discharge in a proper
manner this responsibility to the respondents. Consequently,
we hold that the respondents cannot be bound by the
provision in question by which KLM unilaterally assumed the
role of a mere ticket-issuing agent for other airlines and limited
its liability only to untoward occurrences on its own lines.
3. Moreover, as maintained by the respondents and the
Court of Appeals, the passage tickets of the respondents
provide that the carriage to be performed thereunder by
several successive carriers is to be regarded as a single
operation, which is diametrically incompatible with the theory
of the KLM that the respondents entered into a series of
independent contracts with the carriers which took them on
the various segments of their trip. This position of KLM we
reject. The respondents dealt exclusively with the KLM which
issued them tickets for their entire trip and which in effect
guaranteed to them that they would have sure space in Aer
Lingus flight 861. The respondents, under that assurance of the
internationally prestigious KLM, naturally had the right to
expect that their tickets would be honored by Aer Lingus to
which, in the legal sense, the KLM had indorsed and in effect
guaranteed the performance of its principal engagement to
carry out the respondents' scheduled itinerary previously and
mutually agreed upon between the parties.
4. The breach of that guarantee was aggravated by the
discourteous and highly arbitrary conduct of an official of the Aer
Lingus which the KLM had engaged to transport the respondents
on the Barcelona-Lourdes segment of their itinerary. It is but just
and in full accord with the policy expressly embodied in our civil
law which enjoins courts to be more vigilant for the protection of
a contracting party who occupies an inferior position with
respect to the other contracting party, that the KLM should be
held responsible for the abuse, injury and embarrassment
suffered by the respondents at the hands of a supercilious boor
[15]
of the Aer Lingus.
In the instant case, the CA ruled that under the contract
of transportation, petitioner -- as the ticket-issuing carrier (like
KLM) -- was liable regardless of the fact that PAL was to
perform or had performed the actual carriage. It elucidated on
this point as follows:
By the very nature of their contract, defendant-appellant CAL
is clearly liable under the contract of carriage with [respondent]
and remains to be so, regardless of those instances when
actual carriage was to be performed by another carrier. The
issuance of a confirmed CAL ticket in favor of [respondent]

covering his entire trip abroad concretely attests to this. This


also serves as proof that defendant-appellant CAL, in effect
guaranteed that the carrier, such as defendant-appellant PAL
would honor his ticket, assure him of a space therein and
[16]
transport him on a particular segment of his trip.
Notwithstanding the errant quotation, we have found
after careful deliberation that the assailed Decision is
supported in substance by KLM v. CA. The misquotation by the
CA cannot serve as basis for the reversal of its ruling.
Nonetheless, to avert similar incidents in the future, this
Court hereby exhorts members of the bar and the bench to
refer to and quote from the official repository of our decisions,
[17]
thePhilippine Reports, whenever practicable.
In the absence
of this primary source, which is still being updated, they may
[18]
resort to unofficial sources like the SCRA.
We remind them
that the Courts ponencia, when used to support a judgment or
[19]
ruling, should be quoted accurately.
Second Issue:
Liability of the Ticket-Issuing Airline
We now come to the main issue of whether CAL is liable
for damages. Petitioner posits that the CA Decision must be
annulled, not only because it was rooted on an erroneous
quotation, but also because it disregarded jurisprudence,
notably China
Airlines
v.
Intermediate
Appellate
[20]
[21]
Court and China Airlines v. Court of Appeals.
Jurisprudence Supports
CA Decision
It is significant to note that the contract of air
transportation was between petitioner and respondent, with
the former endorsing to PAL the Hong Kong-to-Manila segment
of the journey. Such contract of carriage has always been
treated in this jurisdiction as a single operation. This
jurisprudential rule is supported by the Warsaw
[22]
Convention, to which the Philippines is a party, and by the
existing practices of the International Air Transport Association
(IATA).
Article 1, Section 3 of the Warsaw Convention states:
Transportation to be performed by several successive air
carriers shall be deemed, for the purposes of this Convention,
to be one undivided transportation, if it has been regarded by
the parties as a single operation, whether it has been agreed
upon under the form of a single contract or of a series of
contracts, and it shall not lose its international character
merely because one contract or a series of contracts is to be
performed entirely within a territory subject to the sovereignty,
suzerainty, mandate, or authority of the same High Contracting
[23]
Party.
Article 15 of IATA-Recommended Practice similarly
provides:
Carriage to be performed by several successive carriers under
one ticket, or under a ticket and any conjunction ticket issued
therewith, is regarded as a single operation.
[24]
In American Airlines v. Court of Appeals, we have noted
that under a general pool partnership agreement, the ticketissuing airline is the principal in a contract of carriage, while the
endorsee-airline is the agent.
x x x Members of the IATA are under a general pool
partnership agreement wherein they act as agent of each other

in the issuance of tickets to contracted passengers to boost


ticket sales worldwide and at the same time provide
passengers easy access to airlines which are otherwise
inaccessible in some parts of the world. Booking and
reservation among airline members are allowed even by
telephone and it has become an accepted practice among
them. A member airline which enters into a contract of carriage
consisting of a series of trips to be performed by different
carriers is authorized to receive the fare for the whole trip and
through the required process of interline settlement of
accounts by way of the IATA clearing house an airline is duly
compensated for the segment of the trip serviced. Thus, when
the petitioner accepted the unused portion of the conjunction
tickets, entered it in the IATA clearing house and undertook to
transport the private respondent over the route covered by the
unused portion of the conjunction tickets, i.e., Geneva to New
York, the petitioner tacitly recognized its commitment under
the IATA pool arrangement to act as agent of the principal
contracting airline, Singapore Airlines, as to the segment of the
trip the petitioner agreed to undertake. As such, the petitioner
thereby assumed the obligation to take the place of the carrier
originally designated in the original conjunction ticket. The
petitioners argument that it is not a designated carrier in the
original conjunction tickets and that it issued its own ticket is
not decisive of its liability. The new ticket was simply a
replacement for the unused portion of the conjunction ticket,
both tickets being for the same amount of US$ 2,760 and
having the same points of departure and destination. By
constituting itself as an agent of the principal carrier the
petitioners undertaking should be taken as part of a single
operation under the contract of carriage executed by the
[25]
private respondent and Singapore Airlines in Manila.
Likewise, as the principal in the contract of carriage, the
[26]
petitioner in British Airways v. Court of Appeals was held
liable, even when the breach of contract had occurred, not on
its own flight, but on that of another airline. The Decision
followed our ruling in Lufthansa German Airlines v. Court of
[27]
Appeals, in which we had held that the obligation of the
ticket-issuing airline remained and did not cease, regardless of
the fact that another airline had undertaken to carry the
passengers to one of their destinations.
In the instant case, following the jurisprudence cited
above, PAL acted as the carrying agent of CAL. In the same way
that we ruled against British Airways and Lufthansa in the
aforementioned cases, we also rule that CAL cannot evade
liability to respondent, even though it may have been only a
ticket issuer for the Hong Kong-Manila sector.
Moral and Exemplary Damages
Both the trial and the appellate courts found that
respondent had satisfactorily proven the existence of the
factual basis for the damages adjudged against petitioner and
PAL. As a rule, the findings of fact of the CA affirming those of
[28]
the RTC will not be disturbed by this Court.
Indeed, the
Supreme Court is not a trier of facts. As a rule also, only
questions of law -- as in the present recourse -- may be raised
in petitions for review under Rule 45.

Moral damages cannot be awarded in breaches of


carriage contracts, except in the two instances contemplated in
Articles 1764 and 2220 of the Civil Code, which we quote:
Article 1764. Damages in cases comprised in this Section shall
be awarded in accordance with Title XVIII of this Book,
concerning Damages. Article 2206 shall also apply to the death
of a passenger caused by the breach of contract by a common
carrier.
x
x
x
x
x
x
xxx
Article 2220. Willful injury to property may be a legal ground
for awarding moral damages if the court should find that,
under the circumstances, such damages are justly due. The
same rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith. (Italics supplied)
There is no occasion for us to invoke Article 1764
here. We must therefore determine if CAL or its agent (PAL) is
guilty of bad faith that would entitle respondent to moral
damages.
[29]
In Lopez v. Pan American World Airways, we
defined bad faith as a breach of a known duty through some
motive of interest or ill will.
In the case at bar, the known duty of PAL was to transport
herein respondent from Hong Kong to Manila. That duty arose
when its agent confirmed his reservation for Flight PR
[30]
311, and it became demandable when he presented himself
for the trip on November 24, 1981.
It is true that due to a typhoon, PAL was unable to
transport respondent on Flight PR 311 on November 24, 1981.
This fact, however, did not terminate the carriers responsibility
to its passengers. PAL voluntarily obligated itself to
automatically transfer all confirmed passengers of PR 311 to
[31]
the next available flight, PR 307, on the following day.
That
responsibility was subsisting when respondent, holding a
confirmed ticket for the former flight, presented himself for the
latter.
The records amply establish that he secured repeated
confirmations of his PR 311 flight on November 24,
1981. Hence, he had every reason to expect that he would be
put on the replacement flight as a confirmed
passenger. Instead, he was harangued and prevented from
boarding the original and the replacement flights. Thus, PAL
breached its duty to transport him. After he had been directed
to pay the terminal fee, his pieces of luggage were removed
[32]
from the weighing-in counter despite his protestations.
It is relevant to point out that the employees of PAL were
utterly insensitive to his need to be in Manila on November 25,
1981, and to the likelihood that his business affairs in the city
would be jeopardized because of a mistake on their part. It
was that mistake that had caused the omission of his name
from the passenger list despite his confirmed flight ticket. By
merely looking at his ticket and validation sticker, it is evident
that the glitch was the airlines fault. However, no serious
attempt was made by PAL to secure the all-important
transportation of respondent to Manila on the following
day. To make matters worse, PAL allowed a group of nonrevenue passengers, who had no confirmed tickets or
[33]
reservations, to board Flight PR 307.

Time and time again, this Court has stressed that the
business of common carriers is imbued with public interest and
duty; therefore, the law governing them imposes an exacting
[34]
[35]
standard. In Singson v. Court of Appeals, we said:
x x x *T+he carrier's utter lack of care and sensitivity to the
needs of its passengers, clearly constitutive of gross negligence,
recklessness and wanton disregard of the rights of the latter,
[are] acts evidently indistinguishable or no different from fraud,
malice and bad faith. As the rule now stands, where in
breaching the contract of carriage the defendant airline is
shown to have acted fraudulently, with malice or in bad faith,
the award of moral and exemplary damages, in addition to
[36]
actual damages, is proper. (Italics supplied)
[37]
In Saludo v. Court of Appeals, the Court reminded
airline companies that due to the nature of their business, they
must not merely give cursory instructions to their personnel to
be more accommodating towards customers, passengers and
the general public; they must require them to be so.
The acts of PALs employees, particularly Chan, clearly fell
short of the extraordinary standard of care that the law
[38]
requires of common carriers.
As narrated in Chans oral
[39]
deposition, the manner in which the airline discharged its
responsibility to respondent and its other passengers
manifested a lack of the requisite diligence and due regard for
their welfare. The pertinent portions of the Oral Deposition are
reproduced as follows:
Q Now you said that flight PR 311 on 24th
November was cancelled due to [a] typhoon
and naturally the passengers on said flight had
to be accommodated on the first flight the
following
day
or
the
first
flight
subsequently. [W]ill you tell the Honorable
Deposition Officer the procedure followed by
Philippine Airlines in the handling of passengers
of cancelled flight[s] like that of PR 311 which
was cancelled due to [a] typhoon?
A The procedure will be: all the confirmed
passengers from [PR] 311 24th November [are]
automatically transfer[red] to [PR] 307, 25th
November[,] as a protection for all
disconfirmed passengers.
Q Aside from this procedure[,] what do you do
with the passengers on the cancelled flight who
are expected to check-in on the flights if this
flight is cancelled or not operating due to
typhoon or other reasons[?] In other words,
are they not notified of the cancellation?
A I think all these passengers were not notified
because of a typhoon and Philippine Airlines
Reservation were [sic] not able to call every
passenger by phone.
Atty. Fruto:
Q Did you say were not notified?
A I believe they were not, but believe me, I was on
day-off.
Atty. Calica:

Q Per procedure, what should have been done by


Reservations Office when a flight is cancelled
for one reason or another?
A If there is enough time, of course, Reservations
Office x x x call[s] up all the passengers and
tell[s] them the reason. But if there [is] no
time[,] then the Reservations Office will not be
[40]
able to do that.
x
x
x
x
xxx
Q I see. Miss Chan, I [will] show you a ticket which
has been marked as Exh. A and A-1. Will you
please go over this ticket and tell the court
whether this is the ticket that was used
precisely by Mr. Chiok when he checked-in at
[F]light 307, 25 November 81?
A [Are you] now asking me whether he used this
ticket with this sticker?
Q No, no, no. That was the ticket he used.
A Yes, [are you] asking me whether I saw this
ticket?
Atty. Fruto: Yes.
A I believe I saw it.
Q You saw it, O.K. Now of course you will agree
with me Miss Chan that this yellow stub here
which has been marked as Exh. A-1-A, show[s]
that the status on flight 311, 24th November, is
O.K., correct?
A Yes.
Q You agree with me. And you will also agree with
me that in this ticket of flight 311, on this,
another sticker Exh. A-1-B for 24 November is
O.K.?
A May I x x x look at them. Yes, it says O.K. x x x,
but [there is] no validation.
Q O.K. Miss Chan what do you understand by these
[41]
entries here R bar M N 6 V?
A This is what we call a computer reference.
Q I see. This is a computer reference showing that
the name of Mr. Chiok has been entered in
Philippine Airlines computer, and this is his
computer number.
A Yes.
Q Now you stated in your answer to the procedure
taken, that all confirmed passengers on flight
311, 24 November[,] were automatically
transferred to 307 as a protection for the
passengers, correct?
A Correct.
Q So that since following the O.K. status of Mr.
Chioks reservation *on+ flight 311, *he+ was
also automatically transferred to flight 307 the
following day?
A Should be.
Q Should be. O.K. Now do you remember how
many passengers x x x were transferred from
flight 311, 24 November to flight 307, 25
November 81?

I can only give you a very brief idea because that


was supposed to be air bus so it should be able
to accommodate 246 people; but how many
[42]
*exactly+, I dont know.
x
x
x
x
x
x
xxx
Q So, between six and eight oclock in the evening
of 25 November 81, Mr. Chiok already told you
that he just [came] from the Swire Building
where Philippine Airlines had [its] offices and
that he told you that his space for 311 25
November 81 was confirmed?
A Yes.
Q That is what he told you. He insisted on that
flight?
A Yes.
Q And did you not try to call up Swire Building-Philippine Airlines and verify indeed if Mr.
Chiok was there?
A Swire House building is not directly under
Philippine Airlines. it is just an agency for selling
Philippine Airlines ticket. And besides around
six o clock theyre close*d+ in Central.
Q So this Swire Building is an agency authorized by
Philippine Airlines to issue tickets for and on
behalf of Philippine Airlines and also...
A Yes.
Q And also to confirm spaces for and on behalf of
Philippine Airlines.
[43]
A Yes.
Under the foregoing circumstances, we cannot apply our
1989 ruling in China Airlines v. Intermediate Appellate
[44]
Court, which petitioner urges us to adopt. In that case, the
breach of contract and the negligence of the carrier in effecting
the immediate flight connection for therein private respondent
[45]
was incurred in good faith.
Having found no gross
negligence or recklessness, we thereby deleted the award of
[46]
moral and exemplary damages against it.
This Courts 1992 ruling in China Airlines v. Court of
[47]
Appeals is likewise inapplicable. In that case, we found no
bad faith or malice in the airlines breach of its contractual
[48]
obligation. We held that, as shown by the flow of telexes
from one of the airlines offices to the others, petitioner
therein had exercised diligent efforts in assisting the private
respondent change his flight schedule. In the instant case,
petitioner failed to exhibit the same care and sensitivity to
respondents needs.
[49]
In Singson v. Court of Appeals, we said:
x x x Although the rule is that moral damages predicated upon
a breach of contract of carriage may only be recoverable in
instances where the mishap results in the death of a passenger,
or where the carrier is guilty of fraud or bad faith, there are
situations where the negligence of the carrier is so gross and
reckless as to virtually amount to bad faith, in which case, the
passenger likewise becomes entitled to recover moral
damages.
In the present case, we stress that respondent had
repeatedly secured confirmations of his PR 311 flight on

November 24, 1981 -- initially from CAL and subsequently from


the PAL office in Hong Kong. The status of this flight was
marked OK on a validating sticker placed on his ticket. That
sticker also contained the entry RMN6V. Ms Chan explicitly
acknowledged that such entry was a computer reference that
meant that respondents name had been entered in PALs
computer.
Since the status of respondent on Flight PR 311 was OK,
as a matter of right testified to by PALs witness, he should
have been automatically transferred to and allowed to board
Flight 307 the following day. Clearly resulting from negligence
on the part of PAL was its claim that his name was not included
in its list of passengers for the November 24, 1981 PR 311 flight
and, consequently, in the list of the replacement flight PR
307. Since he had secured confirmation of his flight -- not only
once, but twice -- by personally going to the carriers offices
where he was consistently assured of a seat thereon -- PALs
negligence was so gross and reckless that it amounted to bad
faith.
In view of the foregoing, we rule that moral and
[50]
exemplary damages were properly awarded by the lower
[51]
courts.
Third Issue:
Propriety of the Cross-Claim
We now look into the propriety of the ruling on CALs
cross-claim against PAL. Petitioner submits that the CA should
have ruled on the cross-claim, considering that the RTC had
found that it was PALs employees who had acted negligently.
Section 8 of Rule 6 of the Rules of Court reads:
Sec. 8. Cross-claim. - A cross claim is any claim by one party
against a co-party arising out of the transaction or occurrence
that is the subject matter either of the original action or of a
counterclaim therein. Such cross-claim may include a claim
that the party against whom it is asserted is or may be liable to
the cross-claimant for all or part of a claim asserted in the
action against the cross-claimant.
For purposes of a ruling on the cross-claim, PAL is an
[52]
indispensable party. In BA Finance Corporation v. CA, the
Court stated:
x x x. An indispensable party is one whose interest will be
affected by the courts action in the litigation, and without
whom no final determination of the case can be had. The
partys interest in the subject matter of the suit and in the relief
sought are so inextricably intertwined with the other parties
that his legal presence as a party to the proceeding is an
absolute necessity. In his absence there cannot be a resolution
of the dispute of the parties before the court which is
effective, complete, or equitable.
x
x
x
x
x
x
xxx
Without the presence of indispensable parties to a suit or
proceeding, judgment of a court cannot attain real finality.
PALs interest may be affected by any ruling of this Court
on CALs cross-claim. Hence, it is imperative and in accordance
with due process and fair play that PAL should have been
impleaded as a party in the present proceedings, before this
Court can make a final ruling on this matter.

Although PAL was petitioners co-party in the case before


the RTC and the CA, petitioner failed to include the airline in
the present recourse. Hence, the Court has no jurisdiction over
it. Consequently, to make any ruling on the cross-claim in the
present Petition would not be legally feasible because PAL, not
[53]
being a party in the present case, cannot be bound thereby.
WHEREFORE, the Petition is DENIED. Costs against
petitioner.
SO ORDERED.

G.R. No. 101538 June 23, 1992


AUGUSTO BENEDICTO SANTOS III, represented by his father
and legal guardian, Augusto Benedicto Santos, petitioner,
vs.
NORTHWEST
ORIENT
AIRLINES
and
COURT
OF
APPEALS, respondents.
CRUZ, J.:
This case involves the Proper interpretation of Article 28(1) of
the Warsaw Convention, reading as follows:
Art. 28. (1) An action for damage must be
brought at the option of the plaintiff, in the
territory of one of the High Contracting
Parties, either before the court of the
domicile of the carrier or of his principal place
of business, or where he has a place of
business through which the contract has been
made, or before the court at the place of
destination.
The petitioner is a minor and a resident of the Philippines.
Private respondent Northwest Orient Airlines (NOA) is a foreign
corporation with principal office in Minnesota, U.S.A. and
licensed to do business and maintain a branch office in the
Philippines.
On October 21, 1986, the petitioner purchased from NOA a
round-trip ticket in San Francisco. U.S.A., for his flight from San
Francisco to Manila via Tokyo and back. The scheduled
departure date from Tokyo was December 20, 1986. No date
1
was specified for his return to San Francisco.
On December 19, 1986, the petitioner checked in at the NOA
counter in the San Francisco airport for his scheduled
departure to Manila. Despite a previous confirmation and reconfirmation, he was informed that he had no reservation for
his flight from Tokyo to Manila. He therefore had to be waitlisted.
On March 12, 1987, the petitioner sued NOA for damages in
the Regional Trial Court of Makati. On April 13, 1987, NOA
moved to dismiss the complaint on the ground of lack of
jurisdiction. Citing the above-quoted article, it contended that
the complaint could be instituted only in the territory of one of
the High Contracting Parties, before:
1. the court of the domicile of the carrier;
2. the court of its principal place of business;
3. the court where it has a place of business
through which the contract had been made;
4. the court of the place of destination.

The private respondent contended that the Philippines was not


its domicile nor was this its principal place of business. Neither
was the petitioner's ticket issued in this country nor was his
destination Manila but San Francisco in the United States.
On February 1, 1988, the lower court granted the motion and
2
dismissed the case. The petitioner appealed to the Court of
3
Appeals, which affirmed the decision of the lower court. On
June 26, 1991, the petitioner filed a motion for reconsideration,
4
but the same was denied. The petitioner then came to this
Court, raising substantially the same issues it submitted in the
Court of Appeals.
The assignment of errors may be grouped into two major
issues, viz:
(1) the constitutionality of Article 28(1) of the Warsaw
Convention; and
(2) the jurisdiction of Philippine courts over the case.
The petitioner also invokes Article 24 of the Civil Code on the
protection of minors.
I
THE ISSUE OF CONSTITUTIONALITY
A. The petitioner claims that the lower court
erred in not ruling that Article 28(1) of the
Warsaw
Convention
violates
the
constitutional guarantees of due process and
equal protection.
The Republic of the Philippines is a party to the Convention for
the Unification of Certain Rules Relating to International
Transportation by Air, otherwise known as the Warsaw
Convention. It took effect on February 13, 1933. The
Convention was concurred in by the Senate, through its
Resolution No. 19, on May 16, 1950. The Philippine instrument
of accession was signed by President Elpidio Quirino on
October 13, 1950, and was deposited with the Polish
government on November 9, 1950. The Convention became
applicable to the Philippines on February 9, 1951. On
September 23, 1955, President Ramon Magsaysay issued
Proclamation No. 201, declaring our formal adherence thereto.
"to the end that the same and every article and clause thereof
may be observed and fulfilled in good faith by the Republic of
5
the Philippines and the citizens thereof."
The Convention is thus a treaty commitment voluntarily
assumed by the Philippine government and, as such, has the
force and effect of law in this country.
The petitioner contends that Article 28(1) cannot be applied in
the present case because it is unconstitutional. He argues that
there is no substantial distinction between a person who
purchases a ticket in Manila and a person who purchases his
ticket in San Francisco. The classification of the places in which
actions for damages may be brought is arbitrary and irrational
and thus violates the due process and equal protection clauses.
It is well-settled that courts will assume jurisdiction over a
constitutional question only if it is shown that the essential
requisites of a judicial inquiry into such a question are first
satisfied. Thus, there must be an actual case or controversy
involving a conflict of legal rights susceptible of judicial
determination; the constitutional question must have been
opportunely raised by the proper party; and the resolution of

the question is unavoidably necessary to the decision of the


6
case itself.
Courts generally avoid having to decide a constitutional
question. This attitude is based on the doctrine of separation of
powers, which enjoins upon the departments of the
government a becoming respect for each other's acts.
The treaty which is the subject matter of this petition was a
joint legislative-executive act. The presumption is that it was
first carefully studied and determined to be constitutional
before it was adopted and given the force of law in this
country.
The petitioner's allegations are not convincing enough to
overcome this presumption. Apparently, the Convention
considered the four places designated in Article 28 the most
convenient forums for the litigation of any claim that may arise
between the airline and its passenger, as distinguished from all
other places. At any rate, we agree with the respondent court
that this case can be decided on other grounds without the
necessity of resolving the constitutional issue.
B. The petitioner claims that the lower court
erred in not ruling that Art. 28(1) of the
Warsaw Convention is inapplicable because of
a fundamental change in the circumstances
that served as its basis.
The petitioner goes at great lengths to show that the provisions
in the Convention were intended to protect airline companies
under "the conditions prevailing then and which have long
ceased to exist." He argues that in view of the significant
developments in the airline industry through the years, the
treaty has become irrelevant. Hence, to the extent that it has
lost its basis for approval, it has become unconstitutional.
The petitioner is invoking the doctrine of rebus sic stantibus.
According to Jessup, "this doctrine constitutes an attempt to
formulate a legal principle which would justify nonperformance of a treaty obligation if the conditions with
relation to which the parties contracted have changed so
materially and so unexpectedly as to create a situation in which
7
the exaction of performance would be unreasonable." The
key element of this doctrine is the vital change in the condition
of the contracting parties that they could not have foreseen at
the time the treaty was concluded.
The Court notes in this connection the following observation
made in Day v. Trans World Airlines, Inc.: 8
The Warsaw drafters wished to create a
system of liability rules that would cover all
the hazards of air travel . . . The Warsaw
delegates knew that, in the years to come,
civil aviation would change in ways that they
could not foresee. They wished to design a
system of air law that would be both durable
and flexible enough to keep pace with these
changes . . . The ever-changing needs of the
system of civil aviation can be served within
the framework they created.
It is true that at the time the Warsaw Convention was drafted,
the airline industry was still in its infancy. However, that
circumstance alone is not sufficient justification for the
rejection of the treaty at this time. The changes recited by the

petitioner were, realistically, not entirely unforeseen although


they were expected in a general sense only. In fact, the
Convention itself, anticipating such developments, contains the
following significant provision:
Article 41. Any High Contracting Party shall be
entitled not earlier than two years after the
coming into force of this convention to call
for the assembling of a new international
conference in order to consider any
improvements which may be made in this
convention. To this end, it will communicate
with the Government of the French Republic
which will take the necessary measures to
make preparations for such conference.
But the more important consideration is that the treaty has not
been rejected by the Philippine government. The doctrine
of rebus sic stantibus does not operate automatically to render
the treaty inoperative. There is a necessity for a formal act of
rejection, usually made by the head of State, with a statement
of the reasons why compliance with the treaty is no longer
required.
In lieu thereof, the treaty may be denounced even without an
expressed justification for this action. Such denunciation is
authorized under its Article 39, viz:
Article 39. (1) Any one of the High Contracting
Parties may denounce this convention by a
notification addressed to the Government of
the Republic of Poland, which shall at once
inform the Government of each of the High
Contracting Parties.
(2) Denunciation shall take effect six months
after the notification of denunciation, and
shall operate only as regards the party which
shall have proceeded to denunciation.
Obviously. rejection of the treaty, whether on the ground
of rebus sic stantibus or pursuant to Article 39, is not a function
of the courts but of the other branches of government. This is a
political act. The conclusion and renunciation of treaties is the
prerogative of the political departments and may not be
usurped by the judiciary. The courts are concerned only with
the interpretation and application of laws and treaties in force
and not with their wisdom or efficacy.
C. The petitioner claims that the lower court
erred in ruling that the plaintiff must sue in
the United States, because this would deny
him the right to access to our courts.
The petitioner alleges that the expenses and difficulties he will
incur in filing a suit in the United States would constitute a
constructive denial of his right to access to our courts for the
protection of his rights. He would consequently be deprived of
this vital guaranty as embodied in the Bill of Rights.
Obviously, the constitutional guaranty of access to courts refers
only to courts with appropriate jurisdiction as defined by law. It
does not mean that a person can go to any court for redress of
his grievances regardless of the nature or value of his claim. If
the petitioner is barred from filing his complaint before our
courts, it is because they are not vested with the appropriate

jurisdiction under the Warsaw Convention, which is part of the


law of our land.
II
THE ISSUE OF JURISDICTION.
A. The petitioner claims that the lower court
erred in not ruling that Article 28(1) of the
Warsaw Convention is a rule merely of venue
and was waived by defendant when it did not
move to dismiss on the ground of improper
venue.
By its own terms, the Convention applies to all international
transportation of persons performed by aircraft for hire.
International transportation is defined in paragraph (2) of
Article 1 as follows:
(2) For the purposes of this convention, the
expression "international transportation"
shall mean any transportation in which,
according to the contract made by the
parties, the place of departure and the place
of destination, whether or not there be a
break in the transportation or a
transshipment, are situated [either] within
the territories of two High Contracting Parties
...
Whether the transportation is "international" is determined by
the contract of the parties, which in the case of passengers is
the ticket. When the contract of carriage provides for the
transportation of the passenger between certain designated
terminals "within the territories of two High Contracting
Parties," the provisions of the Convention automatically apply
and exclusively govern the rights and liabilities of the airline
and its passenger.
Since the flight involved in the case at bar is international, the
same being from the United States to the Philippines and back
to the United States, it is subject to the provisions of the
Warsaw Convention, including Article 28(1), which enumerates
the four places where an action for damages may be brought.
Whether Article 28(1) refers to jurisdiction or only to venue is a
question over which authorities are sharply divided. While the
petitioner cites several cases holding that Article 28(1) refers to
9
venue rather than jurisdiction, there are later cases cited by
the private respondent supporting the conclusion that the
10
provision is jurisdictional.
Venue and jurisdiction are entirely distinct matters. Jurisdiction
may not be conferred by consent or waiver upon d court which
otherwise would have no jurisdiction over the subject-matter
of an action; but the venue of an action as fixed by statute may
be changed by the consent of the parties and an objection that
the plaintiff brought his suit in the wrong county may be
waived by the failure of the defendant to make a timely
objection. In either case, the court may render a valid
judgment. Rules as to jurisdiction can never be left to the
consent or agreement of the parties, whether or not a
11
prohibition exists against their alteration.
A number of reasons tends to support the characterization of
Article 28(1) as a jurisdiction and not a venue provision. First,
the wording of Article 32, which indicates the places where the
action for damages "must" be brought, underscores the

mandatory nature of Article 28(1). Second, this characterization


is consistent with one of the objectives of the Convention,
which is to "regulate in a uniform manner the conditions of
international transportation by air." Third, the Convention does
not contain any provision prescribing rules of jurisdiction other
than Article 28(1), which means that the phrase "rules as to
jurisdiction" used in Article 32 must refer only to Article 28(1).
In fact, the last sentence of Article 32 specifically deals with the
exclusive enumeration in Article 28(1) as "jurisdictions," which,
as such, cannot be left to the will of the parties regardless of
the time when the damage occurred.
This issue was analyzed in the leading case of Smith v. Canadian
12
Pacific Airways, Ltd., where it was held:
. . . Of more, but still incomplete, assistance is
the wording of Article 28(2), especially when
considered in the light of Article 32. Article
28(2)
provides
that
"questions
of procedure shall be governed by the law of
the court to which the case is submitted"
(Emphasis supplied). Section (2) thus may be
read to leave for domestic decision questions
regarding the suitability and location of a
particular Warsaw Convention case.
In other words, where the matter is governed by the Warsaw
Convention, jurisdiction takes on a dual concept. Jurisdiction in
the international sense must be established in accordance with
Article 28(1) of the Warsaw Convention, following which the
jurisdiction of a particular court must be established pursuant
to the applicable domestic law. Only after the question of
which court has jurisdiction is determined will the issue of
venue be taken up. This second question shall be governed by
the law of the court to which the case is submitted.
The petitioner submits that since Article 32 states that the
parties are precluded "before the damages occurred" from
amending the rules of Article 28(1) as to the place where the
action may be brought, it would follow that the Warsaw
Convention was not intended to preclude them from doing so
"after the damages occurred."
Article 32 provides:
Art. 32. Any clause contained in the contract
and all special agreements entered into
before the damage occurred by which the
parties purport to infringe the rules laid down
by this convention, whether by deciding the
law to be applied, or by altering the rules as
to jurisdiction, shall be null and void.
Nevertheless for the transportation of goods,
arbitration clauses shall be allowed, subject
to this convention, if the arbitration is to take
place within one of the jurisdictions referred
to in the first paragraph of Article 28.
His point is that since the requirements of Article 28(1) can be
waived "after the damages (shall have) occurred," the article
should be regarded as possessing the character of a "venue"
and not of a "jurisdiction" provision. Hence, in moving to
dismiss on the ground of lack of jurisdiction, the private
respondent has waived improper venue as a ground to dismiss.

The foregoing examination of Article 28(1) in relation to Article


32 does not support this conclusion. In any event, we agree
that even granting arguendo that Article 28(1) is a venue and
not a jurisdictional provision, dismissal of the case was still in
order. The respondent court was correct in affirming the ruling
of the trial court on this matter, thus:
Santos' claim that NOA waived venue as a
ground of its motion to dismiss is not correct.
True it is that NOA averred in its MOTION TO
DISMISS that the ground thereof is "the Court
has no subject matter jurisdiction to entertain
the Complaint" which SANTOS considers as
equivalent to "lack of jurisdiction over the
subject matter . . ." However, the gist of
NOA's argument in its motion is that the
Philippines is not the proper place where
SANTOS could file the action meaning that
the venue of the action is improperly laid.
Even assuming then that the specified ground
of the motion is erroneous, the fact is the
proper ground of the motion improper
venue has been discussed therein.
Waiver cannot be lightly inferred. In case of doubt, it must be
resolved in favor of non-waiver if there are special
circumstances justifying this conclusion, as in the petition at
bar. As we observed in Javier vs. Intermediate Court of
13
Appeals:
Legally, of course, the lack of proper venue
was deemed waived by the petitioners when
they failed to invoke it in their original motion
to dismiss. Even so, the motivation of the
private respondent should have been taken
into account by both the trial judge and the
respondent court in arriving at their
decisions.
14
The petitioner also invokes KLM Royal Dutch Airlines v. RTC, a
decision of our Court of Appeals, where it was held that Article
28(1) is a venue provision. However, the private respondent
avers that this was in effect reversed by the case of Aranas v.
15
United Airlines, where the same court held that Article 28(1)
is a jurisdictional provision. Neither of these cases is binding on
this Court, of course, nor was either of them appealed to us.
Nevertheless, we here express our own preference for the later
case of Aranas insofar as its pronouncements on jurisdiction
conform to the judgment we now make in this petition.
B. The petitioner claims that the lower court
erred in not ruling that under Article 28(1) of
the Warsaw Convention, this case was
properly filed in the Philippines, because
Manila was the destination of the plaintiff.
The Petitioner contends that the facts of this case are
16
analogous to those in Aanestad v. Air Canada. In that case,
Mrs. Silverberg purchased a round-trip ticket from Montreal to
Los Angeles and back to Montreal. The date and time of
departure were specified but not of the return flight. The plane
crashed while on route from Montreal to Los Angeles, killing
Mrs. Silverberg. Her administratrix filed an action for damages
against Air Canada in the U.S. District Court of California. The

defendant moved to dismiss for lack of jurisdiction but the


motion was denied thus:
. . . It is evident that the contract entered into
between Air Canada and Mrs. Silverberg as
evidenced by the ticket booklets and the
Flight Coupon No. 1, was a contract for Air
Canada to carry Mrs. Silverberg to Los
Angeles on a certain flight, a certain time and
a certain class, but that the time for her to
return remained completely in her power.
Coupon No. 2 was only a continuing offer by
Air Canada to give her a ticket to return to
Montreal between certain dates. . . .
The only conclusion that can be reached then,
is that "the place of destination" as used in
the Warsaw Convention is considered by both
the Canadian C.T.C. and the United States
C.A.B. to describe at least two "places of
destination," viz., the "place of destination"
of a particular flight either an "outward
destination" from the "point of origin" or
from the "outward point of destination" to
any place in Canada.
Thus the place of destination under Art. 28
and Art. 1 of the Warsaw Convention of the
flight on which Mrs. Silverberg was killed, was
Los Angeles according to the ticket, which
was the contract between the parties and the
suit is properly filed in this Court which has
jurisdiction.
The Petitioner avers that the present case falls squarely under
the above ruling because the date and time of his return flight
to San Francisco were, as in the Aanestad case, also left open.
Consequently, Manila and not San Francisco should be
considered the petitioner's destination.
The private respondent for its part invokes the ruling in Butz v.
17
British Airways, where the United States District Court
(Eastern District of Pennsylvania) said:
. . . Although the authorities which addressed
this precise issue are not extensive, both the
cases and the commentators are almost
unanimous in concluding that the "place of
destination" referred to in the Warsaw
Convention "in a trip consisting of several
parts . . . is the ultimate destination that is
accorded treaty jurisdiction." . . .
But apart from that distinguishing feature, I
cannot agree with the Court's analysis
in Aanestad; whether the return portion of
the ticket is characterized as an option or a
contract, the carrier was legally bound to
transport the passenger back to the place of
origin within the prescribed time and. the
passenger for her part agreed to pay the fare
and, in fact, did pay the fare. Thus there was
mutuality of obligation and a binding contract
of carriage, The fact that the passenger could
forego her rights under the contract does not

make it any less a binding contract. Certainly,


if the parties did not contemplate the return
leg of the journey, the passenger would not
have paid for it and the carrier would not
have issued a round trip ticket.
We agree with the latter case. The place of destination, within
the meaning of the Warsaw Convention, is determined by the
terms of the contract of carriage or, specifically in this case, the
ticket between the passenger and the carrier. Examination of
the petitioner's ticket shows that his ultimate destination is San
Francisco. Although the date of the return flight was left open,
the contract of carriage between the parties indicates that NOA
was bound to transport the petitioner to San Francisco from
Manila. Manila should therefore be considered merely an
agreed stopping place and not the destination.
The petitioner submits that the Butz case could not have
overruled the Aanestad case because these decisions are from
different jurisdictions. But that is neither here nor there. In
fact, neither of these cases is controlling on this Court. If we
have preferred the Butz case, it is because, exercising our own
freedom of choice, we have decided that it represents the
better, and correct, interpretation of Article 28(1).
Article 1(2) also draws a distinction between a "destination"
and an "agreed stopping place." It is the "destination" and not
an "agreed stopping place" that controls for purposes of
ascertaining jurisdiction under the Convention.
The contract is a single undivided operation, beginning with the
place of departure and ending with the ultimate destination.
The use of the singular in this expression indicates the
understanding of the parties to the Convention that every
contract of carriage has one place of departure and one place
of destination. An intermediate place where the carriage may
be broken is not regarded as a "place of destination."
C. The petitioner claims that the lower court
erred in not ruling that under Art. 28(1) of the
Warsaw Convention, this case was properly
filed in the Philippines because the defendant
has its domicile in the Philippines.
The petitioner argues that the Warsaw Convention was
originally written in French and that in interpreting its
provisions, American courts have taken the broad view that the
18
French legal meaning must govern. In French, he says, the
"domicile" of the carrier means every place where it has a
branch office.
The private respondent notes, however, that in Compagnie
19
Nationale Air France vs. Giliberto, it was held:
The plaintiffs' first contention is that Air
France is domiciled in the United States. They
say that the domicile of a corporation
includes any country where the airline carries
on its business on "a regular and substantial
basis," and that the United States qualifies
under such definition. The meaning of
domicile cannot, however, be so extended.
The domicile of a corporation is customarily
regarded as the place where it is
incorporated, and the courts have given the
meaning to the term as it is used in article

28(1) of the Convention. (See Smith v.


Canadian Pacific Airways, Ltd. (2d Cir. 1971),
452 F2d 798, 802; Nudo v. Societe Anonyme
Belge d' Exploitation de la Navigation
Aerienne Sabena Belgian World Airlines (E.D.
pa. 1962). 207 F. Supp, 191; Karfunkel v.
Compagnie Nationale Air France (S.D.N.Y.
1977), 427 F. Suppl. 971, 974). Moreover, the
structure of article 28(1), viewed as a whole,
is also incompatible with the plaintiffs' claim.
The article, in stating that places of business
are among the bases of the jurisdiction, sets
out two places where an action for damages
may be brought; the country where the
carrier's principal place of business is located,
and the country in which it has a place of
business through which the particular
contract in question was made, that is, where
the ticket was bought, Adopting the plaintiffs'
theory would at a minimum blur these
carefully drawn distinctions by creating a
third intermediate category. It would
obviously introduce uncertainty into litigation
under the article because of the necessity of
having to determine, and without standards
or criteria, whether the amount of business
done by a carrier in a particular country was
"regular" and "substantial." The plaintiff's
request to adopt this basis of jurisdiction is in
effect a request to create a new jurisdictional
standard for the Convention.
20
Furthermore, it was argued in another case that:
. . . In arriving at an interpretation of a treaty
whose sole official language is French, are we
bound to apply French law? . . . We think this
question and the underlying choice of law
issue
warrant
some
discussion
. . . We do not think this statement can be
regarded as a conclusion that internal French
law is to be "applied" in the choice of law
sense, to determine the meaning and scope
of the Convention's terms. Of course, French
legal usage must be considered in arriving at
an accurate English translation of the French.
But when an accurate English translation is
made and agreed upon, as here, the inquiry
into meaning does not then revert to a quest
for a past or present French law to be
"applied" for revelation of the proper scope
of the terms. It does not follow from the fact
that the treaty is written in French that in
interpreting it, we are forever chained to
French law, either as it existed when the
treaty was written or in its present state of
development. There is no suggestion in the
treaty that French law was intended to
govern the meaning of Warsaw's terms, nor
have we found any indication to this effect in

its legislative history or from our study of its


application and interpretation by other
courts. Indeed, analysis of the cases indicates
that the courts, in interpreting and applying
the Warsaw Convention, have, not
considered themselves bound to apply French
law simply because the Convention is written
in French. . . .
We agree with these rulings.
Notably, the domicile of the carrier is only one of the places
where the complaint is allowed to be filed under Article 28(1).
By specifying the three other places, to wit, the principal place
of business of the carrier, its place of business where the
contract was made, and the place of destination, the article
clearly meant that these three other places were not
comprehended in the term "domicile."
D. The petitioner claims that the lower court
erred in not ruling that Art. 28(1) of the
Warsaw Convention does not apply to actions
based on tort.
The petitioner alleges that the gravamen of the complaint is
that private respondent acted arbitrarily and in bad faith,
discriminated against the petitioner, and committed a willful
misconduct because it canceled his confirmed reservation and
gave his reserved seat to someone who had no better right to
it. In short. the private respondent committed a tort.
Such allegation, he submits, removes the present case from the
coverage of the Warsaw Convention. He argues that in at least
21
two American cases, it was held that Article 28(1) of the
Warsaw Convention does not apply if the action is based on
tort.
This position is negated by Husserl v. Swiss Air Transport
22
Company, where the article in question was interpreted thus:
. . . Assuming for the present that plaintiff's
claim is "covered" by Article 17, Article 24
clearly excludes any relief not provided for in
the Convention as modified by the Montreal
Agreement. It does not, however, limit the
kind of cause of action on which the relief
may be founded; rather it provides that any
action based on the injuries specified in
Article 17 "however founded," i.e., regardless
of the type of action on which relief is
founded, can only be brought subject to the
conditions and limitations established by the
Warsaw System. Presumably, the reason for
the use of the phrase "however founded," in
two-fold: to accommodate all of the
multifarious bases on which a claim might be
founded in different countries, whether
under code law or common law, whether
under contract or tort, etc.; and to include all
bases on which a claim seeking relief for an
injury might be founded in any one country.
In other words, if the injury occurs as
described in Article 17, any relief available is
subject to the conditions and limitations
established by the Warsaw System,

regardless of the particular cause of action


which forms the basis on which a plaintiff
could
seek
relief . . .
The private respondent correctly contends that the allegation
of willful misconduct resulting in a tort is insufficient to exclude
the case from the comprehension of the Warsaw Convention.
The petitioner has apparently misconstrued the import of
Article 25(l) of the Convention, which reads as follows:
Art. 25 (1). The carrier shall not be entitled to
avail himself of the provisions of this
Convention which exclude or limit his liability.
if the damage is caused by his willful
misconduct or by such default on his part as,
in accordance with the law of the court to
which the case is submitted, is considered to
be equivalent to willful misconduct.
It is understood under this article that the court called upon to
determine the applicability of the limitation provision must first
be vested with the appropriate jurisdiction. Article 28(1) is the
provision in the Convention which defines that jurisdiction.
23
Article 22 merely fixes the monetary ceiling for the liability of
the carrier in cases covered by the Convention. If the carrier is
indeed guilty of willful misconduct, it can avail itself of the
limitations set forth in this article. But this can be done only if
the action has first been commenced properly under the rules
on jurisdiction set forth in Article 28(1).
III
THE ISSUE OF PROTECTION TO MINORS
The petitioner calls our attention to Article 24 of the Civil Code,
which states:
Art. 24. In all contractual property or other
relations, when one of the parties is at a
disadvantage on account of his moral
dependence, ignorance, indigence, mental
weakness, tender age or other handicap, the
courts must be vigilant for his protection.
Application of this article to the present case is misplaced. The
above provision assumes that the court is vested with
jurisdiction to rule in favor of the disadvantaged minor, As
already explained, such jurisdiction is absent in the case at bar.
CONCLUSION
A number of countries have signified their concern over the
problem of citizens being denied access to their own courts
because of the restrictive provision of Article 28(1) of the
Warsaw Convention. Among these is the United States, which
has proposed an amendment that would enable the passenger
to sue in his own domicile if the carrier does business in that
jurisdiction. The reason for this proposal is explained thus:
In the event a US citizen temporarily residing
abroad purchases a Rome to New York to
Rome ticket on a foreign air carrier which is
generally subject to the jurisdiction of the US,
Article 28 would prevent that person from
suing the carrier in the US in a "Warsaw Case"
even though such a suit could be brought in
the absence of the Convention.

The proposal was incorporated in the Guatemala Protocol


amending the Warsaw Convention, which was adopted at
Guatemala
City
on
March
8,
24
1971. But it is still ineffective because it has not yet been
ratified by the required minimum number of contracting
parties. Pending such ratification, the petitioner will still have
to file his complaint only in any of the four places designated by
Article 28(1) of the Warsaw Convention.
The proposed amendment bolsters the ruling of this Court that
a citizen does not necessarily have the right to sue in his own
courts simply because the defendant airline has a place of
business in his country.
The Court can only sympathize with the petitioner, who must
prosecute his claims in the United States rather than in his own
country at least inconvenience. But we are unable to grant him
the relief he seeks because we are limited by the provisions of
the Warsaw Convention which continues to bind us. It may not
be amiss to observe at this point that the mere fact that he will
have to litigate in the American courts does not necessarily
mean he will litigate in vain. The judicial system of that country
in known for its sense of fairness and, generally, its strict
adherence to the rule of law.
WHEREFORE, the petition is DENIED, with costs against the
petitioner. It is so ordered.

UNITED AIRLINES, petitioner, vs. WILLIE J. UY, respondent.


DECISION
BELLOSILLO, J.:
UNITED AIRLINES assails in this petition for review
on certiorari under Rule 45 the 29 August 1995 Decision of the
Court of Appeals in CA-G.R. CV No. 39761 which reversed the 7
August 1992 order issued by the trial court in Civil Case No. Q[1]
92-12410 granting petitioner's motion to dismiss based on
prescription of cause of action. The issues sought to be
resolved are whether the notice of appeal to the appellate
court was timely filed, and whether Art. 29 of the Warsaw
[2]
Convention should apply to the case at bar.
On 13 October 1989 respondent Willie J. Uy, a revenue
passenger on United Airlines Flight No. 819 for the San
Francisco - Manila route, checked in together with his luggage
one piece of which was found to be overweight at the airline
counter. To his utter humiliation, an employee of petitioner
rebuked him saying that he should have known the maximum
weight allowance to be 70 kgs. per bag and that he should have
packed his things accordingly. Then, in a loud voice in front of
the milling crowd, she told respondent to repack his things and
transfer some of them from the overweight luggage to the
lighter ones. Not wishing to create further scene, respondent
acceded only to find his luggage still overweight. The airline
then billed him overweight charges which he offered to pay
with a miscellaneous charge order (MCO) or an airline pre-paid
credit. However, the airlines employee, and later its airport
supervisor, adamantly refused to honor the MCO pointing out
that there were conflicting figures listed on it. Despite the
explanation from respondent that the last figure written on the
MCO represented his balance, petitioners employees did not

accommodate him. Faced with the prospect of leaving without


his luggage, respondent paid the overweight charges with his
American Express credit card.
Respondents troubles did not end there. Upon arrival in
Manila, he discovered that one of his bags had been slashed
and its contents stolen. He particularized his losses to be
around US $5,310.00. In a letter dated 16 October 1989
respondent bewailed the insult, embarrassment and
humiliating treatment he suffered in the hands of United
Airlines employees, notified petitioner of his loss and
requested reimbursement thereof. Petitioner United Airlines,
through Central Baggage Specialist Joan Kroll, did not refute
any of respondents allegations and mailed a check
representing the payment of his loss based on the maximum
liability of US $9.70 per pound. Respondent, thinking the
amount to be grossly inadequate to compensate him for his
losses, as well as for the indignities he was subjected to, sent
two (2) more letters to petitioner airline, one dated 4 January
1990 through a certain Atty. Pesigan, and another dated 28
October 1991 through Atty. Ramon U. Ampil demanding an
out-of-court settlement of P1,000,000.00. Petitioner United
Airlines did not accede to his demands.
Consequently, on 9 June 1992 respondent filed a
complaint for damages against United Airlines alleging that he
was a person of good station, sitting in the board of directors of
several top 500 corporations and holding senior executive
[3]
positions for such similar firms; that petitioner airline
accorded him ill and shabby treatment to his extreme
embarrassment and humiliation; and, as such he should be
paid moral damages of at leastP1,000,000.00, exemplary
damages of at least P500,000.00, plus attorney's fees of at
least P50,000.00. Similarly, he alleged that the damage to his
luggage and its stolen contents amounted to around $5,310.00,
and requested reimbursement therefor.
United Airlines moved to dismiss the complaint on the
ground that respondents cause of action had prescribed,
invoking Art. 29 of the Warsaw Convention which provides Art. 29 (1) The right to damages shall be extinguished if an
action is not brought within two (2) years, reckoned from the
date of arrival at the destination, or from the date on which the
aircraft ought to have arrived, or from the date on which the
transportation stopped.
(2) The method of calculating the period of limitation shall be
determined by the law of the court to which the case is
submitted.
Respondent countered that par. (1) of Art. 29 of the
Warsaw Convention must be reconciled with par. (2) thereof
which states that "the method of calculating the period of
limitation shall be determined by the law of the court to which
the case is submitted." Interpreting thus, respondent noted
that according to Philippine laws the prescription of actions is
interrupted "when they are filed before the court, when there
is a written extrajudicial demand by the creditors, and when
there is any written acknowledgment of the debt by the
[4]
debtor." Since he made several demands upon United
Airlines: first, through his personal letter dated 16 October
1989; second, through a letter dated 4 January 1990 from Atty.
Pesigan; and, finally, through a letter dated 28 October 1991

written for him by Atty. Ampil, the two (2)-year period of


limitation had not yet been exhausted.
On 2 August 1992 the trial court ordered the dismissal of
the action holding that the language of Art. 29 is clear that the
action must be brought within two (2) years from the date of
arrival at the destination. It held that although the second
paragraph of Art. 29 speaks of deference to the law of the local
court in "calculating the period of limitation," the same does
not refer to the local forums rules in interrupting the
prescriptive period but only to the rules of determining the
time in which the action may be deemed commenced, and
within our jurisdiction the action shall be deemed "brought" or
commenced by the filing of a complaint. Hence, the trial court
concluded that Art. 29 excludes the application of our
interruption rules.
Respondent received a copy of the dismissal order on 17
August 1992. On 31 August 1992, or fourteen (14) days later,
he moved for the reconsideration of the trial courts order. The
trial court denied the motion and respondent received copy of
the denial order on 28 September 1992. Two (2) days later, on
1 October 1992 respondent filed his notice of appeal.
United Airlines once again moved for the dismissal of the
case this time pointing out that respondents fifteen (15)-day
period to appeal had already elapsed. Petitioner argued that
having used fourteen (14) days of the reglementary period for
appeal, respondent Uy had only one (1) day remaining to
perfect his appeal, and since he filed his notice of appeal two
(2) days later, he failed to meet the deadline.
[5]
In its questioned Decision dated 29 August 1995 the
appellate court gave due course to the appeal holding that
respondents delay of two (2) days in filing his notice of appeal
did not hinder it from reviewing the appealed order of
dismissal since jurisprudence dictates that an appeal may be
entertained despite procedural lapses anchored on equity and
justice.
On the applicability of the Warsaw Convention, the
appellate court ruled that the Warsaw Convention did not
preclude the operation of the Civil Code and other pertinent
laws. Respondents failure to file his complaint within the two
(2)-year limitation provided in the Warsaw Convention did not
bar his action since he could still hold petitioner liable for
breach of other provisions of the Civil Code which prescribe a
different period or procedure for instituting an action. Further,
under Philippine laws, prescription of actions is interrupted
where, among others, there is a written extrajudicial demand
by the creditors, and since respondent Uy sent several demand
letters to petitioner United Airlines, the running of the two (2)year prescriptive period was in effect suspended. Hence, the
appellate court ruled that respondents cause of action had not
yet prescribed and ordered the records remanded to the
Quezon City trial court for further proceedings.
Petitioner now contends that the appellate court erred in
assuming jurisdiction over respondent's appeal since it is clear
that the notice of appeal was filed out of time. It argues that
the courts relax the stringent rule on perfection of appeals only
when there are extraordinary circumstances, e.g., when the
Republic stands to lose hundreds of hectares of land already
titled and used for educational purposes; when the counsel of

record was already dead; and wherein appellant was the owner
of the trademark for more than thirty (30) years, and the
circumstances of the present case do not compare to the above
[6]
exceptional cases.
Section 1 of Rule 45 of the 1997 Rules of Civil
Procedure provides that "a party may appeal by certiorari, from
a judgment of the Court of Appeals, by filing with the Supreme
Court a petition for certiorari, within fifteen (15) days from
notice of judgment or of the denial of his motion for
reconsideration filed in due time x x x x" This Rule however
should not be interpreted as "to sacrifice the substantial right
of the appellant in the sophisticated altar of technicalities with
[7]
impairment of the sacred principles of justice." It should be
borne in mind that the real purpose behind the limitation of
the period of appeal is to forestall or avoid an unreasonable
delay in the administration of justice. Thus, we have ruled that
delay in the filing of a notice of appeal does not justify the
dismissal of the appeal where the circumstances of the case
show that there is no intent to delay the administration of
[8]
justice on the part of appellant's counsel, or when there are
[9]
no substantial rights affected, or when appellant's counsel
committed a mistake in the computation of the period of
[10]
appeal, an error not attributable to negligence or bad faith.
In the instant case, respondent filed his notice of appeal
two (2) days later than the prescribed period. Although his
counsel failed to give the reason for the delay, we are inclined
to give due course to his appeal due to the unique and peculiar
facts of the case and the serious question of law it poses. In
the now almost trite but still good principle, technicality, when
it deserts its proper office as an aid to justice and becomes its
great hindrance and chief enemy, deserves scant
[11]
consideration.
Petitioner likewise contends that the appellate court
erred in ruling that respondent's cause of action has not
prescribed since delegates to the Warsaw Convention clearly
intended the two (2)-year limitation incorporated in Art. 29 as
an absolute bar to suit and not to be made subject to the
various tolling provisions of the laws of the forum. Petitioner
argues that in construing the second paragraph of Art. 29
private respondent cannot read into it Philippine rules on
interruption of prescriptive periods and state that his
extrajudicial demand has interrupted the period of
[12]
prescription. American jurisprudence has declared that "Art.
29 (2) was not intended to permit forums to consider local
limitation tolling provisions but only to let local law determine
whether an action had been commenced within the two-year
period, since the method of commencing a suit varies from
[13]
country to country."
Within our jurisdiction we have held that the Warsaw
Convention can be applied, or ignored, depending on the
[14]
peculiar facts presented by each case. Thus, we have ruled
that the Convention's provisions do not regulate or exclude
liability for other breaches of contract by the carrier or
misconduct of its officers and employees, or for some
[15]
particular or exceptional type of damage. Neither may the
Convention be invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and
preclude recovery therefor beyond the limits set by said

[16]

Convention. Likewise, we have held that the Convention


does not preclude the operation of the Civil Code and other
[17]
pertinent laws. It does not regulate, much less exempt, the
carrier from liability for damages for violating the rights of its
passengers under the contract of carriage, especially if willful
misconduct on the part of the carrier's employees is found or
[18]
established.
Respondent's complaint reveals that he is suing on two (2)
causes of action: (a) the shabby and humiliating treatment he
received from petitioner's employees at the San Francisco
Airport which caused him extreme embarrassment and social
humiliation; and, (b) the slashing of his luggage and the loss of
his personal effects amounting to US $5,310.00.
While his second cause of action - an action for damages
arising from theft or damage to property or goods - is well
within the bounds of the Warsaw Convention, his first cause of
action -an action for damages arising from the misconduct of
the airline employees and the violation of respondent's rights
as passenger - clearly is not.
Consequently, insofar as the first cause of action is
concerned, respondent's failure to file his complaint within the
two (2)-year limitation of the Warsaw Convention does not bar
his action since petitioner airline may still be held liable for
breach of other provisions of the Civil Code which prescribe a
different period or procedure for instituting the action,
specifically, Art. 1146 thereof which prescribes four (4) years
for filing an action based on torts.
As for respondent's second cause of action, indeed
the travaux preparatories of the Warsaw Convention reveal
that the delegates thereto intended the two (2)-year limitation
incorporated in Art. 29 as an absolute bar to suit and not to be
made subject to the various tolling provisions of the laws of the
forum. This therefore forecloses the application of our own
rules on interruption of prescriptive periods. Article 29, par.
(2), was intended only to let local laws determine whether an
action had been commenced within the two (2)-year period,
and within our jurisdiction an action shall be deemed
commenced upon the filing of a complaint. Since it is
indisputable that respondent filed the present action beyond
the two (2)-year time frame his second cause of action must be
barred. Nonetheless, it cannot be doubted that respondent
exerted efforts to immediately convey his loss to petitioner,
even employed the services of two (2) lawyers to follow up his
claims, and that the filing of the action itself was delayed
because of petitioner's evasion.
In this regard, Philippine Airlines, Inc. v. Court of
[19]
Appeals is instructive. In this case of PAL, private respondent
filed an action for damages against petitioner airline for the
breakage of the front glass of the microwave oven which she
shipped under PAL Air Waybill No. 0-79-1013008-3. Petitioner
averred that, the action having been filed seven (7) months
after her arrival at her port of destination, she failed to comply
with par. 12, subpar. (a) (1), of the Air Waybill which expressly
provided that the person entitled to delivery must make a
complaint to the carrier in writing in case of visible damage to
the goods, immediately after discovery of the damage and at
the latest within 14 days from receipt of the goods. Despite
non-compliance therewith the Court held that by private

respondent's immediate submission of a formal claim to


petitioner, which however was not immediately entertained as
it was referred from one employee to another, she was
deemed to have substantially complied with the
requirement. The Court noted that with private respondent's
own zealous efforts in pursuing her claim it was clearly not her
fault that the letter of demand for damages could only be filed,
after months of exasperating follow-up of the claim, on 13
August 1990, and that if there was any failure at all to file the
formal claim within the prescriptive period contemplated in the
Air Waybill, this was largely because of the carrier's own doing,
the consequences of which could not in all fairness be
attributed to private respondent.
In the same vein must we rule upon the circumstances
brought before us. Verily, respondent filed his complaint more
than two (2) years later, beyond the period of limitation
prescribed by the Warsaw Convention for filing a claim for
damages. However, it is obvious that respondent was
forestalled from immediately filing an action because petitioner
airline gave him the runaround, answering his letters but not
giving in to his demands. True, respondent should have already
filed an action at the first instance when his claims were denied
by petitioner but the same could only be due to his desire to
make an out-of-court settlement for which he cannot be
faulted. Hence, despite the express mandate of Art. 29 of the
Warsaw Convention that an action for damages should be filed
within two (2) years from the arrival at the place of destination,
such rule shall not be applied in the instant case because of the
delaying tactics employed by petitioner airline itself. Thus,
private respondent's second cause of action cannot be
considered as time-barred under Art. 29 of the Warsaw
Convention.
WHEREFORE, the assailed Decision of the Court of
Appeals reversing and setting aside the appealed order of the
trial court granting the motion to dismiss the complaint, as well
as its Resolution denying reconsideration, is AFFIRMED. Let the
records of the case be remanded to the court of origin for
further proceedings taking its bearings from this disquisition.
SO ORDERED.

G.R. No. 95536 March 23, 1992


ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO,
LEOPOLDO
G.
SALUDO
and
SATURNINO
G.
SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and
PHILIPPINE AIRLINES, INC.,respondents.
REGALADO, J.:
Assailed in this petition for review on certiorari is the decision
in CA-G.R. CV No. 20951 of respondent Court of
1
Appeals which affirmed the decision of the trial
2
court dismissing for lack of evidence herein petitioners'
complaint in Civil Case No R-2101 of the then Court of First
Instance of Southern Leyte, Branch I.

The facts, as recounted by the court a quo and adopted by


respondent court after "considering the evidence on record,"
are as follows:
After the death of plaintiffs' mother, Crispina
Galdo Saludo, in Chicago Illinois, (on) October
23, 1976 (Exh. A), Pomierski and Son Funeral
Home of Chicago, made the necessary
preparations and arrangements for the
shipment, of the remains from Chicago to the
Philippines. The funeral home had the
remains embalmed (Exb. D) and secured a
permit for the disposition of dead human
body on October 25, 1976 (Exh. C), Philippine
Vice Consul in Chicago, Illinois, Bienvenido M.
Llaneta, at 3:00 p.m. on October 26, 1976 at
the Pomierski & Son Funeral Home, sealed
the shipping case containing a hermetically
sealed casket that is airtight and waterproof
wherein was contained the remains of
Crispina Saludo Galdo (sic) (Exb. B). On the
same date, October 26, 1976, Pomierski
brought the remains to C.M.A.S. (Continental
Mortuary Air Services) at the airport
(Chicago) which made the necessary
arrangements such as flights, transfers, etc.;
C.M.A.S. is a national service used by
undertakers to throughout the nation
(U.S.A.), they furnish the air pouch which the
casket is enclosed in, and they see that the
remains are taken to the proper air freight
terminal (Exh. 6-TWA). C.M.A.S. booked the
shipment with PAL thru the carrier's agent Air
Care International, with Pomierski F.H. as the
shipper and Mario (Maria) Saludo as the
consignee. PAL Airway Bill No. 079-01180454
Ordinary was issued wherein the requested
routing was from Chicago to San Francisco on
board TWA Flight 131 of October 27, 1976
and from San Francisco to Manila on board
PAL Flight No. 107 of the same date, and from
Manila to Cebu on board PAL Flight 149 of
October 29, 1976 (See Exh. E., Also Exh. 1PAL).
In the meantime, plaintiffs Maria Salvacion
Saludo and Saturnino Saludo, thru a travel
agent, were booked with United Airlines from
Chicago to California, and with PAL from
California to Manila. She then went to the
funeral director of Pomierski Funeral Home
who had her mother's remains and she told
the director that they were booked with
United Airlines. But the director told her that
the remains were booked with TWA flight to
California. This upset her, and she and her
brother had to change reservations from UA
to the TWA flight after she confirmed by
phone that her mother's remains should be
on that TWA flight. They went to the airport

and watched from the look-out area. She saw


no body being brought. So, she went to the
TWA counter again, and she was told there
was no body on that flight. Reluctantly, they
took the TWA flight upon assurance of her
cousin, Ani Bantug, that he would look into
the matter and inform her about it on the
plane or have it radioed to her. But no
confirmation from her cousin reached her
that her mother was on the West Coast.
Upon arrival at San Francisco at about 5:00
p.m., she went to the TWA counter there to
inquire about her mother's remains. She was
told they did not know anything about it.
She then called Pomierski that her mother's
remains were not at the West Coast terminal,
and Pomierski immediately called C.M.A.S.,
which in a matter of 10 minutes informed him
that the remains were on a plane to Mexico
City, that there were two bodies at the
terminal, and somehow they were switched;
he relayed this information to Miss Saludo in
California; later C.M.A.S. called and told him
they were sending the remains back to
California via Texas (see Exh. 6-TWA).
It-turned out that TWA had carried a
shipment under PAL Airway Bill No. 079-ORD01180454 on TWA Flight 603 of October 27,
1976, a flight earlier than TWA Flight 131 of
the same date. TWA delivered or transferred
the said shipment said to contain human
remains to PAL at 1400H or 2:00 p.m. of the
same date, October 27, 1976 (Bee Exh. 1TWA). "Due to a switch(ing) in Chicago", this
shipment was withdrawn from PAL by CMAS
at 1805H (or 6:05 p.m.) of the same date,
October 27 (Exh. 3-PAL, see Exh. 3-a-PAL).
What transpired at the Chicago (A)irport is
explained in a memo or incident report by
Pomierski (Exh. 6-TWA) to Pomierski's
lawyers who in turn referred to said' memo
and enclosed it in their (Pomierski's lawyers)
answer dated July 18, 1981 to herein
plaintiff's counsel (See Exh. 5-TWA). In that
memo or incident report (Exh. 6-TWA), it is
stated that the remains (of Crispina Saludo)
were taken to CMAS at the airport; that there
were two bodies at the (Chicago Airport)
terminal, and somehow they were switched,
that the remains (of Crispina Saludo) were on
a plane to Mexico City; that CMAS is a
national service used by undertakers
throughout the nation (U.S.A.), makes all the
necessary arrangements, such as flights,
transfers, etc., and see(s) to it that the
remains are taken to the proper air freight
terminal.

The following day October 28, 1976, the


shipment or remains of Crispina Saludo
arrived (in) San Francisco from Mexico on
board American Airlines. This shipment was
transferred to or received by PAL at 1945H or
7:45 p.m. (Exh. 2-PAL, Exh. 2-a-PAL). This
casket bearing the remains of Crispina
Saludo, which was mistakenly sent to Mexico
and was opened (there), was resealed by
Crispin F. Patagas for shipment to the
Philippines (See Exh. B-1). The shipment was
immediately loaded on PAL flight for Manila
that same evening and arrived (in) Manila on
October 30, 1976, a day after its expected
3
arrival on October 29, 1976.
4
In a letter dated December 15, 1976, petitioners' counsel
informed private respondent Trans World Airlines (TWA) of the
misshipment and eventual delay in the delivery of the cargo
containing the remains of the late Crispin Saludo, and of the
discourtesy of its employees to petitioners Maria Salvacion
Saludo and Saturnino Saludo. In a separate letter on June 10,
1977 addressed to co-respondent Philippine Airlines
5
(PAL), petitioners stated that they were holding PAL liable for
said delay in delivery and would commence judicial action
should no favorable explanation be given.
Both private respondents denied liability. Thus, a damage
6
suit was filed by petitioners before the then Court of First
Instance, Branch III, Leyte, praying for the award of actual
damages of P50,000.00, moral damages of P1,000,000.00,
exemplary damages, attorney's fees and costs of suit.
As earlier stated, the court below absolved the two respondent
airlines companies of liability. The Court of Appeals affirmed
the decision of the lower court in toto, and in a subsequent
7
resolution, denied
herein
petitioners'
motion
for
reconsideration for lack of merit.
In predictable disagreement and dissatisfaction with the
conclusions reached by respondent appellate court, petitioners
now urge this Court to review the appealed decision and to
resolve whether or not (1) the delay in the delivery of the
casketed remains of petitioners' mother was due to the fault of
respondent airline companies, (2) the one-day delay in the
delivery of the same constitutes contractual breach as would
entitle petitioners to damages, (3) damages are recoverable by
petitioners for the humiliating, arrogant and indifferent acts of
the employees of TWA and PAL, and (4) private respondents
should be held liable for actual, moral and exemplary damages,
8
aside from attorney's fees and litigation expenses.
At the outset and in view of the spirited exchanges of the
parties on this aspect, it is to be stressed that only questions of
law may be raised in a petition filed in this Court to review
9
on certiorari the decision of the Court of Appeals. This being
so, the factual findings of the Court of Appeals are final and
conclusive and cannot be reviewed by the Supreme Court. The
rule, however, admits of established exceptions, to wit: (a)
where there is grave abuse of discretion; (b) when the finding is
grounded entirely on speculations, surmises or conjectures;(c)
when the inference made is manifestly-mistaken, absurd or
impossible; (d) when the judgment of the Court of Appeals was

based on a misapprehension of facts; (e) when the factual


findings are conflicting; (f) when the Court of Appeals, in
making its findings, went beyond the issues of the case and the
same are contrary to the admissions of both appellant and
10
appellee; (g) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed by the parties
and which, if properly considered, would justify a different
11
conclusion; and (h) where the findings of fact of the Court of
Appeals are contrary to those of the trial court, or are mere
conclusions without citation of specific evidence, or where the
facts of set forth by the petitioner are not disputed by the
respondent, or where the findings of fact of the Court of
Appeals are premised on the absence of evidence and are
12
contradicted by the evidence on record.
To distinguish, a question of law is one which involves a doubt
or controversy on what the law is on a certain state of facts;
and, a question of fact, contrarily, is one in which there is a
doubt or difference as to the truth or falsehood of the alleged
13
facts. One test, it has been held, is whether the appellate
court can determine the issue raised without reviewing or
evaluating the evidence, in which case it is a question of law,
14
otherwise it will be a question of fact.
Respondent airline companies object to the present recourse of
petitioners on the ground that this petition raises only factual
15
questions. Petitioners maintain otherwise or, alternatively,
they are of the position that, assuming that the petition raises
factual questions, the same are within the recognized
exceptions to the general rule as would render the petition
16
cognizable and worthy of review by the Court.
Since it is precisely the soundness of the inferences or
conclusions that may be drawn from the factual issues which
are here being assayed, we find that the issues raised in the
instant petition indeed warrant a second look if this litigation is
to come to a reasonable denouement. A discussion seriatim of
said issues will further reveal that the sequence of the events
involved is in effect disputed. Likewise to be settled is whether
or not the conclusions of the Court of Appeals subject of this
review indeed find evidentiary and legal support.
I. Petitioners fault respondent court for "not finding that
private respondents failed to exercise extraordinary diligence
required by law which resulted in the switching and/or
misdelivery of the remains of Crispina Saludo to Mexico causing
gross delay in its shipment to the Philippines, and
17
consequently, damages to petitioners."
Petitioner allege that private respondents received the
casketed remains of petitioners' mother on October 26, 1976,
as evidenced by the issuance of PAL Air Waybill No. 07918
01180454 by Air Care International as carrier's agent; and
from said date, private respondents were charged with the
responsibility to exercise extraordinary diligence so much so
that for the alleged switching of the caskets on October 27,
1976, or one day after private respondents received the cargo,
the latter must necessarily be liable.
To support their assertion, petitioners rely on the
jurisprudential dictum, both under American and Philippine
law, that "(t)he issuance of a bill of lading carries the
presumption that the goods were delivered to the carrier
issuing the bill, for immediate shipment, and it is nowhere

questioned that a bill of lading is prima facie evidence of the


receipt of the goods by the carrier. . . . In the absence of
convincing testimony establishing mistake, recitals in the bill of
lading showing that the carrier received the goods for shipment
19
on a specified date control (13 C.J.S. 235)."
A bill of lading is a written acknowledgment of the receipt of
the goods and an agreement to transport and deliver them at a
specified place to a person named or on his order. Such
instrument may be called a shipping receipt, forwarder's
20
receipt and receipt for transportation. The designation,
however, is immaterial. It has been hold that freight tickets for
bus companies as well as receipts for cargo transported by all
forms of transportation, whether by sea or land, fall within the
definition. Under the Tariff and Customs Code, a bill of lading
21
includes airway bills of lading. The two-fold character of a bill
of lading is all too familiar; it is a receipt as to the quantity and
description of the goods shipped and a contract to transport
the goods to the consignee or other person therein designated,
22
on the terms specified in such instrument.
Logically, since a bill of lading acknowledges receipt of goods to
be transported, delivery of the goods to the carrier normally
precedes the issuance of the bill; or, to some extent, delivery of
the goods and issuance of the bill are regarded in commercial
23
practice as simultaneous acts. However, except as may be
prohibited by law, there is nothing to prevent an inverse order
of events, that is, the execution of the bill of lading even prior
to actual possession and control by the carrier of the cargo to
be transported. There is no law which requires that the delivery
of the goods for carriage and the issuance of the covering bill of
lading must coincide in point of time or, for that matter, that
the former should precede the latter.
Ordinarily, a receipt is not essential to a complete delivery of
goods to the carrier for transportation but, when issued, is
competent and prima facie, but not conclusive, evidence of
delivery to the carrier. A bill of lading, when properly executed
and delivered to a shipper, is evidence that the carrier has
received the goods described therein for shipment. Except as
modified by statute, it is a general rule as to the parties to a
contract of carriage of goods in connection with which a bill of
lading is issued reciting that goods have been received for
transportation, that the recital being in essence a receipt alone,
is not conclusive, but may be explained, varied or contradicted
24
by parol or other evidence.
While we agree with petitioners' statement that "an airway bill
estops the carrier from denying receipt of goods of the quantity
and quality described in the bill," a further reading and a more
faithful quotation of the authority cited would reveal that "(a)
bill of lading may contain constituent elements of estoppel and
thus become something more than a contract between the
shipper and the carrier. . . . (However), as between the shipper
and the carrier,when no goods have been delivered for
shipment no recitals in the bill can estop the carrier from
showing the true facts . . . Between the consignor of goods and
receiving carrier, recitals in a bill of lading as to the goods
shipped raise only a rebuttable presumption that such goods
were delivered for shipment. As between the consignor and a
receiving
carrier,
the
fact
must
outweigh
the
25
recital." (Emphasis supplied)

For this reason, we must perforce allow explanation by private


respondents why, despite the issuance of the airway bill and
the date thereof, they deny having received the remains of
Crispina Saludo on October 26, 1976 as alleged by petitioners.
The findings of the trial court, as favorably adopted by the
Court of Appeals and which we have earner quoted, provide us
with the explanation that sufficiently over comes the
presumption relied on by petitioners in insisting that the
remains of their mother were delivered to and received by
private respondents on October 26, 1976. Thus
. . . Philippine Vice Consul in Chicago, Illinois,
Bienvenido M. Llaneta, at 3:00 p.m. on
October 26, 1976 at the Pomierski & Son
Funeral Home, sealed the shipping case
containing a hermetically sealed casket that is
airtight and waterproof wherein was
contained the remains of Crispina Saludo
Galdo (sic) (Exh. B). On the same date October
26, 1976, Pomierski brought the remains to
C.M.A.S. (Continental Mortuary Air Services)
at the airport (Chicago) which made the
necessary arrangements such as flights,
transfers, etc; C.M.A.S. is a national service
used by undertakers throughout the nation
(U.S.A.), they furnish the air pouch which the
casket is enclosed in, and they see that the
remains are taken to the proper air freight
terminal (Exh. G-TWA). C.M.A.S. booked the
shipment with PAL thru the carrier's agent Air
Care International, with Pomierski F.H. as the
shipper and Mario (Maria) Saludo as the
consignee. PAL Airway Bill No. 079- 01180454
Ordinary was issued wherein the requested
routing was from Chicago to San Francisco on
board TWA Flight-131 of October 27;1976,
and from San Francisco to Manila on board
PAL Flight No. 107 of the same date, and from
Manila to Cebu on board PAL Flight 149 of
October 29, 1976 (See Exh. E, also Exh. 126
PAL). (Emphasis ours.)
Moreover, we are persuaded to believe private respondent
PAL's account as to what transpired October 26, 1976:
. . . Pursuant thereto, on 26 October 1976,
CMAS acting upon the instruction of
Pomierski, F.H., the shipper requested
booking of the casketed remains of Mrs.
Cristina (sic) Saludo on board PAL's San
Francisco-Manila Flight No. PR 107 on
October 27, 1976.
2. To signify acceptance and confirmation of
said booking, PAL issued to said Pomierski
F.H., PAL Airway Bill No. 079-01180454 dated
October 27, 1976 (sic, "10/26/76"). PAL
confirmed the booking and transporting of
the shipment on board of its Flight PR 107 on
October 27, 1976 on the basis of the
representation of the shipper and/or CMAS
that the said cargo would arrive in San

Francisco from Chicago on board United


27
Airlines Flight US 121 on 27 October 1976.
In other words, on October 26, 1976 the cargo containing the
casketed remains of Crispina Saludo was booked for PAL Flight
Number PR-107 leaving San Francisco for Manila on October
27, 1976, PAL Airway Bill No. 079-01180454 was issued, not as
evidence of receipt of delivery of the cargo on October 26,
1976, but merely as a confirmation of the booking thus made
for the San Francisco-Manila flight scheduled on October 27,
1976. Actually, it was not until October 28, 1976 that PAL
received physical delivery of the body at San Francisco, as duly
evidenced by the Interline Freight Transfer Manifest of the
American Airline Freight System and signed for by Virgilio
28
Rosales at 1945H, or 7:45 P.M. on said date.
Explicit is the rule under Article 1736 of the Civil Code that the
extraordinary responsibility of the common carrier begins from
the time the goods are delivered to the carrier. This
responsibility remains in full force and effect even when they
are temporarily unloaded or stored in transit, unless the
shipper or owner exercises the right of stoppage in
29
transitu, and terminates only after the lapse of a reasonable
time for the acceptance, of the goods by the consignee or such
30
other person entitled to receive them. And, there is delivery
to the carrier when the goods are ready for and have been
placed in the exclusive possession, custody and control of the
carrier for the purpose of their immediate transportation and
31
the carrier has accepted them. Where such a delivery has
thus been accepted by the carrier, the liability of the common
32
carrier commences eo instanti.
Hence, while we agree with petitioners that the extraordinary
diligence statutorily required to be observed by the carrier
instantaneously commences upon delivery of the goods
thereto, for such duty to commence there must in fact have
been delivery of the cargo subject of the contract of carriage.
Only when such fact of delivery has been unequivocally
established can the liability for loss, destruction or
deterioration of goods in the custody of the carrier, absent the
excepting causes under Article 1734, attach and the
presumption of fault of the carrier under Article 1735 be
invoked.
As already demonstrated, the facts in the case at bar belie the
averment that there was delivery of the cargo to the carrier on
October 26, 1976. Rather, as earlier explained, the body
intended to be shipped as agreed upon was really placed in the
possession and control of PAL on October 28, 1976 and it was
from that date that private respondents became responsible
for the agreed cargo under their undertakings in PAL Airway Bill
No. 079-01180454. Consequently, for the switching of caskets
prior thereto which was not caused by them, and subsequent
events caused thereby, private respondents cannot be held
liable.
Petitioners, proceeding on the premise that there was delivery
of the cargo to private respondents on October 26,1976 and
that the latter's extraordinary responsibility had by then
become operative, insist on foisting the blame on private
respondents for the switching of the two caskets which
occurred on October 27, 1976. It is argued that since there is no
clear evidence establishing the fault Continental Mortuary Air

Services (CMAS) for the mix-up, private respondents are


presumably negligent pursuant to Article 1735 of the Civil Code
and, for failure to rebut such presumption, they must
necessarily be held liable; or, assuming that CMAS was at fault,
the same does not absolve private respondents of liability
because whoever brought the cargo to the airport or loaded it
on the plane did so as agent of private respondents.
This contention is without merit. As pithily explained by the
Court of Appeals:
The airway bill expressly provides that
"Carrier certifies goods described below were
received for carriage", and said cargo was
"casketed human remains of Crispina
Saludo," with "Maria Saludo as Consignee;
Pomierski F.H. as Shipper; Air Care
International as carrier's agent." On the face
of the said airway bill, the specific flight
numbers, specific routes of shipment and
dates of departure and arrival were
typewritten, to wit: Chicago TWA Flight
131/27 to San Francisco and from San
Francisco by PAL 107 on, October 27, 1976 to
Philippines and to Cebu via PAL Flight 149 on
October 29, 1976. The airway bill also
contains the following typewritten words, as
follows: all documents have been examined
(sic). Human remains of Crispina Saludo.
Please return back (sic) first available flight to
SFO.
But, as it turned out and was discovered later
the casketed human remains which was
issued PAL Airway Bill #079-1180454 was not
the remains of Crispina Saludo, the casket
containing her remains having been shipped
to Mexico City.
However, it should be noted that, Pomierski
F.H., the shipper of Mrs. Saludo's remains,
hired
Continental
Mortuary
Services
(hereafter referred to as C.M.A.S.), which is
engaged in the business of transporting and
forwarding human remains. Thus, C.M.A.S.
made all the necessary arrangements such as
flights, transfers, etc. for shipment of the
remains of Crispina Saludo.
The remains were taken on
October 26th, 1976, to
C.M.A.S. at the airport.
These people made all the
necessary
arrangements,
such as flights, transfers,
etc. This is a national
service used by undertakers
throughout the nation. They
furnished the air pouch
which the casket is enclosed
in, and they see that the
remains are taken to the
proper air frieght terminal. I

was very surprised when


Miss Saludo called me to
say that the remains were
not at the west coast
terminal. I
immediately
called C.M.A.S. They called
me back in a matter of ten
minutes to inform me that
the remains were on a plane
to Mexico City. The man
said that there were two
bodies at the terminal, and
somehow
they
were
switched. . . . (Exb. 6
"TWA", which is the memo
or incident report enclosed
in the stationery of Walter
Pomierski & Sons Ltd.)
Consequently, when the cargo was received
from C.M.A.S. at the Chicago airport terminal
for shipment, which was supposed to contain
the remains of Crispina Saludo, Air Care
International and/or TWA, had no way of
determining its actual contents, since the
casket was hermetically sealed by the
Philippine Vice-Consul in Chicago and in an air
pouch of C.M.A.S., to the effect that Air Care
International and/or TWA had to rely on the
information furnished by the shipper
regarding the cargo's content. Neither could
Air Care International and/or TWA open the
casket for further verification, since they were
not only without authority to do so, but even
prohibited.
Thus, under said circumstances, no fault
and/or negligence can be attributed to PAL
(even if Air Care International should be
considered as an agent of PAL) and/or TWA,
the entire fault or negligence being
33
exclusively
with
C.M.A.S. (Emphasis
supplied.)
It can correctly and logically be concluded, therefore, that the
switching occurred or, more accurately, was discovered on
October 27, 1976; and based on the above findings of the Court
of appeals, it happened while the cargo was still with CMAS,
well before the same was place in the custody of private
respondents.
Thus, while the Air Cargo Transfer Manifest of TWA of October
34
27, 1976 was signed by Garry Marcial of PAL at 1400H, or
2:00 P.M., on the same date, thereby indicating
acknowledgment by PAL of the transfer to them by TWA of
what was in truth the erroneous cargo, said misshipped cargo
was in fact withdrawn by CMAS from PAL as shown by the
35
notation on another copy of said manifest stating "Received
by CMAS Due to switch in Chicago 10/27-1805H," the
authenticity of which was never challenged. This shows that
said misshipped cargo was in fact withdrawn by CMAS from
PAL and the correct shipment containing the body of Crispina

Saludo was received by PAL only on October 28, 1976, at


1945H, or 7:45 P.M., per American Airlines Interline Freight
36
Transfer Manifest No. AA204312.
Witness the deposition of TWA's ramp serviceman, Michael
Giosso, on this matter:
ATTY. JUAN COLLAS, JR.:
On that date, do (sic) you
have occasion to handle or
deal with the transfer of
cargo from TWA Flight No.
603 to PAL San Francisco?
MICHAEL GIOSSO:
Yes, I did.
ATTY. JUAN COLLAS, JR.:
What
was
your
participation
with
the
transfer of the cargo?
MICHAEL GIOSSO:
I manifested the freight on
a transfer manifest and
physically moved it to PAL
and concluded the transfer
by signing it off.
ATTY. JUAN COLLAS, JR.:
You brought it there
yourself?
MICHAEL GIOSSO:
Yes sir.
ATTY. JUAN COLIAS, JR.:
Do you have anything to
show that PAL received the
cargo from TWA on October
27, 1976?
MICHAEL GIOSSO:
Yes, I do.
(Witness
presenting
a
document)
ATTY. JUAN COLLAS, JR.:
For purposes of clarity,
Exhibit I is designated as
Exhibit I-TWA.
xxx xxx xxx
ATTY. JUAN COLLAS, JR.:
This Exhibit I-TWA, could
you tell what it is, what it
shows?
MICHAEL GIOSSO:
It shows transfer of
manifest on 10-27-76 to
PAL at 1400 and verified
with two signatures as it
completed the transfer.
ATTY. JUAN COLLAS, JR.:
Very good,. Who was the
PAL employee who received
the cargo?
MICHAEL GIOSSO:

The
name
is
Garry
37
Marcial."
The deposition of Alberto A. Lim, PAL's cargo supervisor at San
Francisco, as deponent-witness for PAL, makes this further
clarification:
ATTY.
CESAR
P.
MANALAYSAY:
You mentioned Airway Bill,
Mr. Lim. I am showing to
you a PAL Airway Bill
Number 01180454 which
for purposes of evidence, I
would like to request that
the same be marked as
evidence Exhibit I for PAL.
xxx xxx xxx
In what circumstances did
you encounter Exhibit IPAL?
ALBERTO A. LIM:
If I recall correctly, I was
queried by Manila, our
Manila office with regard to
a certain complaint that a
consignee filed that this
shipment did not arrive on
the day that the consignee
expects the shipment to
arrive.
ATTY
CESAR
P.
MANALAYSAY:
Okay. Now, upon receipt of
that query from your
Manila office, did you
conduct any investigation to
pinpoint the possible causes
of mishandling?
ALBERTO A. LIM:
Yes.
xxx xxx xxx
ATTY.
CESAR
P.
MANALAYSAY:
What is the result of your
investigation?
ALBERTO A. LIM:
In the course of my
investigation, I found that
we received the body on
October 28, 1976, from
American Airlines.
ATTY.
CESAR
P.
MANALAYSAY:
What body are you
referring to?
xxx xxx xxx
ALBERTO A. LIM:
The remains of Mrs. Cristina
(sic) Saludo.

ATTY.
CESAR
P.
MANALAYSAY:
Is that the same body
mentioned in this Airway
Bill?
ALBERTO A. LIM:
Yes.
ATTY.
CESAR
P.
MANALAYSAY:
What time did you receive
said body on October 28,
1976?
ALBERTO A. LIM:
If
I
recall
correctly,
approximately
7:45
of
October 28, 1976.
ATTY.
CESAR
P.
MANALAYSAY:
Do you have any proof with
you to back the statement?
ALBERTO A. LIM:
Yes. We have on our
records a Transfer Manifest
from American Airlines
Number 204312 showing
that we received a human
remains shipment belong to
Mrs. Cristina (sic) Saludo or
the human remains of Mrs.
Cristina (sic) Saludo.
ATTY.
CESAR
P.
MAIALAYSAY:
At this juncture, may I
request that the Transfer
Manifest referred to by the
witness be marked as an
evidence as Exhibit II-PAL.
xxx xxx xxx
Mr. Lim, yesterday your codefendant TWA presented
as their Exhibit I evidence
tending to show that on
October 27, 1976 at about
2:00 in the, afternoon they
delivered to you a cargo
bearing human remains.
Could you go over this
Exhibit I and please give us
your comments as to that
exhibit?
ATTY.
ALBERTO
C.
MENDOZA:
That is a vague question. I
would rather request that
counsel propound specific
questions
rather
than
asking for comments on
Exhibit I-TWA.

ATTY.
CESAR
P.
MANALAYSAY:
In that case, I will reform
my question. Could you tell
us whether TWA in fact
delivered to you the human
remains as indicated in that
Transfer Manifest?
ALBERTO A. LIM:
Yes, they did.
ATTY.
CESAR
P.
MANALAYSAY:
I noticed that the Transfer
Manifest of TWA marked as
Exhibit I-TWA bears the
same numbers or the same
entries as the Airway Bill
marked as Exhibit I-A PAL
tending to show that this is
the human remains of Mrs
Cristina (sic) Saludo. Could
you tell us whether this is
true?
ALBERTO A. LIM:
It is true that we received
human remains shipment
from TWA as indicated on
this Transfer Manifest. But
in
the
course
of
investigation, it was found
out that the human remains
transferred to us is not the
remains of Mrs. Cristina
(sic) Saludo this is the
reason why we did not
38
board it on our flight.
Petitioners consider TWA's statement that "it had to rely on the
information furnished by the shipper" a lame excuse and that
its failure to prove that its personnel verified and identified the
contents of the casket before loading the same constituted
39
negligence on the part of TWA.
We upbold the favorable consideration by the Court of Appeals
of the following findings of the trial court:
It was not (to) TWA, but to C.M.A.S. that the
Pomierski & Son Funeral Home delivered the
casket containing the remains of Crispina
Saludo. TWA would have no knowledge
therefore that the remains of Crispina Saludo
were not the ones inside the casket that was
being presented to it for shipment. TWA
would have to rely on there presentations of
C.M.A.S. The casket was hermetically sealed
and also sealed by the Philippine Vice Consul
in Chicago. TWA or any airline for that matter
would not have opened such a sealed casket
just for the purpose of ascertaining whose
body was inside and to make sure that the
remains inside were those of the particular

person indicated to be by C.M.A.S. TWA had


to accept whatever information was being
furnished by the shipper or by the one
presenting the casket for shipment. And so as
a matter of fact, TWA carried to San Francisco
and transferred to defendant PAL a shipment
covered by or under PAL Airway Bill No. 079ORD-01180454, the airway bill for the
shipment of the casketed remains of Crispina
Saludo. Only, it turned out later, while the
casket was already with PAL, that what was
inside the casket was not the body of Crispina
Saludo so much so that it had to be
withdrawn by C.M.A.S. from PAL. The body of
Crispina Saludo had been shipped to Mexico.
The casket containing the remains of Crispina
Saludo was transshipped from Mexico and
arrived in San Francisco the following day on
board American Airlines. It was immediately
loaded by PAL on its flight for Manila.
The foregoing points at C.M.A.S., not
defendant TWA much less defendant PAL, as
the ONE responsible for the switching or mixup of the two bodies at the Chicago Airport
terminal, and started a chain reaction of the
misshipment of the body of Crispina Saludo
and a one-day delay in the delivery thereof to
40
its destination.
Verily, no amount of inspection by respondent airline
companies could have guarded against the switching that had
already taken place. Or, granting that they could have opened
the casket to inspect its contents, private respondents had no
means of ascertaining whether the body therein contained was
indeed that of Crispina Saludo except, possibly, if the body was
that of a male person and such fact was visually apparent upon
opening the casket. However, to repeat, private respondents
had no authority to unseal and open the same nor did they
have any reason or justification to resort thereto.
It is the right of the carrier to require good faith on the part of
those persons who deliver goods to be carried, or enter into
contracts with it, and inasmuch as the freight may depend on
the value of the article to be carried, the carrier ordinarily has
the right to inquire as to its value. Ordinarily, too, it is the duty
of the carrier to make inquiry as to the general nature of the
articles shipped and of their value before it consents to carry
them; and its failure to do so cannot defeat the shipper's right
to recovery of the full value of the package if lost, in the
absence of showing of fraud or deceit on the part of the
shipper. In the absence of more definite information, the
carrier has a the right to accept shipper's marks as to the
contents of the package offered for transportation and is not
bound to inquire particularly about them in order to take
advantage of a false classification and where a shipper
expressly represents the contents of a package to be of a
designated character, it is not the duty of the carrier to ask for
a repetition of the statement nor disbelieve it and open the box
41
and see for itself. However, where a common carrier has
reasonable ground to suspect that the offered goods are of a

dangerous or illegal character, the carrier has the right to know


the character of such goods and to insist on an inspection, if
reasonable and practical under the circumstances, as a
42
condition of receiving and transporting such goods.
It can safely be said then that a common carrier is entitled to
fair representation of the nature and value of the goods to be
carried, with the concomitant right to rely thereon, and further
noting at this juncture that a carrier has no obligation to inquire
43
into the correctness or sufficiency of such information. The
consequent duty to conduct an inspection thereof arises in the
event that there should be reason to doubt the veracity of such
representations. Therefore, to be subjected to unusual search,
other than the routinary inspection procedure customarily
undertaken, there must exist proof that would justify cause for
apprehension that the baggage is dangerous as to warrant
exhaustive inspection, or even refusal to accept carriage of the
same; and it is the failure of the carrier to act accordingly in the
face of such proof that constitutes the basis of the common
44
carrier's liability.
In the case at bar, private respondents had no reason
whatsoever to doubt the truth of the shipper's representations.
The airway bill expressly providing that "carrier certifies goods
received below were received for carriage," and that the cargo
contained "casketed human remains of Crispina Saludo," was
issued on the basis of such representations. The reliance
thereon by private respondents was reasonable and, for so
doing, they cannot be said to have acted negligently. Likewise,
no evidence was adduced to suggest even an iota of suspicion
that the cargo presented for transportation was anything other
than what it was declared to be, as would require more than
routine inspection or call for the carrier to insist that the same
be opened for scrutiny of its contents per declaration.
Neither can private respondents be held accountable on the
basis of petitioners' preposterous proposition that whoever
brought the cargo to the airport or loaded it on the airplane did
so as agent of private respondents, so that even if CMAS whose
services were engaged for the transit arrangements for the
remains was indeed at fault, the liability therefor would
supposedly still be attributable to private respondents.
While we agree that the actual participation of CMAS has been
sufficiently and correctly established, to hold that it acted as
agent for private respondents would be both an inaccurate
appraisal and an unwarranted categorization of the legal
position it held in the entire transaction.
It bears repeating that CMAS was hired to handle all the
necessary shipping arrangements for the transportation of the
human remains of Crispina Saludo to Manila. Hence, it was to
CMAS that the Pomierski & Son Funeral Home, as shipper,
brought the remains of petitioners' mother for shipment, with
Maria Saludo as consignee. Thereafter, CMAS booked the
shipment with PAL through the carrier's agent, Air Care
45
International. With its aforestated functions, CMAS may
accordingly be classified as a forwarder which, by accepted
commercial practice, is regarded as an agent of the shipper and
not of the carrier. As such, it merely contracts for the
transportation of goods by carriers, and has no interest in the
freight but receives compensation from the shipper as his
46
agent.

At this point, it can be categorically stated that, as culled from


the findings of both the trial court and appellate courts, the
entire chain of events which culminated in the present
controversy was not due to the fault or negligence of private
respondents. Rather, the facts of the case would point to CMAS
as the culprit. Equally telling of the more likely possibility of
CMAS' liability is petitioners' letter to and demanding an
explanation from CMAS regarding the statement of private
respondents laying the blame on CMAS for the incident,
portions of which, reading as follows:
. . . we were informed that the unfortunate a
mix-up occurred due to your negligence. . . .
Likewise, the two airlines pinpoint the
responsibility upon your agents. Evidence
were presented to prove that allegation.
On the face of this overwhelming evidence
we could and should have filed a case against
47
you. . . .
clearly allude to CMAS as the party at fault. This is tantamount
to an admission by petitioners that they consider private
respondents without fault, or is at the very least indicative of
the fact that petitioners entertained serious doubts as to
whether herein private respondents were responsible for the
unfortunate turn of events.
Undeniably, petitioners' grief over the death of their mother
was aggravated by the unnecessary inconvenience and anxiety
that attended their efforts to bring her body home for a decent
burial. This is unfortunate and calls for sincere commiseration
with petitioners. But, much as we would like to give them
consolation for their undeserved distress, we are barred by the
inequity of allowing recovery of the damages prayed for by
them at the expense of private respondents whose fault or
negligence in the very acts imputed to them has not been
convincingly and legally demonstrated.
Neither are we prepared to delve into, much less definitively
rule on, the possible liability of CMAS as the evaluation and
adjudication of the same is not what is presently at issue here
and is best deferred to another time and addressed to another
forum.
II. Petitioners further fault the Court of Appeals for ruling that
there was no contractual breach on the part of private
respondents as would entitle petitioners to damages.
Petitioners hold that respondent TWA, by agreeing to transport
the remains of petitioners' mother on its Flight 131 from
Chicago to San Francisco on October 27, 1976, made itself a
party to the contract of carriage and, therefore, was bound by
the terms of the issued airway bill. When TWA undertook to
ship the remains on its Flight 603, ten hours earlier than
scheduled, it supposedly violated the express agreement
embodied in the airway bill. It was allegedly this breach of
obligation which compounded, if not directly caused, the
switching of the caskets.
In addition, petitioners maintain that since there is no evidence
as to who placed the body on board Flight 603, or that CMAS
actually put the cargo on that flight, or that the two caskets at
the Chicago airport were to be transported by the same airline,
or that they came from the same funeral home, or that both
caskets were received by CMAS, then the employees or agents

of TWA presumably caused the mix-up by loading the wrong


casket on the plane. For said error, they contend, TWA must
necessarily be presumed negligent and this presumption of
negligence stands undisturbed unless rebutting evidence is
presented to show that the switching or misdelivery was due to
circumstances that would exempt the carrier from liability.
Private respondent TWA professes otherwise. Having duly
delivered or transferred the cargo to its co-respondent PAL on
October 27, 1976 at 2:00 P.M., as supported by the TWA
Transfer Manifest, TWA faithfully complied with its obligation
under the airway bill. Said faithful compliance was not affected
by the fact that the remains were shipped on an earlier flight as
there was no fixed time for completion of carriage stipulated
on. Moreover, the carrier did not undertake to carry the cargo
aboard any specified aircraft, in view of the condition on the
back of the airway bill which provides:
CONDITIONS OF CONTRACT
xxx xxx xxx
It is agreed that no time is fixed for the
completion of carriage hereunder and that
Carrier may without notice substitute
alternate carriers or aircraft. Carrier assumes
no obligation to carry the goods by any
specified aircraft or over any particular route
or routes or to make connection at any point
according to any particular schedule, and
Carrier is hereby authorized to select, or
deviate from the route or routes of shipment,
notwithstanding that the same may be stated
on the face hereof. The shipper guarantees
48
payment of all charges and advances.
Hence, when respondent TWA shipped the body on earlier
flight and on a different aircraft, it was acting well within its
rights. We find this argument tenable.
The contention that there was contractual breach on the part
of private respondents is founded on the postulation that there
was ambiguity in the terms of the airway bill, hence petitioners'
insistence on the application of the rules on interpretation of
contracts and documents. We find no such ambiguity. The
terms are clear enough as to preclude the necessity to probe
beyond the apparent intendment of the contractual provisions.
The hornbook rule on interpretation of contracts consecrates
the primacy of the intention of the parties, the same having the
force of law between them. When the terms of the agreement
are clear and explicit, that they do not justify an attempt to
read into any alleged intention of the parties, the terms are to
be understood literally just as they appear on the face of the
49
contract. The various stipulations of a contract shall be
50
interpreted together and such a construction is to be adopted
51
as will give effect to all provisions thereof. A contract cannot
be construed by parts, but its clauses should be interpreted in
relation to one another. The whole contract must be
interpreted or read together in order to arrive at its true
meaning. Certain stipulations cannot be segregated and then
made to control; neither do particular words or phrases
necessarily determine the character of a contract. The legal
effect of the contract is not to be determined alone by any
particular provision disconnected from all others, but in the

ruling intention of the parties as gathered from all the language


they have used and from their contemporaneous and
52
subsequent acts.
Turning to the terms of the contract at hand, as presented by
PAL Air Waybill No. 079-01180454, respondent court
approvingly quoted the trial court's disquisition on the
aforequoted condition appearing on the reverse side of the
airway bill and its disposition of this particular assigned error:
The foregoing stipulation fully answers
plaintiffs' objections to the one-day delay and
the shipping of the remains in TWA Flight 603
instead of TWA Flight 131. Under the
stipulation, parties agreed that no time was
fixed to complete the contract of carriage and
that the carrier may, without notice,
substitute alternate carriers or aircraft. The
carrier did not assume the obligation to carry
the shipment on any specified aircraft.
xxx xxx xxx
Furthermore, contrary to the claim of
plaintiffs-appellants, the conditions of the Air
Waybill are big enough to be read and
noticed. Also, the mere fact that the cargo in
question was shipped in TWA Flight 603, a
flight earlier on the same day than TWA Flight
131, did not in any way cause or add to the
one-day delay complained of and/or the
53
switching or mix-up of the bodies.
Indubitably, that private respondent can use substitute aircraft
even without notice and without the assumption of any
obligation whatsoever to carry the goods on any specified
aircraft is clearly sanctioned by the contract of carriage as
specifically provided for under the conditions thereof.
Petitioners' invocation of the interpretative rule in the Rules of
Court that written words control printed words in
54
documents, to bolster their assertion that the typewritten
provisions regarding the routing and flight schedule prevail
over the printed conditions, is tenuous. Said rule may be
considered only when there is inconsistency between the
written and printed words of the contract.
As previously stated, we find no ambiguity in the contract
subject of this case that would call for the application of said
rule. In any event, the contract has provided for such a
situation by explicitly stating that the above condition remains
effective "notwithstanding that the same (fixed time for
completion of carriage, specified aircraft, or any particular
route or schedule) may be stated on the face hereof." While
petitioners hinge private respondents' culpability on the fact
that the carrier "certifies goods described below were received
for carriage," they may have overlooked that the statement on
the face of the airway bill properly and completely reads
Carrier certifies goods described below were
received for carriage subject to the Conditions
on the reverse hereof the goods then being in
apparent good order and condition except as
55
noted hereon. (Emphasis ours.)
Private respondents further aptly observe that the carrier's
certification regarding receipt of the goods for carriage "was of

a smaller print than the condition of the Air Waybill, including


Condition No. 5 and thus if plaintiffs-appellants had
recognized the former, then with more reason they were
56
aware of the latter.
In the same vein, it would also be incorrect to accede to the
suggestion of petitioners that the typewritten specifications of
the flight, routes and dates of departures and arrivals on the
face of the airway bill constitute a special contract which
modifies the printed conditions at the back thereof. We
reiterate that typewritten provisions of the contract are to be
read and understood subject to and in view of the printed
conditions, fully reconciling and giving effect to the manifest
intention of the parties to the agreement.
The oft-repeated rule regarding a carrier's liability for delay is
that in the absence of a special contract, a carrier is not an
insurer against delay in transportation of goods. When a
common carrier undertakes to convey goods, the law implies a
contract that they shall be delivered at destination within a
reasonable time, in the absence, of any agreement as to the
57
time of delivery. But where a carrier has made an express
contract to transport and deliver property within a specified
time, it is bound to fulfill its contract and is liable for any delay,
58
no matter from what cause it may have arisen. This result
logically follows from the well-settled rule that where the law
creates a duty or charge, and the party is disabled from
performing it without any default in himself, and has no
remedy over, then the law will excuse him, but where the party
by his own contract creates a duty or charge upon himself, he is
bound to make it good notwithstanding any accident or delay
by inevitable necessity because he might have provided against
it by contract. Whether or not there has been such an
undertaking on the part of the carrier to be determined from
the circumstances surrounding the case and by application of
59
the ordinary rules for the interpretation of contracts.
Echoing the findings of the trial court, the respondent court
correctly declared that
In a similar case of delayed delivery of air
cargo under a very similar stipulation
contained in the airway bill which reads: "The
carrier does not obligate itself to carry the
goods by any specified aircraft or on a
specified time. Said carrier being hereby
authorized to deviate from the route of the
shipment without any liability therefor", our
Supreme Court ruled that common carriers
are not obligated by law to carry and to
deliver merchandise, and persons are not
vested with the right to prompt delivery,
unless such common carriers previously
assume the obligation. Said rights and
obligations are created by a specific contract
entered into by the parties (Mendoza vs. PAL,
90 Phil. 836).
There is no showing by plaintiffs that such a
special or specific contract had been entered
into between them and the defendant airline
companies.

And this special contract for prompt delivery


should call the attention of the carrier to the
circumstances surrounding the case and the
approximate amount of damages to be
suffered in case of delay (See Mendoza vs.
PAL, supra). There was no such contract
60
entered into in the instant case.
Also, the theory of petitioners that the specification of the
flights and dates of departure and arrivals constitute a special
contract that could prevail over the printed stipulations at the
back of the airway bill is vacuous. To countenance such a
postulate would unduly burden the common carrier for that
would have the effect of unilaterally transforming every single
bill of lading or trip ticket into a special contract by the simple
expedient of filling it up with the particulars of the flight, trip or
voyage, and thereby imposing upon the carrier duties and/or
obligations which it may not have been ready or willing to
assume had it been timely, advised thereof.
Neither does the fact that the challenged condition No. 5 was
printed at the back of the airway bill militate against its binding
effect on petitioners as parties to the contract, for there were
sufficient indications on the face of said bill that would alert
them to the presence of such additional condition to put them
on their guard. Ordinary prudence on the part of any person
entering or contemplating to enter into a contract would
prompt even a cursory examination of any such conditions,
terms and/or stipulations.
There is a holding in most jurisdictions that the acceptance of a
bill of lading without dissent raises a presumption that all terms
therein were brought to the knowledge of the shipper and
agreed to by him, and in the absence of fraud or mistake, he is
estopped from thereafter denying that he assented to such
terms. This rule applies with particular force where a shipper
accepts a bill of lading with full knowledge of its contents, and
acceptance under such circumstances makes it a binding
contract. In order that any presumption of assent to a
stipulation in a bill of lading limiting the liability of a carrier may
arise, it must appear that the clause containing this exemption
from liability plainly formed a part of the contract contained in
the bill of lading. A stipulation printed on the back of a receipt
or bill of lading or on papers attached to such receipt will be
quite as effective as if printed on its face, if it is shown that the
consignor knew of its terms. Thus, where a shipper accepts a
receipt which states that its conditions are to be found on the
back, such receipt comes within the general rule, and the
shipper is held to have accepted and to be bound by the
61
conditions there to be found.
Granting arguendo that Condition No. 5 partakes of the nature
of a contract of adhesion and as such must be construed strictly
against the party who drafted the same or gave rise to any
ambiguity therein, it should be borne in mind that a contract of
adhesion may be struck down as void and unenforceable, for
being subversive of public policy, only when the weaker party is
imposed upon in dealing with the dominant bargaining party
and is reduced to the alternative of taking it or leaving it,
completely deprived of the opportunity to bargain on equal
62
footing. However, Ong Yiu vs. Court of Appeals, et
63
al instructs us 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, be gives his consent.
Accordingly, petitioners, far from being the weaker party in this
situation, duly signified their presumed assent to all terms of
the contract through their acceptance of the airway bill and are
consequently bound thereby. It cannot be gainsaid that
petitioners' were not without several choices as to carriers in
Chicago with its numerous airways and airliner servicing the
same.
We wish to allay petitioners' apprehension that Condition No. 5
of the airway bill is productive of mischief as it would validate
delay in delivery, sanction violations of contractual obligations
with impunity or put a premium on breaches of contract.
Just because we have said that condition No. 5 of the airway
bill is binding upon the parties to and fully operative in this
transaction, it does not mean, and let this serve as fair warning
to respondent carriers, that they can at all times whimsically
seek refuge from liability in the exculpatory sanctuary of said
Condition No. 5 or arbitrarily vary routes, flights and schedules
to the prejudice of their customers. This condition only serves
to insulate the carrier from liability in those instances when
changes in routes, flights and schedules are clearly justified by
the peculiar circumstances of a particular case, or by general
transportation practices, customs and usages, or by
contingencies or emergencies in aviation such as weather
turbulence, mechanical failure, requirements of national
security and the like. And even as it is conceded that specific
routing and other navigational arrangements for a trip, flight or
voyage, or variations therein, generally lie within the discretion
of the carrier in the absence of specific routing instructions or
directions by the shipper, it is plainly incumbent upon the
carrier to exercise its rights with due deference to the rights,
interests and convenience of its customers.
A common carrier undertaking to transport property has the
implicit duty to carry and deliver it within reasonable time,
absent any particular stipulation regarding time of delivery, and
to guard against delay. In case of any unreasonable delay, the
carrier shall be liable for damages immediately and proximately
64
resulting from such neglect of duty. As found by the trial
court, the delay in the delivery of the remains of Crispina
Saludo, undeniable and regrettable as it was, cannot be
attributed to the fault, negligence or malice of private
65
respondents, a conclusion concurred in by respondent court
and which we are not inclined to disturb.
We are further convinced that when TWA opted to ship the
remains of Crispina Saludo on an earlier flight, it did so in the
exercise of sound discretion and with reasonable prudence, as
shown by the explanation of its counsel in his letter of February
19, 1977 in response to petitioners' demand letter:
Investigation of TWA's handling of this matter
reveals that although the shipment was
scheduled on TWA Flight 131 of October 27,
1976, it was actually boarded on TWA Flight
603 of the same day, approximately 10 hours
earlier, in order to assure that the shipment
would be received in San Francisco in
sufficient time for transfer to PAL. This

transfer was effected in San Francisco at 2:00


66
P.M. on October 27, 1976.
Precisely, private respondent TWA knew of the urgency of the
shipment by reason of this notation on the lower portion of the
airway bill: "All documents have been certified. Human remains
of Cristina (sic) Saludo. Please return bag first available flight to
SFO." Accordingly, TWA took it upon itself to carry the remains
of Crispina Saludo on an earlier flight, which we emphasize it
could do under the terms of the airway bill, to make sure that
there would be enough time for loading said remains on the
transfer flight on board PAL.
III. Petitioners challenge the validity of respondent court's
finding that private respondents are not liable for tort on
account of the humiliating, arrogant and indifferent acts of
their officers and personnel. They posit that since their
mother's remains were transported ten hours earlier than
originally scheduled, there was no reason for private
respondents' personnel to disclaim knowledge of the arrival or
whereabouts of the same other than their sheer arrogance,
indifference and extreme insensitivity to the feelings of
petitioners. Moreover, being passengers and not merely
consignors of goods, petitioners had the right to be treated
with courtesy, respect, kindness and due consideration.
In riposte, TWA claims that its employees have always dealt
politely with all clients, customers and the public in general.
PAL, on the other hand, declares that in the performance of its
obligation to the riding public, other customers and clients, it
has always acted with justice, honesty, courtesy and good faith.
Respondent appellate court found merit in and reproduced the
trial court's refutation of this assigned error:
About the only evidence of plaintiffs that may
have reference to the manner with which the
personnel of defendants treated the two
plaintiffs at the San Francisco Airport are the
following pertinent portions of Maria Saludo's
testimony:
Q When you arrived there,
what did you do, if any?
A I immediately went to the
TWA counter and I inquired
about whether my mother
was there or if' they knew
anything about it.
Q What was the answer?
A They said they do not
know. So, we waited.
Q About what time was that
when you reached San
Francisco from Chicago?
A I think 5 o'clock.
Somewhere around that in
the afternoon.
Q You made inquiry it was
immediately thereafter?
A Right after we got off the
plane.
Q Up to what time did you
stay in the airport to wait

until the TWA people could


tell you the whereabouts?
A Sorry, Sir, but the TWA
did not tell us anything. We
stayed there until about 9
o'clock. They have not
heard anything about it.
They did not say anything.
Q Do you want to convey to
the Court that from 5 up to
9 o'clock in the evening you
yourself went back to the
TWA and they could not tell
you where the remains of
your mother were?
A Yes sir.
Q And after nine o'clock,
what did you do?
A I told my brother my
Mom was supposed to be
on the Philippine Airlines
flight. "Why don't" we
check with PAL instead to
see if she was there?" We
tried to comfort each other.
I told him anyway that was
a shortest flight from
Chicago to California. We
will be with our mother on
this longer flight. So, we
checked with the PAL.
Q What did you find?
A We learned, Yes, my Mom
would be on the flight.
Q Who was that brother?
A Saturnino Saludo.
Q And did you find what
was your flight from San
Francisco
to
the
Philippines?
A I do not know the
number. It was the evening
flight of the Philippine
Airline(s)
from
San
Francisco to Manila.
Q You took that flight with
your mother?
A We were scheduled to,
Sir.
Q Now, you could not
locate the remains of your
mother in San Francisco
could you tell us what did
you feel?
A After we were told that
my mother was not there?
Q After you learned that
your mother could not fly

with you from Chicago to


California?
A Well, I was very upset. Of
course, I wanted the
confirmation
that
my
mother was in the West
Coast. The fliqht was about
5 hours from Chicago to
California.
We
waited
anxiously all that time on
the plane. I wanted to be
assured about my mother's
remains. But there was
nothing and we could not
get any assurance from
anyone about it.
Q Your feeling when you
reached San Francisco and
you could not find out from
the TWA the whereabouts
of the remains, what did
you feel?
A Something nobody would
be able to describe unless
he experiences it himself. It
is a kind of panic. I think it's
a feeling you are about to
go crazy. It is something I do
not want to live through
again. (Inting, t.s.n., Aug. 9,
1983, pp. 14-18).
The foregoing does not show any humiliating
or arrogant manner with which the personnel
of both defendants treated the two plaintiffs.
Even their alleged indifference is not clearly
established. The initial answer of the TWA
personnel at the counter that they did not
know anything about the remains, and later,
their answer that they have not heard
anything about the remains, and the inability
of the TWA counter personnel to inform the
two plaintiffs of the whereabouts of the
remains, cannot be said to be total or
complete indifference to the said plaintiffs. At
any rate, it is any rude or discourteous
conduct, malfeasance or neglect, the use of
abusive or insulting language calculated to
humiliate and shame passenger or had faith
by or on the part of the employees of the
carrier that gives the passenger an action for
damages against the carrier (Zulueta vs. Pan
American World Airways, 43 SCRA 397; Air
France vs. Carrascoso, et al., 18 SCRA 155;
Lopez, et al. vs. Pan American World Airways,
16 SCRA 431; Northwest Airlines, Inc. vs.
Cuenca, 14 SCRA 1063), and none of the
67
above is obtaining in the instant case.

We stand by respondent court's findings on this point, but only


to the extent where it holds that the manner in which private
respondent TWA's employees dealt with petitioners was not
grossly humiliating, arrogant or indifferent as would assume
the proportions of malice or bad faith and lay the basis for an
award of the damages claimed. It must however, be pointed
out that the lamentable actuations of respondent TWA's
employees leave much to be desired, particularly so in the face
of petitioners' grief over the death of their mother,
exacerbated by the tension and anxiety wrought by the
impasse and confusion over the failure to ascertain over an
appreciable period of time what happened to her remains.
Airline companies are hereby sternly admonished that it is their
duty not only to cursorily instruct but to strictly require their
personnel to be more accommodating towards customers,
passengers and the general public. After all, common carriers
such as airline companies are in the business of rendering
public service, which is the primary reason for their
enfranchisement and recognition in our law. Because the
passengers in a contract of carriage do not contract merely for
transportation, they have a right to be treated with kindness,
68
respect, courtesy and consideration. A contract to transport
passengers is quite different in kind and degree from any other
contractual relation, and generates a relation attended with
public duty. The operation of a common carrier is a business
affected with public interest and must be directed to serve the
69
comfort and convenience of passengers. Passengers are
human beings with human feelings and emotions; they should
not be treated as mere numbers or statistics for revenue.
The records reveal that petitioners, particularly Maria and
Saturnino Saludo, agonized for nearly five hours, over the
possibility of losing their mother's mortal remains, unattended
to and without any assurance from the employees of TWA that
they were doing anything about the situation. This is not to say
that petitioners were to be regaled with extra special attention.
They were, however, entitled to the understanding and
humane consideration called for by and commensurate with
the extraordinary diligence required of common carriers, and
not the cold insensitivity to their predicament. It is hard to
believe that the airline's counter personnel were totally
helpless about the situation. Common sense would and should
have dictated that they exert a little extra effort in making a
more extensive inquiry, by themselves or through their
superiors, rather than just shrug off the problem with a callous
and uncaring remark that they had no knowledge about it.
With all the modern communications equipment readily
available to them, which could have easily facilitated said
inquiry and which are used as a matter of course by airline
companies in their daily operations, their apathetic stance
while not legally reprehensible is morally deplorable.
Losing a loved one, especially one's, parent, is a painful
experience. Our culture accords the tenderest human feelings
toward and in reverence to the dead. That the remains of the
deceased were subsequently delivered, albeit belatedly, and
eventually laid in her final resting place is of little consolation.
The imperviousness displayed by the airline's personnel, even
for just that fraction of time, was especially condemnable
particularly in the hour of bereavement of the family of

Crispina Saludo, intensified by anguish due to the uncertainty


of the whereabouts of their mother's remains. Hence, it is quite
apparent that private respondents' personnel were remiss in
the observance of that genuine human concern and
professional attentiveness required and expected of them.
The foregoing observations, however, do not appear to be
applicable or imputable to respondent PAL or its employees.
No attribution of discourtesy or indifference has been made
against PAL by petitioners and, in fact, petitioner Maria Saludo
testified that it was to PAL that they repaired after failing to
receive proper attention from TWA. It was from PAL that they
received confirmation that their mother's remains would be on
the same flight to Manila with them.
We find the following substantiation on this particular episode
from the deposition of Alberto A. Lim, PAL's cargo supervisor
earlier adverted to, regarding their investigation of and the
action taken on learning of petitioner's problem:
ATTY.
ALBERTO
C.
MENDOZA:
Yes.
Mr. Lim, what exactly was
your procedure adopted in
your
so
called
investigation?
ALBERTO A. LIM:
I called the lead agent on
duty at that time and
requested for a copy of
airway
bill,
transfer
manifest
and
other
documents concerning the
shipment.
ATTY
ALBERTO
C.
MENDOZA:
Then, what?
ALBERTO A. LIM:
They proceeded to analyze
exactly where PAL failed, if
any, in forwarding the
human remains of Mrs.
Cristina (sic) Saludo. And I
found out that there was
not (sic) delay in shipping
the remains of Mrs. Saludo
to Manila. Since we
received the body from
American Airlines on 28
October at 7:45 and we
expedited the shipment so
that it could have been
loaded on our flight leaving
at 9:00 in the evening or
just barely one hour and 15
minutes prior to the
departure of the aircraft.
That is so (sic) being the
case, I reported to Manila
70
these circumstances.

IV. Finally, petitioners insist, as a consequence of the delay in


the shipment of their mother's remains allegedly caused by
wilful contractual breach, on their entitlement to actual, moral
and exemplary damages as well as attorney's fees, litigation
expenses, and legal interest.
The uniform decisional tenet in our jurisdiction bolds that
moral damages may be awarded for wilful or fraudulent breach
71
of contract or when such breach is attended by malice or bad
72
faith. However, in the absence of strong and positive
evidence of fraud, malice or bad faith, said damages cannot be
73
awarded. Neither can there be an award of exemplary
74
75
damages nor of attorney's fees as an item of damages in
the absence of proof that defendant acted with malice, fraud
or bad faith.
The censurable conduct of TWA's employees cannot, however,
be said to have approximated the dimensions of fraud, malice
or bad faith. It can be said to be more of a lethargic reaction
produced and engrained in some people by the mechanically
routine nature of their work and a racial or societal culture
which stultifies what would have been their accustomed
human response to a human need under a former and different
ambience.
Nonetheless, the facts show that petitioners' right to be
treated with due courtesy in accordance with the degree of
diligence required by law to be exercised by every common
carrier was violated by TWA and this entitles them, at least, to
nominal damages from TWA alone. Articles 2221 and 2222 of
the Civil Code make it clear that nominal damages are not
intended for indemnification of loss suffered but for the
vindication or recognition of a right violated of invaded. They
are recoverable where some injury has been done but the
amount of which the evidence fails to show, the assessment of
damages being left to the discretion of the court according to
76
the circumstances of the case. In the exercise of our
discretion, we find an award of P40,000.00 as nominal damages
in favor of, petitioners to be a reasonable amount under the
circumstances of this case.
WHEREFORE, with the modification that an award of
P40,000.00 as and by way of nominal damages is hereby
granted in favor of petitioners to be paid by respondent Trans
World Airlines, the appealed decision is AFFIRMED in all other
respects.
SO ORDERED.
Melencio-Herrera, Paras, Padilla and Nocon, JJ., concur.