Transportation Law

MORAL DAMAGES Zulueta vs. Pan American World Airways Facts: Plaintiff Zulueta, his wife and daughter were passengers aboard defendants plane from Honolulu to Manila. Upon reaching Wake Island the passengers were advised that they could disembark for a stopover for about 30 minutes. Plaintiff went to the toilet at the terminal building but finding it full walked 200 yards away. Upon returning he told an employee of the defendant that they almost made him miss the flight because of a defective announcing system. He had a discussion with either the plan captain or the terminal manager. He was told that they would open his bags which he refused and he warned them of the consequences. Just the same they opened his bags and found nothing prohibited. They forced him to go out of the plane and left him at Wake Island. His wife had to send him money and he was able to leave Wake Island and return to Manila thru Honolulu and Tokyo after two days. This action was to recover damages from the defendant. Issue: WON moral damages may be recovered. Held: The records amply establish plaintiffs right to recover both moral and exemplary damages. Indeed, the rude and rough reception plaintiff received at the hands of Sitton or Captain Zentner when the latter met him at the ramp (What in the hell do you think you are? Get on that plane); the menacing attitude of Zentner or Sitton and the supercilious manner in which he had asked plaintiff to open his bags (open your bag, and when told that a fourth bag was missing, I dont give a damn); the abusive language and highly scornful reference to plaintiffs as monkeys by one of PAN AMs employees (who turning to Mrs. Zulueta remarked, will you pull these three monkeys out of here?); the unfriendly attitude, the ugly stares and unkind remarks to which plaintiffs were subjected, and their being cordoned by men in uniform as if they were criminals, while plaintiff was arguing with Sitton; the airline officials refusal to allow plaintiff to board the plane on the pretext that he was hiding a bomb in his luggage and their arbitrary and high-handed decision to leave him in Wake; Mrs. Zuluetas having suffered a nervous breakdown for which she was hospitalized as a result of the embarrassment, insults and humiliations to which plaintiffs were exposed by the conduct of PAN AMs employees; Mrs. Zulueta having suff ered shame, humiliation and embarrassment for the treatment received by her parents at the airport all these justify an award for moral damages resulting from mental anguish, serious anxiety, wounded feelings, moral shock, and social humiliation thereby suffered by plaintiffs. Plaintiffs were awarded Pesos 500,000.00 and moral damages, Pesos 200,000.00 exemplary damages, Pesos 75,000.00 attorneys fees and Pesos 5,502.85 actual damages. PALvs.CA Facts: Samson is a licensed aviator employed by the Philippine Airlines. He was partnered with another pilot Bustamante. Samson had complained on previous occasions to PAL that Bustamante was slow in reacting and was having lapses of poor judgment during flights. PAL however still allowed Bustamante to continue flying. On a certain flight, Bustamante overshot the airfield while landing the plane at the Daet airport. Samson tried to control the plane, but did not succeed. The plane crash-landed beyond the runway into a mangrove. Samson hit his head on the windshield due to the impact of the crash. He suffered head injuries such as brain concussions and wounds on his forehead. To make matters worse, plaintiff was discharged from employment. Samson then filed an action for damages against PAL. Issue: Whether or not PAL is liable for damages. Held:The Court held that PAL is liable for damages. There was gross negligence on the part of PAL because despite the knowledge of Bustamantes condition the still allowed him to continue flying. Bustamante had a tumor in his nasopharynx which affected his vision. As provided in Articles 1732, 1733, and 1756 of the NCC, PAL being a common carrier should have exercised extraordinary diligence in the supervision of their employees and utmost diligence in bringing passengers to their destination. The court affirmed the decision of the trial court in awaring damages. Private respondent is entitled to P198,000.00 as unearned income or compulsory damages, P80,000.00 for moral damages, P20,000 as attorneys fees and P5,000 as expenses for litigation. This claim of the plaintiff for loss and impairment of earning capacity is based on the provision of Art. 2205, NCC. Even from the standpoint of the petitioner that there is employer-employee relationship between it and private respondent arising from the contract of employment, private respondent is still entitled to moral damages in view of the finding of bad faith or malice, applying the provisions of Art. 2220 of the NCC. Flores vs. Miranda FACTS: Miranda was one of the passengers on a jeepney driven by Eugenio Luga. While the vehicle was descending the Sta. Mesa bridge at an excessive rate of speed, the driver lost control thereof, causing it to swerve and to his the bridge wall. Five of the passengers were injured, including Miranda who suffered a fracture of the upper right humerus. He was taken to the National Orthopedic Hospital for treatment, and later was subjected to a series of operations. At the time of the trial, it appears that respondent had not yet recovered the use of his right arm. The driver was charged with serious physical injuries through reckless imprudence, and upon interposing a plea of guilty was sentenced accordingly. ISSUE 1: "Is the approval of the Public Service Commission necessary for the sale of a public service vehicle even without conveying therewith the authority to operate the same?" Assuming the dubious sale to be a fact, the court of Appeals answered the query in the affirmative. HELD: The ruling should be upheld.

Martha Rose C. Serrano

Transportation Law
RATIO: Section 20 of the Public Service Act (Commonwealth Act No. 146) provides: it shall be unlawful for any public service or for the owner, lessee or operator thereof, without the previous approval and authority of the Commission previously had (g) To sell, alienate, mortgage, encumber or lease its property, franchises, certificates, privileges, or rights, or any part thereof; or merge or consolidate its property, franchises, privileges or rights, or any part thereof, with those of any other public service xxx Thus, a transfer contemplated by the law, if made without the requisite approval of the Public Service Commission, is not effective and binding in so far as the responsibility of the grantee under the franchise in relation to the public is concerned. ACTUAL DAMAGES NO CHANGE The P10,000 actual damages awarded by the Court of First Instance of Manila were reduced by the Court of Appeals to only P2,000, on the ground that a review of the records failed to disclose a sufficient basis for the trial court's appraisal, since the only evidence presented on this point consisted of respondent's bare statement that his expenses and loss of income amounted to P20,000. On the other hand, "it cannot be denied," the lower court said, "that appellee (respondent) did incur expenses"' It is well to note further that respondent was a painter by profession and a professor of Fine Arts, so that the amount of P2,000 awarded cannot be said to be excessive The attorney's fees in the sum of P3,000 also awarded to the respondent are assailed on the ground that the Court of First Instance did not provided for the same, and since no appeal was interposed by said respondent, it was allegedly error for the Court of Appeals to award them motu proprio. Petitioner fails to note that attorney's fees are included in the concept of actual damages under the Civil Code and may be awarded whenever the court deems it is just and equitable (Art. 2208, Civil Code of the Philippines). MORAL DAMAGES ISSUE 2: Whether or not Moral Damages should be awarded? HELD: NO Moral damages. (eliminating the award of P5,000.00 by way of moral damages) RATIO: MORAL DAMAGES ARE NOT RECOVERABLE IN DAMAGE ACTIONS PREDICTED ON A BREACH OF THE CONTRACT OF TRANSPORTATION, IN VIEW OF ARTICLES 2219 AND 2220 Art. 2219. Moral damages may be recovered in the following and analogous cases: (1) A criminal offense resulting in physical injuries; (2) Quasi-delicts causing physical injuries; Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under circumstances, such damages are justify due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. (a) In case of breach of contract (including one of transportation) proof of bad faith or fraud (dolus), i.e., wanton or deliberately injurious conduct, is essential to justify an award of moral damages; and (b) That a breach of contract can not be considered included in the descriptive term "analogous cases" used in Art. 2219; not only because Art. 2220 specifically provides for the damages that are caused by contractual breach, but because the definition of quasi-delict in Art. 2176 of the Code expressly excludes the cases where there is a "preexisting contractual relation between the parties." The exception to the basic rule of damages now under consideration is a mishap resulting in the death of a passenger, in which case Article 1764 makes the common carrier expressly subject to the rule of Art. 2206, that entitles the deceased passenger to "demand moral damages for mental anguish by reason of the death of the deceased" But the exceptional rule of Art. 1764 makes it all the more evident that where the injured passenger does not die, moral damages are not recoverable unless it is proved that the carrier was guilty of malice or bad faith. The mere carelessness of the carrier's driver does not per se constitute of justify an inference of malice or bad faith on the part of the carrier; and in the case at bar there is no other evidence of such malice to support the award of moral damages by the Court of Appeals. To award moral damages for breach of contract, therefore, without proof of bad faith or malice on the part of the defendant, as required by Art. 220, would be to violate the clear provisions of the law, and constitute unwarranted judicial legislation. SUB ISSUE: Whether or not the breach of contract constituted BAD FAITH, thus LIABLE to MORAL DAMAGES? HELD: In this case, no. RATIO: It is also suggested that a carrier's violation of its engagement to safety transport the passenger involves a breach of the passenger's confidence, and therefore should be regarded as a breach of contract in bad faith, justifying recovery of moral damages under Art. 2220. This theory is untenable, for under it the carrier would always be deemed in bad faith, in every case its obligation to the passenger is infringed, and it would be never accountable for simple negligence; while under the law (Art. 1756). The presumption is that common carriers acted negligently (and not maliciously), and Art. 1762 speaks of negligence of the common carrier. ART. 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in article 1733 and 1755. ART. 1762. The contributory negligence of the passenger does not bar recovery of damages for his death or injuries, if the proximate cause thereof is the negligence of the common carrier, but the amount of damages shall be equitably reduced. THE DISTINCTION BETWEEN FRAUD, BAD FAITH OR MALICE IN THE SENSE OF DELIBERATE OR WANTON WRONG DOING AND NEGLIGENCE (AS MERE CARELESSNESS) IS TOO FUNDAMENTAL IN OUR LAW TO BE IGNORED (ARTS. 1170-1172); THEIR CONSEQUENCES BEING CLEARLY DIFFERENTIATED BY THE CODE. In case of fraud, bad faith, malice or wanton attitude, the obligor shall be responsible for all damages which may be reasonably attributed to the non-performance of the obligation.

Martha Rose C. Serrano

Transportation Law
It is to be presumed, in the absence of statutory provision to the contrary, that this difference was in the mind of the lawmakers when in Art. 2220 THEY LIMITED RECOVERY OF MORAL DAMAGES TO BREACHES OF CONTRACT IN BAD FAITH. It is true that negligence may be occasionally so gross as to amount to malice; but that fact must be shown in evidence, and a carrier's bad faith is not to be lightly inferred from a mere finding that the contract was breached through negligence of the carrier's employees CALALAS VS. CA, SUPRA VICTORY LINER, INC vs. GAMMAD Pet: Victory Liner owner of bus that killed Marie Grace Gammad wife of Resp: Respondent Rosalito Gammad, April Rossan, Rois Rozano and Diana Gammad (children) Facts: 1. 2. 3. 4. When a passenger dies or id injured, CC presumed at fault. Unless presumption rebutted. Here no evidence was presented to rebut this statutory presumption that the proximate cause of the death of Marie Grace is the negligence of petitioner. The award of damages should be modified. 3. Compensatory damages should be deleted for lack of basis. GN:Docu evi should be presented to substantiate damages for loss of earn capacity. EXC: (1) Deceased was self-employed earning less than min wage. (2) deceased was a daily wage worker earning less than minimum wage. HERE: Only testimony of Resp. was presented that the deceased was 39yo, employed as Section Chief of BIR, earning P83K per annum. No docu evidence was presented and the case fall on neither of the two exception. Therefore the claim for loss of earn capacity was unsubstantiated. 4. Loss having been established, but the amount unsubstantiated, temperate damages may be awarded @P500K, pursuant to NCC 2224, when the court finds that there is a loss but its amount cannot be proved with certainty. a. Pleno v. CA the court awarded P200K temperate damages because the income of the victim was not sufficiently proven. 5. Moral Damages cannot be lumped with exemplary damages. They are based on different jural foundations. (People v. Trapane) In Culpa Contractual, moral damages may be awarded when the defendant acted in bad faith or was guilty of gross negligence (amounting to BF) or in wanton disregard of contractual obli and AS IN THIS CASE when the act of breach of contract itself constitutes the ort that results in physical injuries. By special provision (NCC1764 in relation to NCC 2206) moral damages may also be awarded in case of the death of a passenger results from the breach of carriage. HERE: respondents should be awarded moral damages due to compensate for the grief caused by the death of the deceased. 6. Furthermore Victory failed to prove the exercise the extra ord diligence, and is presumed to have acted recklessly. Thus. The award for exemplary damages is proper. 7. People v. Duban: Only substantiated and proven expenses or those that appear to have been genuinely incurred will be recognized. HERE actual damages will be further reduced to the amount actually supported by receipts in Ex J and F. 8. Attys fees may also be recovered in case at bar where exemplary damages are awarded. 10% WHEREFORE Affirmed with modification. P50K indemnity for death, P100K moral damages, P100K exemplary damages, P78K actual damages, P500K temperate damages, 10% total amount as attys fees. Lopez v. Pan American World Airways Facts: Reservation for first class accommodation in Pan American Airlines from Tokyo to San Francisco was made by Delfin Faustino for then Senator Fernando Lopez and company. First class tickets were a.

Issues:

3:00 am, 14 Mar 96: Aircon Victory Liner bus (Tugegarao to Manila). The bus was running at high speed. The bus fell into a ravine at Sta Fe, Nueva Vizcaya. Death of Marir Grace and physical injuries of other passengers. FILED: Damages arising from culpa contractual. ANSWER: Incident was purely accidental. Always exercised extra-ord diligence in 50yr ops. RTC : In favor of Gammad. Awarded: Actual Damages 122K, Death Indemnity 50K, Exemplary and Moral Damages 400K, Compensatory Dam 1.5M, attys fees 10% total, costs of suit. CA: Affirmed but changed amounts, deleting completely the death indemnity and costs of suit. Actual P88K, Compe 1.5M, Moral and Exemp P400, attys fees 10%. 1. w/n the pet. counsel was guilty of gross negligence 2. w/n pet should be held liable for breach of C of Carriage 3. w/n the award of damages was proper.

Held: 1. Counsel guilty of negligence, but Pet. also guilty of contributory negligence. a. GN: Negligence counsel binds the client. EXC: where reckless or gross negligence deprives client of due process. Application will result in outright deprivation of liberty. b. The exceptions are not present in this case. Although initially declared in default Atty Paguirigan was able to successfully move for setting aside of the order of default. He also filed a timely appeal. Hence pet was not deprived of DP. Pet also was late in issuing an SPA, only after the order of default. Therefore contributory negligence. 2. Victory liner was correctly found liable for breach of contract of carriage.

Martha Rose C. Serrano

Transportation Law
issued and paid for. The party left Manila for Tokyo as scheduled. Senator Lopez requested Minister Busuego to contact the airlines regarding their accommodation. However, they were informed that there was no accommodation for them. Because of some urgent matters to attend to in San Francisco, they were constrained to take the tourist flight under protest. Issues: (1) Whether the defendant acted in bad faith for deliberate refusal to comply with its contract to provide first-class accommodation to the plaintiff (2) Whether moral and exemplary damages should be awarded Held: (1) From the evidence of defendant it is in effect admitted that defendant - through its agents - first cancelled plaintiffs, reservations by mistake and thereafter deliberately and intentionally withheld from plaintiffs or their travel agent the fact of said cancellation, letting them go on believing that their first class reservations stood valid and confirmed. In so misleading plaintiffs into purchasing first class tickets in the conviction that they had confirmed reservations for the same, when in fact they had none, defendant wilfully and knowingly placed itself into the position of having to breach its a foresaid contracts with plaintiffs should there be no last-minute cancellation by other passengers before flight time, as it turned out in this case. Such actuation of defendant may indeed have been prompted by nothing more than the promotion of its self-interest in holding on to Senator Lopez and party as passengers in its flight and foreclosing on their chances to seek the services of other airlines that may have been able to afford them first class accommodations. All the time, in legal contemplation such conduct already amounts to action in bad faith. For bad faith means a breach of a known duty through some motive of interest or ill-will. At the time plaintiffs bought their tickets, defendant, therefore, in breach of its known duty, made plaintiffs believe that their reservation had not been cancelled. Such willful-non-disclosure of the cancellation or pretense that the reservations for plaintiffs stood - and not simply the erroneous cancellation itself - is the factor to which is attributable the breach of the resulting contracts. And, as above-stated, in this respect defendant clearly acted in bad faith. (2) First, then, as to moral damages. As a proximate result of defendant's breach in bad faith of its contracts with plaintiffs, the latter suffered social humiliation, wounded feelings, serious anxiety and mental anguish. For plaintiffs were travelling with first class tickets issued by defendant and yet they were given only the tourist class. At stop-overs, they were expected to be among the first-class passengers by those awaiting to welcome them, only to be found among the tourist passengers. It may not be humiliating to travel as tourist passengers; it is humiliating to be compelled to travel as such, contrary to what is rightfully to be expected from the contractual undertaking. The rationale behind exemplary or corrective damages is, as the name implies, to provide an example or correction for public good. Defendant having breached its contracts in bad faith, the court, as stated earlier, may award exemplary damages in addition to moral damages. In view of its nature, it should be imposed in such an amount as to sufficiently and effectively deter similar breach of contracts in the future by defendant or other airlines. In this light, we find it just to award P75,000.00 as exemplary or corrective damages. LOPEZ vs. PAAN AMERICAN WORLD AIRWAYS FACTS: > Remington Industrial ordered 194 hot rolled steel sheets from Wangs. Wangs forwarded the order to its supplier Burwill. The sheets were loaded on MV Indian Reliance in Poland and shipped to the Philippines under a Bill of Lading. Iron Bulk Shipping represented the charterer in the Philippines. > Upon discharge of the cargo, the sheets were found to be wet and with rust extending to 50 to 60% of each sheet. > No one honored the claims of loss and as recourse, Remington filed an action for collection. Both lower and appellate courts ruled in favor of Remington. > The charterers defense (Iron Bulk) was that the sheets were already rusty when they were loaded on the ship. However, the Bill of Lading it issued was found to be a clean bill of lading (i.e. it does not indicate any defect on the goods covered by it). The sheets were found to be in a fair, usually accepted condition. > The suppliers defense (Wangs) was that Iron Bulk did not exercise extraordinary diligence in shipping the sheets. > The appellate court dismissed the case against Wangs and now, only Iron Bulk raised the case on certiorari. ISSUES: 1. Whether or not Iron Bulk exercised extraordinary diligence? No. > Diligence required: Even if the cargo was already in a damaged condition at the time it was accepted for transportation, the carrier is not relieved from its responsibility to exercise due care in handling the merchandise and in employing the necessary precautions to prevent the cargo from further deteriorating. Extraordinary diligence requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery. The common carrier must exercise due diligence to forestall or lessen the loss (by applying additional safety measures to make sure that the cargo is protected from corrosion). > Presumption: Except in the cases mentioned under Art. 1734, 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.

Martha Rose C. Serrano

Transportation Law
2. Whether or not the CA erred in relying on the pro forma Bill of Lading? No. > Two-fold character: A bill of lading operates as both a receipt and a contract. It is a receipt for the goods shipped (dates, place, description, quality and value) and a contract to transport and deliver the same as therein stipulated. Estoppel: Since Iron Bulk shipping failed to annotate in the bill of lading the alleged damaged condition of the cargo when it was loaded, they are bound by the description contained therein and they are now estopped from denying the contents of the said bill of lading. VICTORY LINER VS. GAMMAD, SUPRA ZULUETA VS. PAN AMERICAN , SUPRA PAL VS. CA, SUPRA JAPAN AIRLINES VS. CA Facts: Private respondents boarded the JAL flights to Manila with a stop over at Narita Japan at the airlines' expense. Upon arrival at Narita private respondents were billeted at Hotel Nikko Narita for the night. The next day, private respondents went to the airport to take their flight to Manila. However, due to the Mt. Pinatubo eruption rendered NAIA inaccessible to airline traffic. Hence, private respondents' trip to Manila was cancelled indefinitely. JAL then booked another flight fort the passengers and again answered for the hotel accommodations but still the succeeding flights were cancelled. Issue: Whether or not JAL was obligated to answer for the accommodation expenses due to the force majeure. Held: No, there is no question that when a party is unable to fulfill his obligation because of "force majeure," the general rule is that he cannot be held liable for damages for non-performance. Corollarily, when JAL was prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel and meal expenses the stranded passengers incurred, cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses of respondents for their unexpected overnight stay on June 15, 1991. It has been held that airline passengers must take such risks incident to the mode of travel. In this regard, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the consequences of which the passenger must assume or expect. While JAL was no longer required to defray private respondents' living expenses during their stay in Narita on account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport private respondents on the first available connecting flight to Manila. Petitioner JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified private respondents from "transit passengers" to "new passengers" as a result of which private respondents were obliged to make the necessary arrangements themselves for the next flight to Manila. Accordingly, there is no question that when a party is unable to fulfill his obligation because of "force majeure," the general rule is that he cannot be held liable for damages for non-performance. Corollarily, when JAL was prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel and meal expenses the stranded passengers incurred, cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses of respondents for their unexpected overnight stay on June 15, 1991. It has been held that airline passengers must take such risks incident to the mode of travel. In this regard, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the consequences of which the passenger must assume or expect. While JAL was no longer required to defray private respondents' living expenses during their stay in Narita on account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport private respondents on the first available connecting flight to Manila. Petitioner JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified private respondents from "transit passengers" to "new passengers" as a result of which private respondents were obliged to make the necessary arrangements themselves for the next flight to Manila. EASTERN SHIPPING VS. CA Facts: On September 4, 1978, thirteen coils of uncoated 7- wire stress relieved for pre- stressed concrete were shipped on board the vessel Jupri Venture owned and operated by petitioner, for delivery to stresstek Post- Tensioning Philippines in Manila. The said cargo was insured by respondent operator E. Razon, from whom the consignees broker received for delivery to consignees warehouse. It appears that while en route, the vessel encountered very rough seas and stormy weather, for the days, which caused it to pound and roll heavily. The coils which were wrapped in burlap cloth and cardboard paper were stored in the lower hold of the hatch of the vessel which were rusty on one side each and it was found that the wetting was caused by fresh water that entered the hatch. The complaint that was filed by the first Nationwide Assurance Corporation (insurer) against Eastern Shipping Lines and F. Razon in RTC, Manila was dismissed. On appeal, the judgment appealed from is hereby SET ASIDE. Only Eastern Shipping Lines, Inc. filed this petition. Issue: Whether or not rains and rough is considered as caso fortuito which would exempt petitioner from liability for the deterioration of the cargo. Held: No, such is not considered caso fortuito which would exempt from liability for the deterioration of the cargo. Art. 1737 of the Civil Code provides that, common carrier are bound to observe extraordinary vigilance over goods according to all circumstances of each case. Further Article 1735 of the Civil Code provides that, 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.

Martha Rose C. Serrano

Transportation Law
In the case at bar, heavy rains and rough seas were not caso fortuito, but normal occurrences that an ocean- going vessel, particularly in the month of September, is a month of rains and heavy seas would encounter as a matter of routine. They are not unforeseen nor unforeseeable. These are conditions that ocean- going vessels would encounter and provide for, in the ordinary course of voyage. That rain water (not sea water) found its way into the holds of the Jupri Venture is a clear indication that care and foresight did not attend the closing of ships hatches so that rain water would not find its way into the cargo holds of the ship. Since, the carrier has failed to establish any caso fortuito, the presumption by law of fault or negligence on the part of the carrier applies. The Court ruled that the petition is DISMISSED. PHILAMGEN vs. SWEET LINES FACTS A total 7,000 bags of low density polyethylene (600 bags of polyethylene 641 and 6,400 bags of polyethylene 647) were shipped from Baton Rouge, LA to Manila on board SS Vishva Yash, a vessel belonging to the Shipping Corporation of India (SCI). From Manila, the cargoes were shipped to Davao on board MV Sweet Love, a vessel owned by Sweet Lines. The consignee was Far East Bank with arrival notice to Tagum Plastics, Inc., Tagum, Davao City. The cargoes were insured by Far East Bank with the Philippine American General Insurance Co (Philamgen) and were covered by bills of lading which contained the following stipulation in paragraph 5: Claims for shortage, damage, must be made at the time of delivery to consignee or agent, if container shows exterior signs of damage or shortage. Claims for non-delivery, misdelivery, loss or damage must be filed within 30 days from accrual. Suits arising from shortage, damage or loss, non-delivery or misdelivery shall be instituted within 60 days from date of accrual of right of action. Failure to file claims or institute judicial proceedings as herein provided constitutes waiver of claim or right of action. In no case shall carrier be liable for any delay, non-delivery, misdelivery, loss of damage to cargo while cargo is not in actual custody of carrier. On May 15, 1977, the shipment(s) were discharged from the interisland carrier into the custody of the consignee. A survey conducted on July 8, 1977 showed that of the shipment totalling 7,000 bags, originally contained in 175 pallets, only a total of 5,820 bags were delivered to the consignee in good order condition, leaving a balance of 1,080 bags. Some of the 1,080 bags were either MISSING OR DAMAGED beyond the point of being useful for the intended purpose. FEBTC and Tagum Plastics sued the international carrier, SCI, the inter-island carriers, Sweet Lines, the arrastre company, Davao Arrastre and FE Zuellig (which I assume is the shipper). Before trial, a compromise agreement was entered into between the complainants and SCI and F.E. Zuellig, thus, only Sweet Lines and Davao Arrastre remained as defendants. The trial court ruled in favour of Philamgen and Tagum Plastics. The CA reversed on the ground of prescription and denied the motion for reconsideration. ISSUES (1) (2) (3)

Was there a prescriptive period? If yes, was the prescriptive period valid and legal? If it was valid and legal, did Philamgen act within the prescriptive period?

RULING (1) Yes. There was a prescriptive period. When the complaint was filed, prescription as an affirmative defense was seasonably raised by Sweet Lines in its answer. Though the bills of lading were not presented in evidence, the SC said that: As petitioners are suing upon SLI's contractual obligation under the contract of carriage as contained in the bills of lading, such bills of lading can be categorized as actionable documents which under the Rules must be properly pleaded either as causes of action or defenses, and the genuineness and due execution of which are deemed admitted unless specifically denied under oath by the adverse party. The rules on actionable documents cover and apply to both a cause of action or defense based on said documents. In their answer, Sweet Lines included the prescriptive period under paragraph 5 of the bills of lading. Philamgen did not deny the existence of the bill of lading under oath. Instead, in its reply to the answer, Philamgen asserted that the bills of lading were contracts of adhesion and that such provisions were contrary to law and public policy and thus, Sweet Lines cannot avail of such prescriptive period as a valid defense. The SC said that Philamgens failure to deny under oath the existence of the bills of lading was tantamount to an admission of its existence, together with paragraph 5 containing the prescriptive period. Thus, the existence of the prescriptive period was duly proved even if the bills of lading were not presented in court. (2) Yes. The prescriptive periods were valid and legal. Philamgen insists that the bills of lading were contracts of adhesion and that the prescriptive periods stated therein were void for being contrary to law and public policy. The SC, citing Ong Yu vs CA, said that contracts of adhesion are not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres he gives his consent. Philamgen, thus, gave its consent to the contracts the bills of lading including consent to the prescriptive periods therein. The SC also agreed with the CA that parties can stipulate a shorter prescriptive period for the filing of suits. The SC quoted the CA, It must be noted, at this juncture, that the aforestated time limitation (paragraph 5) in the presentation of claim for loss or damage, is but a restatement of the rule prescribed under Art. 366 of the Code of Commerce... The SC said that, ... the validity of a contractual limitation of time for filing the suit itself against a carrier shorter than the statutory period therefor has generally been upheld as such stipulation merely affects the shipper's remedy and does not affect the liability of the carrier. In the absence

Martha Rose C. Serrano

Transportation Law
of any statutory limitation and subject only to the requirement on the reasonableness of the stipulated limitation period, the parties to a contract of carriage may fix by agreement a shorter time for the bringing of suit on a claim for the loss of or damage to the shipment than that provided by the statute of limitations. Such limitation is not contrary to public policy for it does not in any way defeat the complete vestiture of the right to recover, but merely requires the assertion of that right by action at an earlier period than would be necessary to defeat it through the operation of the ordinary statute of limitations. The SC also said that, ..., the shortened period for filing s uit is not unreasonable and has in fact been generally recognized to be a valid business practice in the shipping industry. This is in recognition of the inherent dangers of carriage by sea. (3) No. Philamgen did not act within the prescriptive period. The shipment was discharged into the custody of the consignee on May 15, 1977, and it was from this date that petitioners' cause of action accrued, with thirty (30) days therefrom within which to file a claim with the carrier for any loss or damage which may have been suffered by the cargo and thereby perfect their right of action. Claim was filed only on April 28, 1978, way beyond the period provided in the bills of lading and violative of the contractual provision, the inevitable consequence of which is the loss of petitioners' remedy or right to sue. The SC said, Even the filing of the complaint on May 12, 1978 is of no remedial or practical consequence, since the time limits for the filing thereof, whether viewed as a condition precedent or as a prescriptive period, would in this case be productive of the same result, that is, that petitioners had no right of action to begin with or, at any rate, their claim was time-barred. Other things discussed by the SC: 1. ...where the contract of shipment contains a reasonable requirement of giving notice of loss of or injury to the goods, the giving of such notice is a condition precedent to the action for loss or injury or the right to enforce the carrier's liability. Such requirement is not an empty formalism. The fundamental reason or purpose of such a stipulation is not to relieve the carrier from just liability, but reasonably to inform it that the shipment has been damaged and that it is charged with liability therefor, and to give it an opportunity to examine the nature and extent of the injury. This protects the carrier by affording it an opportunity to make an investigation of a claim while the matter is fresh and easily investigated so as to safeguard itself from false and fraudulent claims. 2. Philamgen also asserted that since the purpose of the notice of claim or loss was to charge Sweet Lines with actual knowledge of the loss and damage involved, then the issuance of Sweet Lines of a Report on Losses and Damage dated May 15, 1977, would obviate the need for or render superfluous the filing of a claim within the stipulated period. The SC said, The report on losses and damages is not the claim referred to and required by the bills of lading for it does not fix responsibility for the loss or damage, but merely states the condition of the goods shipped. The claim contemplated herein, in whatever form, must be something more than a notice that the goods have been lost or damaged; it must contain a claim for compensation or indicate an intent to claim. Furthermore, the report bears an annotation at its lower part that says this Copy should be submitted together with your claim invoice or receipt within 30 days from date of issue otherwise your claim will not be honored." 3. The claim against the carrier, Sweet Lines, has prescribed but what about the claim against Davao Arrastre. The SC said that there was not enough proof to pinpoint the party responsible for the lost and damaged bags. (What I found surprising was that the SC also said, Unlike a common carrier, an arrastre operator does not labor under a presumption of negligence in case of loss, destruction or deterioration of goods discharged into its custody. In other words, to hold an arrastre operator liable for loss of and/or damage to goods entrusted to it there must be preponderant evidence that it did not exercise due diligence in the handling and care of the goods. ROLDAN vs. LIM PONZO FACTS: Plaintiff seeks to recover damages in the sum of P3,780.12 for the alleged failure of the defendant company to live up to its contract for the transportation of 2,244 packages of sugar from the plaintiff's hacienda to Iloilo. Defendants admits the execution of the contract, the receipt from the plaintiff of 2,244 packages of sugar for transportation, and the loss of a part of this sugar. Counsel for defendant insists, however, that it should not be held responsible for its failure to carry out the contract, because, as it alleges, the sugar was lost in a wreck in the river of Jalaud, without fault on the part of the owner, the patron, or the crew of the vessel (LORCHA). TC: Peremptorily dismissed the complaint on the ground that it was neither alleged or proved that the plaintiff had complied with the provisions of section 366 of the Commercial Code. Within the twenty-four hours following the receipt of the merchandise a claim may be brought against the carrier on account of damage or average found therein on opening the packages, provided that the indication of the damage of average giving rise to the claim cannot be case said claim would only admitted on the receipt of the packages. After the periods mentioned have elapsed, no claim whatsoever shall be admitted against the carrier with regards to the condition in which the goods transported were delivered. Issue: WON the dismissal of the complaint on this ground was an error? HELD: This action seeks to recover damages for defendant's failure to deliver 1,222 packages or bayones of sugar, the failure to make claim for such damages under the provisions of article 366 of the Commercial Code in no wise affects the respective rights of the parties. It is founded on a claim for damages resulting from the wetting of the 1,022 packages of sugar which were saved from the wreck, it seems clear that if these 1,022 packages of sugar were delivered by the carrier and received by the consignee under and in pursuance of the terms of the contract, this claim for damages would be defeated by the plaintiff's failure to make claim therefor in accordance with the terms of article 366 of the Code.

Martha Rose C. Serrano

Transportation Law
The measures to be taken under the terms of article 367 of the Code when the parties are unable to arrive at an amicable settlement of claims for damages set up in accordance with article 366, quite clearly indicate that the necessity for the presentation of claims under this article arises only in those cases wherein the carrier makes delivery and the consignee receives the goods in pursuance of the terms of the contract. Until the defendant has had an opportunity to submit his evidence it is impossible to determine under what conditions these 1,022 packages of sugar came into the possession of the plaintiff, or to determine whether his claim for damages by the wetting of this sugar, if well founded in every other respect, is or should be defeated by his failure to make claim for such damages in the manner and form indicated in article 366 of the Commercial Code. The judgment entered in the court below should be reversed and the record remanded to the court below for new trial upon all the issues raised by the pleadings, it being expressly understood, however, that the evidence already in the record may be considered as submitted at the new trial, without prejudice to the right of either party to offer such additional evidence as he may deem proper in support of the allegations set forth in the pleadings. No costs will be taxed in this instance. Legal Basis : Article 366 of the Commercial Code is limited to cases of claims for damage goods actually turned over by the carrier and received by the consignee, whether those damages be apparent from the examination of the packages in which the goods are delivered, or of such a character that the nature and extent of the damage is not apparent until the packages are opened and the contents examined. Clearly it has no application in such cases wherein the goods entrusted to the carrier are not delivered by the carrier to the consignee. In such cases there can be no question of a claim for damages suffered by the goods while in transport, since the claim for damages arises exclusively out of the failure to make delivery. Article 367 of the Commercial Code is as follows: If there should occur doubts and disputes between the consignee and the carrier with regard to the condition of goods transported at the time of their delivery to the former, the said goods shall be examined by the experts appointed by the parties, and a third one, in case of disagreement, appointed by the judicial authority, the result of the examination always being reduced to writing; and if the persons interested should not agree to the report of the experts and could not reach an agreement, said judicial authority shall have the merchandise deposited in a safe warehouse, and the parties interested shall make use of their rights in the proper manner. ANG vs. AMERICAN STEAMSHIP Facts: Yau Yue Commercial Bank Ltd. of Hongkong, sell 140 packages of galvanized steel durzinc sheetsto one Herminio G. Teves, shipped by Tokyo Boeki Ltd. of Tokyo, Japan. with American SteamshipAgencies, Inc. as the agent in the Philippines, under a shipping agreement. The bill of lading was indorsed to the order of and delivered to Yau Yue by the shipper. Upon receipt thereof, Yau Yue drew a demand draft together with the bill of lading against Herminio G. Teves, through the Hongkong & Shanghai Bank. Upon arrival, Hongkong & Shanghai Bank notified Teves, the "notify party" under the bill of lading, of the arrival of the goods and requested payment of the demand draft representing the purchase price of the articles. Teves, however, did not pay the demand draft, prompting the bank to make the corresponding protest. The bank likewise returned the bill of lading and demand draft to Yau Yue which indorsed the said bill of lading to Domingo Ang. Despite non-payment Teves was able to secure a "Permit To Deliver Imported Articles" which he presented to the Bureau of Customs which in turn released to him the articles covered by the bill of lading. Subsequently, Domingo Ang claimed for the articles from American Steamship Agencies, Inc., by presenting the indorsed bill of lading, but he was informed by the latter that it had delivered the articles to Teves. A complaint was filed by Ang against American Steamship for having allegedly wrongfully delivered and/or converted the goods covered by the bill of lading. Defendant filed a motion to dismiss upon the ground that plaintiff's cause of action has prescribed under the Carriage of Goods by Sea Act. Lower court dismissed the case on the ground of prescription. Hence, an appeal was filed to SC. Issue: Has plaintiff-appellant's cause of action prescribed under Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act? What is to be resolved in order to determine the applicability of the prescriptive period of one year to the case at bar is whether or not there was "loss" of the goods subject matter of the complaint. Ruling: From the allegations of the complaint, therefore, the goods cannot be deemed "lost". They were delivered to Herminio G. Teves, so that there can only be either delivery, if Teves really was entitled to receive them, or misdelivery, if he was not so entitled. It is not for Us now to resolve whether or not delivery of the goods to Teves was proper, that is, whether or not there was rightful delivery or misdelivery. There being no loss or damage to the goods, the aforequoted provision of the Carriage of Good by Sea Act stating that "In any event, the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the datewhen the goods should have been delivered," does not apply. It follows that for suits predicated not upon loss or damage but on alleged misdelivery (or conversion) of the goods, the applicable rule on prescriptions that found in the Civil Code, namely, either ten years for breach of a written contract or four years for quasi-delict. In either case, plaintiff's cause of action has not vet prescribed, since his right of action would have accrued at the earliest on May 9, 1961 when the ship arrived in Manila and he filed suit on October30, 1963.Wherefore, the dismissal order appealed from is hereby reversed and set aside and this case is remanded to the court a quo for further proceedings

US vs. SMITH BELL

MITSUI VS. CA Paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered. FACTS Mitsui Lines entered into a contract of carriage with Lavine Longewear Manufacturing to

Martha Rose C. Serrano

Transportation Law
transport goods the latter from Manila to France. o Mitsui Lines undertook to deliver the goods to France 28 days from initial loading. o Whatever reduction there may have been in the value of the goods is not due to their deterioration or disappearance because they had been damaged in transit.

On July 24, 1991, Mituis vessel loaded Lavine's container van for carriage at the said port of origin. However, in Kaoshiung, Taiwan the goods were not transshipped immediately, with the result that the shipment arrived in France only on November 14, 1991. o o o The consignee allegedly paid only half the value of the said goods on the ground that they did not arrive in France until the "off season" in that country. The remaining half was allegedly charged to the account of Lavine which in turn demanded payment from Mitsui through its agent. Mitsui denied Lavines claim.

Precisely, the question before the trial court is not the particular sense of "damages" as it refers to the physical loss or damage of a shipper's goods as specifically covered by 3(6) of COGSA but Mitsui's potential liability for the damages it has caused in the general sense and, as such, the matter is governed by the Civil Code, the Code of Commerce and COGSA, for the breach of its contract of carriage with Lavine.

DOLE PHILS vs. MARITIME Co., Facts: The cargo subject of the instant case was discharged in Dadiangas unto the custody of the consignee, Dole Philippines. The corresponding claim for the damages sustained by the cargo was filed by the plaintiff with the defendant, Maritime Company on May 4, 1972. On June 11, 1973 the plaintiff filed a complaint in the CFI Manila embodying 3 causes of action involving 3 separate and different shipments. The third cause of action therein involved the cargo now subject of this present litigation. On December 11, 1974, Judge Serafin Cuevas issued an Order dismissing the first two causes of action. The third cause of action which covered the cargo subject of this case now was likewise dismissed but without prejudice as it was not covered by the settlement. Because of the dismissal of the complaint with respect to the third cause of action, DOLE instituted this present complaint on January 6, 1975. Maritime filed an answer pleading inter alia the affirmative defense of prescription under the provisions of the Carriage of Goods by Sea Act. The Trial Court granted the motion, scheduling the preliminary hearing on April 27, 1977. The record before the Court does not show whether or not that hearing was held, but under date of May 6, 1977, Maritime filed a formal motion to dismiss invoking once more the ground of prescription. The Trial Court, after due consideration, resolved the matter in favor of Maritime and dismissed the complaint. Issue: Whether or not Article 1155 of the Civil Code applies in lieu of the COGSA. Held: No. Article 1155 of the Civil Code provides that the prescription of actions is interrupted by the making of an extrajudicial written demand by the creditor Section 3, paragraph 6 of the COGSA provides that: the carrier and the ship shall be discharged from all liability in respect of loss or damage unless suit is brought within one year after delivery of the goods or the date when the goods should have been delivered; Provided, That, if a notice of loss or damage, either apparent or conceded, is not given as

ISSUE/HELD WoN Lavine's action is for "loss or damage" to goods shipped, within the meaning of 3(6) of the Carriage of Goods by Sea Act (COGSA) - NO RATIO "Loss" refers to the deterioration or disappearance of goods. As defined in the Civil Code and as applied to Section 3(6), paragraph 4 of the Carriage of Goods by Sea Act, "loss" contemplates merely a situation where no delivery at all was made by the shipper of the goods because the same had perished, gone out of commerce, or disappeared in such a way that their existence is unknown or they cannot be recovered. o The deterioration of goods due to delay in their transportation constitutes "loss" or "damage" within the meaning of 3.

Whatever damage or injury is suffered by the goods while in transit would result in loss or damage to either the shipper or the consignee. o As long as it is claimed that the losses or damages suffered by the shipper or consignee were due to the arrival of the goods in damaged or deteriorated condition, the action is still basically one for damage to the goods. The damages suffered by him as a result of the delay in the shipment of his cargo are not covered by the prescriptive provision of the Carriage of Goods by Sea Act above referred to, if such damages were due, not to the deterioration and decay of the goods while in transit, but to other causes independent of the condition of the cargo upon arrival, like a drop in their market value. . . .

In the case at bar, there is neither deterioration nor disappearance nor destruction of goods caused by the carrier's breach of contract.

Martha Rose C. Serrano

Transportation Law
provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when.the goods should have been delivered. 1. Dole argues that since the provisions of the Civil Code are, by express mandate of said Code, suppletory of deficiencies in the Code of Commerce and special laws in matters governed by the latter and there being a patent deficiency with respect to the tolling of the prescriptive period provided for in the Carriage of Goods by Sea Act, prescription under said Act is subject to the provisions of Article 1155 of the Civil Code on tolling. Since Dole's claim for loss or damage was filed on May 4, 1972 amounted to a written extrajudicial demand which would toll or interrupt prescription under Article 1155, it operated to toll prescription also in actions under the Carriage of Goods by Sea Act. These arguments might merit weightier consideration were it not for the fact that the question has already received a definitive answer, adverse to the position taken by Dole, in The Yek Tong Lin Fire & Marine Insurance Co., Ltd. vs. American President Lines, Inc. 2. Dole argues that it was error for the court not to have considered the action of plaintiff-appellant suspended by the extrajudicial demand which took place, according to defendant's own motion to dismiss on August 22, 1952. Court noticed that while plaintiff avoids stating any date when the goods arrived in Manila, it relies upon the allegation made in the motion to dismiss that a protest was filed on August 22, 1952 which goes to show that plaintiff-appellant's counsel has not been laying the facts squarely before the court for the consideration of the merits of the case. We have already decided that in a case governed by the Carriage of Goods by Sea Act, the general provisions of the Code of Civil Procedure on prescription should not be made to apply. (Chua Kuy vs. Everett Steamship Corp., G.R. No. L-5554, May 27, 1953.) We hold that in such a case the general provisions of the new Civil Code (Art. 1155) cannot be made to apply, as such application would have the effect of extending the one-year period of prescription fixed in the law. It is desirable that matters affecting transportation of goods by sea be decided in as short a time as possible; the application of the provisions of Article 1155 of the new Civil Code would unnecessarily extend the period and permit delays in the settlement of questions affecting transportation, contrary to the clear intent and purpose of the law. Under Dole's theory, when its claim was received by Maritime, the one-year prescriptive period was interrupted and began to run anew from May 4, 1972, affording Dole another period of one year counted from that date within which to institute action on its claim for damage. Unfortunately, Dole let the new period lapse without filing action. It instituted Civil Case No. 91043 only on June 11, 1973, more than one month after that period has expired and its right of action had prescribed. EE ELSER vs. CA FACTS: E.E. Elser Inc, petitioners, International Harvester Company of the Philippines, Respondents December 1945, the goods specified in the bill of lading were shipped from New York to Manila The Consignee Udharam Bazar and Co received the vanishing cream except one case valued at PHP159.78 Goods were insured against damage of loss by the Atlantic Mutual Insurance Co. Udaharam Bazar and Co claimed for indemnity of the loss from the insurer Atlantic Mutual Insurance Co. and was paid by E.E. Elser, the amount involved is PHP159.78 Per CA, E.E. Elser have lost their right to claim against respondents because of their failure to serve notice thereof upon the carrier within 30 days upon notice of loss or damage. Appellant petitioners, admittedly that they were late in claiming the indemnity for the loss of the case of the vanishing cream as their claim was made thirty days after they had been fully aware of said loss. ISSUE: WON Elser may still claim validly against International harvester company

HELD: YES! This act cannot be ignored or disregard in determining the equities of the parties it appearing that the same was made an integral part of the bill of lading by express stipulation Sec 3. That if a notice of loss or damage, either apparent of concealed, is not given as provided for in this section, that fact shall not affect or prejudice the right of the shipper to bring suit within one year after the delivery of the goods or the date when the goods should have been delivered. The Philippine act of 1936 like the U.S. Act of 1936 applies propio vigore only to foreign commerce to all contracts for the carriage of goods by sea and from Philippine Ports in foreign trade.

MARITIME Co. of the Phils vs. CA

Martha Rose C. Serrano