SHEWARAM vs. PHILIPPINE AIR LINES, INC.

Facts: Shewaram, a paying passenger on defendant's aircraft flight from Zamboanga City bound for Manila. He checked in three pieces of baggages, a suitcase
and two other pieces. When plaintiff ParmanandShewaram arrived in Manila, his suitcase did not arrive with his flight because it was sent to Iligan. It was found
out that it was mistagged by defendants personnel. The station agent of the PAL in Iligan caused the baggage to be sent to Manila for delivery to plaintiff.
Defendant admitted that the two items (Transistor Radio and the Rollflex Camera) could not be found inside the suitcase. An action for damages was instituted
against PAL. RTC ruled that the loss of the articles was due to the negligence of the employees of PAL. PAL however was ordered to pay damages of P100.00
only, as this was its limited liability as stated in the ticket. (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.). An appeal was then brought up by plaintiff.

Issue: Whether or not the limited liability rule applies.

Held: No. The limited liability rule shall not apply. 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. 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.

Shewaram did not agree to the stipulation on the ticket, as manifested by the fact that Shewaram did not sign the ticket.

KLM Royal Dutch Airlines vs Court of Appeals

(65 SCRA 237)

Facts: Spouses Mendoza approached Mr. Reyes, the branch manager of Philippine Travel Bureau, for consultation about a world tour which they were intending
to make with their daughter and niece. Three segments of the trip, the longest, was via KLM. Respondents decided that one of the routes they will take was a
Barcelona-Lourdes route with knowledge that only one airline, Aer Lingus, served it. Reyes made the necessary reservations. To this, KLM secured seat
reservations for the Mendozas and their companions from the carriers which would ferry them throughout their trip, which the exception of Aer Lingus. When the
Mendozas left the Philippines, they were issued KLM tickets for the entire trip. However, their coupon for Aer Lingus was marked on request.

When they were in Germany, they went to the KLM office and obtained a confirmation from Aer Lingus. At the airport in Barcelona, the Mendozas and their
companions checked in for their flight to Lourdes. However, although their daughter and niece were allowed to take the flight, the spouses Mendozas were off
loaded on orders of the Aer Lingus manager, who brusquely shoved them aside and shouted at them. So the spouses Mendozas took a train ride to Lourdes
instead.

Thus, they filed a complaint for damages against KLM for breach of contract of carriage. The trial court decided in favor of the Mendozas. On appeal, the CA
affirmed the decision. Hence, KLM brings this petition to the Supreme Court. KLM cites Art 30 of the Warsaw Convention, which states: the passenger or his

representatives can take action only against the carrier who performed the transportation during which the accident or delay occurred. Also, KLM avers that the
front cover of each ticket reads: that liability of the carrier for damages shall be limited to occurrences on its own line.

Issue: Whether or not KLM is liable for breach of contract of carriage?

Held: The applicability of Art. 30 of the Warsaw Convention cannot be sustained. The article presupposes the occurrence of delay or accident. What is manifest
here is that the Aer Lingus refused to transport the spouses Mendozas to their planned and contracted destination.

As the airline which issued the tickets, KLM was chargeable with the duty and responsibility of specifically informing the spouses of the conditions prescribed in
their tickets or to ascertain that the spouses read them before they accepted their passage tickets.

The Supreme Court held that KLM cannot be merely assumed as a ticket-issuing agent for other airlines and limit its liability to untoward occurrences on its own
line.

The court found, that the passage tickets provide that the carriage to be performed therein by several successive carriers is to be regarded as a single
operation.

PAN AMERICAN WORLD AIRWAYS, INC. vs. RAPADAS

Facts: Private respondent held Passenger Ticket and Baggage Claim Check for petitioner's Flight with the route from Guam to Manila. While standing in line to
board the flight at the Guam airport, Rapadas was ordered by petitioner's handcarry control agent to check-in his Samsonite attache case. Rapadas protested
pointing to the fact that other co-passengers were permitted to handcarry bulkier baggages. He stepped out of the line only to go back again at the end of it to try
if he can get through without having to register his attache case. However, the same man in charge of handcarry control did not fail to notice him and ordered him
again to register his baggage. For fear that he would miss the plane if he insisted and argued on personally taking the valise with him, he acceded to checking it
in. He then gave his attache case to his brother who happened to be around and who checked it in for him, but without declaring its contents or the value of its
contents. Upon arriving in Manila Rapadas claimed and was given all his checked-in baggages except the attache case. He sent his son, Jorge Rapadas to
request for the search of the missing luggage. The petitioner exerted efforts to locate the luggage through the Pan American World Airways-Manila International
Airport (PAN AM-MIA) Baggage Service.Rapadas received a letter from the petitioner's counsel offering to settle the claim for the sum of $160.00 representing
the petitioner's alleged limit of liability for loss or damage to a passenger's personal property under the contract of carriage between Rapadas and PAN AM.
Refusing to accept this kind of settlement, Rapadas filed the instant action for damages. The lower court ruled in favor of Rapadas after finding no stipulation
giving notice to the baggage liability limitation.On appeal, the Court of Appeals affirmed the trial court decision. Hence, this petition.

Issue: Whether or not a passenger is bound by the terms of a passenger ticket declaring the limitations of carriers liability

Held: Yes. The Warsaw Convention, as amended, specifically provides that it is applicable to international carriage which it defines in Article 1, par. 2 as follows:

(2) For the purposes of this Convention, the expression "international carriage" means any carriage in which, according to the agreement between the parties,
the place of departure and the place of destination, whether or not there be a breach in the carriage or a transhipment, are situated either within the territories of
two High Contracting Parties or within the territory of a single High Contracting Party if there is an agreed stopping place within the territory of another State,
even if that State is not a High Contracting Party. Carriage between two points within the territory of a single High Contracting Party without an agreed stopping
place within the territory of another State is not international carriage for the purposes of this Convention. ("High Contracting Party" refers to a state which has
ratified or adhered to the Convention, or which has not effectively denounced the Convention [Article 40A(l)]).
Nowhere in the Warsaw Convention, as amended, is such a detailed notice of baggage liability limitations required. Nevertheless, it should become a
common, safe and practical custom among air carriers to indicate beforehand the precise sums equivalent to those fixed by the Convention. The Convention

governs the availment of the liability limitations where the baggage check is combined with or incorporated in the passenger ticket. In the case at bar, the
baggage check is combined with the passenger ticket in one document of carriage. The passenger ticket complies with Article 3, which provides:
(c) a notice to the effect that, 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 that 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.

What the petitioner is concerned about is whether or not the notice, which it did not fail to state in the plane ticket and which it deemed to have been
read and accepted by the private respondent will be considered by this Court as adequate under the circumstances of this case. As earlier stated, the Court finds
the provisions in the plane ticket sufficient to govern the limitations of liabilities of the airline for loss of luggage. The passenger, upon contracting with the airline
and receiving the plane ticket, was expected to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to overcome the
stipulations, he cannot avoid the application of the liability limitations.
The facts show that the private respondent actually refused to register the attache case and chose to take it with him despite having been ordered by
the PANAM agent to check it in. In attempting to avoid registering the luggage by going back to the line, private respondent manifested a disregard of airline rules
on allowable handcarriedbaggages. Prudence of a reasonably careful person also dictates that cash and jewelry should be removed from checked-in-luggage
and placed in one's pockets or in a handcarried Manila-paper or plastic envelope.
The alleged lack of enough time for him to make a declaration of a higher value and to pay the corresponding supplementary charges cannot justify
his failure to comply with the requirement that will exclude the application of limited liability.
FEDERICO SERRA
vs.
COURT OF APPEALS AND RIZAL COMMERCIAL BANKING CORPORATION
G.R. No. 103338. January 4, 1994
NOCON, J.:

Facts:Serra is the owner of a 374 square meter parcel of land located at Quezon St., Masbate, Masbate. In 1975, RCBC, in its desire to put up a branch in
Masbate, Masbate, negotiated with Serra for the purchase of the then unregistered property. On May 20, 1975, a contract of LEASE WITH OPTION TO BUY
was instead forged by the parties. The contract provides that:
-

RCBC shall occupy the land for 25 years from June 1, 1975 to June 1, 2000.
RCBC shall have the option to purchase said parcel of land within a period of 10 years from the date of the signing of the contract at a price not
greater than P210.00 per square meter. For this purpose, Serra should, within such ten-year period, register said parcel of land under the
TORRENS SYSTEM and all expenses appurtenant thereto shall be for his sole account.
If, for any reason, the land is not registered under the TORRENS SYSTEM within the ten-year period, RCBC shall have the right, upon
termination of the lease to be paid by Serra the market value of the building and improvements constructed on the land.
RCBC shall pay Serra a monthly rental of P700.00.
RCBC is authorized to construct at its sole expense a building and such other improvements on the land, which it may need in the pursuance
of its business and/or operations; but if RCBC shall fail to exercise its option in case the parcel of land is registered under the TORRENS
SYSTEM within the ten-year period mentioned therein, said building and/or improvements, shall become the property of Serra after the
expiration of the 25-year lease period without right of reimbursement on the part of the RCBC.
Pursuant to said contract, a building and other improvements were constructed on the land which housed the branch office of RCBC in Masbate,
Masbate. Within three years from the signing of the contract, Serra complied with his part of the agreement by having the property registered and placed under
the TORRENS SYSTEM.
Serra alleges that as soon as he had the property registered, he kept on pursuing the manager of the branch to effect the sale of the lot as per their
agreement. It was not until September 4, 1984, however, when the RCBC decided to exercise its option and informed Serra, through a letter, of its intention to
buy the property at the agreed price of not greater than P210 per square meter or a total of P78,430. But much to the surprise of RCBC, Serra replied that he is
no longer selling the property. A complaint for specific performance and damages was filed by RCBC against Serra. Serra contended that: (1) RCBC took
undue advantage on him when it set in lopsided terms on the contract which was prepared & drawn by RCBC,(2) the option was not supported by any
consideration distinct from the price and hence not binding upon him, (3) as a condition for the validity and/or efficacy of the option, it should have been
exercised within the reasonable time after the registration of the land under the Torrens System and its delayed action on the option has forfeited whatever its
claim to the same, and (4) extraordinary inflation supervened resulting in the unusual decrease in the purchasing power of the currency rendering the terms

of the contract unenforceable, inequitable and to the undue enrichment of RCBC. He also alleges that the rental of P700 has become unrealistic and
unreasonable, that justice and equity will require its adjustment.
Initially, the trial court dismissed the complaint. Although it found the contract to be valid, the court ruled that the option to buy is unenforceable
because it lacked a consideration distinct from the price and that RCBC did not exercise its option within reasonable time. But upon motion for reconsideration
of RCBC, the court reversed its decision and ordered Serra to transfer the ownership of the property to RCBC. The Court of Appeals affirmed the trial courts
decision and held that: the contract is valid; the option is supported by a distinct and separate consideration as embodied in the agreement; and there is no
basis in granting an adjustment in rental.

Issues & Ruling:

(1) Is the contract of lease with option to buy among the parties is valid? Or is the disputed contract a contract of adhesion?
- There is no dispute that the contract is valid and existing between the parties, as found by both the trial court and the appellate court.
A contract of adhesion is one wherein a party, usually a corporation, prepares the stipulations in the contract, while the other party merely affixes his
signature or his "adhesion" thereto. These types of contracts are as binding as ordinary contracts. Because in reality, the party who adheres to the contract is
free to reject it entirely. Although, the SC will not hesitate to rule out blind adherence to terms where facts and circumstances will show that it is basically onesided.
The SC did not find the situation in the present case to be inequitable. Serra is a highly educated man, who, at the time of the trial was already a CPALawyer, and when he entered into the contract, was already a CPA, holding a respectable position with the Metropolitan Manila Commission. It is evident that a
man of his stature should have been more cautious in transactions he enters into, particularly where it concerns valuable properties.

(2) Whether there was no consideration to support the option, distinct from the price, hence the option cannot be exercised.
- Jurisprudence has taught us that an optional contract is a privilege existing only in one party the buyer. For a separate consideration paid, he
is given the right to decide to purchase or not, a certain merchandise or property, at any time within the agreed period, at a fixed price. This being his
prerogative, he may not be compelled to exercise the option to buy before the time expires.
On the other hand, what may be regarded as a consideration separate from the price is discussed in the case of Vda. deQuirino v. Palarca wherein the
facts are almost on all fours with the case at bar. The said case also involved a lease contract with option to buy where we had occasion to say that "the
consideration for the lessor's obligation to sell the leased premises to the lessee, should he choose to exercise his option to purchase the same, is the
obligation of the lessee to sell to the lessor the building and/or improvements constructed and/or made by the former, if he fails to exercise his option to buy said
premises."
In the present case, the consideration is even more onerous on the part of the lessee since it entails transferring of the building and/or improvements
on the property to petitioner, should respondent bank fail to exercise its option within the period stipulated.

(3) Whether extraordinary inflation supervened resulting in the unusual decrease in the purchasing power of the currency making the rental of P700 unrealistic
and unreasonable, that justice and equity will require its adjustment.
- There is no basis, legal or factual, in adjusting the amount of the rent. The contract is the law between the parties and if there is indeed
reason to adjust the rent, the parties could by themselves negotiate for the amendment of the contract. Neither could we consider the decline of the
purchasing power of the Philippine peso from 1983 to the time of the commencement of the present case in 1985, to be so great as to result in an
extraordinary inflation. Extraordinary inflation exists when there is an unimaginable increase or decrease of the purchasing power of the Philippine currency,
or fluctuation in the value of pesos manifestly beyond the contemplation of the parties at the time of the establishment of the obligation.

Premises considered, the SC finds that the contract of "LEASE WITH OPTION TO BUY" between petitioner and respondent bank is valid, effective and
enforceable, the price being certain and that there was consideration distinct from the price to support the option given to the lessee.

WHEREFORE, the petition was DISMISSED, and the decision of the appellate court was AFFIRMED.
Sweetline
FACTS:
Atty. Leovigildo Tandog and Rogelio Tiro bought tickets from Sweet Lines,Inc. for Voyage 90 a shipping company transporting inter-island passengers and
cargoes, at Cagayan de Oro City. They were to board the M/S "Sweet Hope" bound for Tagbilaran City via the port of Cebu.
They learned that the vessel was not proceeding to Bohol (most of the passengers were bound for Surigao) so they went to the branch office to be relocated to
the M/S "Sweet Town".
The said vessel was already filled to capacity, they were forced to agree to "to hide at the cargo section to avoid inspection of the officers of the Philippine
Coastguard." They alleged that they were "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 had to pay for new tickets.
Thus, they sued Sweet Lines, Inc. for damages and breach of contract of carriage in the CFI of Misamis Oriental.
Petitioner moved to dismiss the complaint on the ground of improper venue, premised on the fact that in the back of their tickets, there was a condition that states
that: any and all actions arising out of the conditions and provisions of this ticket, irrespective of where it is issued, shall be filed in the competent courts in the
City of Cebu.
Trial Court denied the motion to dismiss and the Motion for Recon filed by Sweet Lines Inc. Thus they filed a petition for prohibition for preliminary injunction.
Issue: May a common carrier engaged in inter-island shipping stipulate thru condition printed at the back of passage tickets to its vessels that any and all actions
arising out of the contract 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? Or Is
Condition No. 14, at the back of the passage tickets, which limits the venue of actions arising from the contract of carriage to the Court of First Instance of Cebu,
valid and enforceable?
Ruling: The contract of carriage entered into by the private respondents and Sweet Lines, Inc. is valid and the passage tickets are the best evidence thereof. All
the essential elements of a valid contract, i.e., consent, cause or consideration and object, are present. (Consent manifested by the passengers boarding the
vessel and vessel accepting them on board; Consideration=fare paid; Object- transportation from one place to another as stated in the ticket.)
However, with respect to the fourteen (14) conditions printed at the back of the passage tickets, 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, "while generally, stipulations in a contract come about after deliberate drafting by the parties thereto, ... there are certain contracts, known as
contracts of adhesion, where almost all the provisions of which have been drafted only by one party, usually a corporation and the only participation of the other
party is the signing of his signature or his 'adhesion' thereto.
SC declared that the Condition No. 14 printed at the back of the passage tickets as void and unenforceable, for the ff. reasons: (1) 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 (2) 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 parts 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 that there is a shortage in inter- island vessels plying between the country's several islands, and the facilities they
offer leave much to be desired. 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 that charge them with having consented
to the conditions, especially if there are a number of such conditions in fine print.
Condition No. 14 was prepared solely by Sweet Lines, respondents had no say in its preparation. Neither did the latter have the opportunity to take
into account the conditions prior to the purchase of their tickets. Unlike the small print provisions of contracts wherein the insured is afforded the
opportunity to examine the same, passengers of inter-island vessels do not have the chance to read the conditions, since their adhesion is
presumed already from the fact that they purchased the tickets.

(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 as in 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.
The reason behind the provisions on transfer of venue of actions is the convenience of the palintiff, his witnesses, and to promote the ends of justice.
Considering the expenses a passenger living outside of Cebu City will incur to prosecute a claim against the carrier, he would probably be unwilling
to file the action. Thus the condition defeats the end of justice.

The carrier has offices in the respective ports of call of its vessel, and has the resources 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.
Under this principle of public policy: freedom of contract or private dealing is restricted by law for the good of the public. Condition No. 14, if
enforced, will be subversive of the public good or interest, since it will frustrate meritorious cases and actions of passenger filed outside of Cebu City,
placing petitioner company at a decided advantage over said persons. The said condition should, therefore, be declared void and unenforceable, as
contrary to public policy.
OngYiu vs. Court of Appeals

While it may be true that the passenger had not signed the plane ticket, 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". 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. 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
ONG YIU vs. COURT OF APPEALS

Facts: Petitioner was paying passenger of respondent Philippine Airlines on board flight No. 946-R from Mactan Cebu bound for ButuanCity. He was scheduled
to attend the trial in the Court of First instance , Br. II thereat. As a passenger, he checked in one piece of luggage, a bull maleta. The plane left MactanAirport,
CebuCity at about 1pm and arrived at BacasiAirport, ButuanCity at past 2pm 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 by the porter clerk which however, the later denied.
When the luggage was delivered to the petitioner with the information that the lock was open, he found out that the folder containing documents and transcripts
were missing, aside from the two gift items for his parents-in-law. Petitioner refused to accept the luggage. Petitioner filed a Complaint against PAL for damages
for breach of contract of transportation. The lower Court found PAL to have acted in bad faith and with malice and declared petitioner entitled to moral damages.
CA held 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 the present
petition.

Issue: Whether or not PAL acted with gross negligence.

Held: No. PAL did not act in bad faith. It was the duty of PAL to look for petitioners luggage which had been miscarried. PAL exerted diligent efforts to locate
the plaintiffs baggage. Petitioner is neither entitled to exemplary damages. Exemplary damages can only be granted if the defendant asked in a wanton,
fraudulent, reckless, oppressive or malevolent manner, which loss, in accordance with the stipulation written at the back of the ticket is limited to P100 per
luggage plaintiff not having declared a greater value and not having called the attention of the defendant on its value ad paid the tariff thereon.
While it may be true that petitioner had not signed the plane ticket, 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". 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 madeform 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. 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
OngyiuvsIAc
Nature of action: Petition for Review by Certiorari

Facts:

1.
2.
3.
4.
5.

6.
7.
8.

9.
10.

August 26, 1967, OngYiu, a lawyer, boarded Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R, from Mactan Cebu, bound for Butuan City.
He was set for hearings from Aug 28- 31, 1967.
He checked in a blue maleta which could not be found upon arrival in Mactan Airport, Cebu at past 2 P.M.
Thereafter, PAL sent messages from Butuan to Cebu, Cebu to Manila to inquire about ther missing luggage.
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.
Atty. OngYiu was worried about the missing luggage because it contained vital documents needed for trial the next day. At 10:00 o'clock that
evening, he 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.
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.
The following day, 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 which 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, Atty. OngYiu 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. He refused to accept the luggage.
Dagorro returned it to the porter clerk, Maximo Gomez, who sealed it and forwarded the same to PAL Cebu.

11.

Atty. OngYiu Through a letter addressed to PAL, 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

12.

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.

13.

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.

Issues and Held:

1.

WON PAL's carriage liability should be limited to the amount of P100.00 as stipulated at the back of the ticket. (related to the assigned lesson)
YES! 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, 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 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, 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". 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.
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. It is likewise to be
noted that there is nothing in the evidence to show the actual value of the goods allegedly lost by petitioner.

2.

WON Petitioner is 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.

3.

WON PAL committed gross negligence and that it had acted fraudulently or in bad faith as to entitle petitioner to an award of moral and exemplary
damages.
From the facts of the case, PAL had not acted in bad faith. Bad faith means a breach of a known duty through some motive of interest or ill
will. 2 It was the duty of PAL to look for petitioner's luggage which had been miscarried. PAL exerted due diligence in complying with such duty.
As aptly stated by the appellate Court:
We do not find any evidence of bad faith in this. On the contrary, 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 fact which cannot be questioned. 3
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.

Telengtan Bros. & Sons. Vs. CA (GR 110581, 21 September 1994)

Second Division, Mendoza (J): 3 concur, 1 took no part
Facts: Kawasaki Kishen Kaisha, Ltd. (K-Line) is a foreign shipping company doing business in the Philippines, its shipping agent being the Smith, Bell & Co., Inc.
It is a member of the Far East Conference, the body which fixes rates by agreement of its member-shipowners. The conference is registered with the U.S.
Federal Maritime Commission. On 8 May 1979, the Van Reekum Paper, Inc. entered into a contract of affreightment with the K-Line for the shipment of 468 rolls
of container board liners from Savannah, Georgia to Manila. The shipment was consigned to La Suerte Cigar & Cigarette Factory. The contract of affreightment
was embodied in Bill of Lading 602 issued by the carrier to the shipper. The expenses of loading and unloading were for the account of the consignee. The
shipment was packed in 12 container vans and loaded on board the carriers vessel, SS Verrazano Bridge. At Tokyo, Japan, the cargo was transhipped on two
vessels of the K-Line. 10 container vans were loaded on the SS Far East Friendship, while 2 were loaded on the SS Hangang Glory. Shortly thereafter, the
consignee (Telengtan Bros. & Sons, Inc.) received from the shipper photocopies of the bill of lading, consular invoice and packing list, as well as notice of the
estimated time of arrival of the cargo. On 11 June 1979, the SS Far East Friendship arrived at the port of Manila. Aside from the
regular advertisements in the shipping section of the Bulletin Today announcing the arrival of its vessels, Telengtan was notified in writing of the ships arrival,
together with information that container demurrage at the rate of P4.00 per linear foot per day for the first 5 days and P8.00 per linear foot per day after the 5th
day would be charged unless the consignee took delivery of the cargo within 10 days. On 21 June 1979, the other vessel SS Hangang Glory, carrying

Telengtans two other vans, arrived and was discharged of its contents the next day. On the same day the shipping agent Smith, Bell & Co. released the Delivery
Permit for 12 containers to the broker upon payment of freight charges on the bill of lading. The next day, the Island
Brokerage Co. presented, in behalf of Telengtan, the shipping documents to the Customs Marine Division of the Bureau of Customs. But the latter refused to act
on them because the manifest of the SS Far East Friendship covered only 10 containers, whereas the bill of lading covered 12 containers. The broker, therefore,
sent back the manifest to the shipping agent with the request that the manifest be amended. Smith, Bell & Co. refused on the ground that an amendment, as
requested, would violate Section 1005 of the Tariff and Customs Code relating to unmanifested cargo. Later, however, it agreed to add a footnote reading Two
container vans carried by the SS Hangang Glory to complete the shipment of twelve containers under the bill
of lading. On 29 June 1979 the manifest was picked up from the office of the shipping agent by an employee of the IBC and filed with the Bureau of Customs.
The manifest was approved for release on 3 July 1979. IBC wrote Smith, Bell & Co. to make of record that entry of the shipment had been delayed by the error in
the manifest. On 11 July 1979, when the IBC tried to secure the release of the cargo, it was informed by K-Lines and Smith Bell & Co.s collection agent, the
CBCS Guaranteed Fast Collection Services, that the free time for removing the containers from the container yard had expired on 26 June 1979, in the case of
the SS Far East Friendship, and on 9 July, in the case of the SS Hangang Glory, and that demurrage charges had begun to run
on 27 June 1979 with respect to the 10 containers on the SS Far East Friendship and on 10 July 1979 with respect to the 2 containers shipped on board the SS
Hangang Glory. On 13 July 1979, Telengtan paid P47,680.00 representing the total demurrage charges on all the containers, but it was not able to obtain its
goods. On 16 July 1979 it was able to obtain the release of 2 containers and on 17 July 1979 of one more container. It was able to obtain only a partial release of
the cargo because of the breakdown of the arrastres equipment at the container yard. This matter was reported by IBC in letters of complaint sent to the
Philippine
Ports Authority. In addition, on 16 July 1979, Telengtan sent a letter dated 12 July 1979 to Smith, Bell & Co., requesting reconsideration of the demurrage
charges, on the ground that the delay in claiming the goods was due to the alleged late arrival of the shipping documents, the delay caused by the amendment of
the manifest, and the fact that 2 of the containers arrived separately from the other 10 containers. On 19 July 1979 Telengtan paid additional charges in the
amount of P20,160.00 for the period July 14-19, 1979 to secure the release of its cargo, but still Telengtan was unable to get any cargo from the remaining 9
container vans. It was only the next day, July 20, 1979, that it was able to have 2 more containers released from the container
yard, bringing to 5 the total number of containers whose contents had been delivered to it. Subsequently, Telengtan refused to pay any more demurrage charges
on the ground that there was no agreement for their payment in the bill of lading and that the delay in the release of the cargo was not due to its fault but to the
breakdown of the equipment at the container yard. In all, petitioner had paid demurrage charges from June 27 to July 19, 1979 in the total amount of P67,840.00.
On 20 July 1979, Telengtan wrote Smith, Bell & Co. for a refund of the demurrage charges, but the latter replied on 25 July 1979 that as member of the Far East
Conference, it could not modify the rules or authorize refunds of the stipulated tariffs. Telengtan, therefore, filed a suit in the RTC for specific performance to
compel K-Line, through its shipping agent, the Smith, Bell & Co., to release 7 container vans consigned to it free of charge and for a refund of
P67,840.00 which it had paid, plus attorneys fees and other expenses of litigation. Telengtan also asked for the issuance of a writ of preliminary injunction to
restrain private respondents from charging additional demurrage. Thereafter, a writ was issued after Telengtan had posted a bond of P50,000.00 and the
container vans were released to the petitioner. On 19 March 1986, however, the RTC dismissed Telengtans complaint. The RTC, therefore, ordered Telengtan to
pay K-Line, through Smith Bell & Co., the sum of P36,480.00 representing demurrage charges for the detention of 7 forty-footer container vans from July 20 to
August 7, 1979, with legal interest commencing on 7 August 1979 until fully paid; and the sum of P10,000.00, by way
of attorneys fees. On appeal, the case was affirmed with modification by the Court of Appeals, deleting the award of attorneys fees; with costs against
Telengtan. Hence, the petition for review. The Supreme Court set aside the decision appealed from, and rendered another one, ordering K-Line, and Smith Bell
&U Co. to pay to Telengtan the sum of P39,360.00 by way of refund, with legal interest.
1. Clause 23, Bill of lading
Clause 23 of the bill of lading provides that the ocean carrier shall have a lien on the goods, which shall survive delivery, for all freight, dead freight, demurrage,
damages, loss, charges, expenses and any other sums whatsoever payable or chargeable to or for the account of the Merchant under this bill of lading.
2. Clause 29, Bill of lading
Clause 29 of the bill of lading provides that the terms of the ocean carriers applicable tariff,
including tariffs covering intermodal transportation on file with the Federal Maritime Commission and the Interstate Commission or any other regulatory body
which governs a portion of the carriage of goods, are incorporated herein.
3. Rule 21 of the Far East Conference Tariff No. 28-FMC No. 12 Rules and Regulations
Rule 21 provides (D) Free Time, Demurrage, and Equipment Detention at Ports in the Philippines. Note: Philippine Customs Law prescribes all cargo discharged
from vessels to be given into custody of the Government Arrastre Contractor, appointed by Philippine Customs who undertakes delivery to the consignee.
xxx Demurrage charges on Containers with CY Cargo. (1) Free time will commence at 8:00 a.m. on the first working calendar day following completion of
discharge of the vessel. It shall expire at 12:00 p.m. (midnight) on the tenth working calendar day, excluding Saturdays, Sundays and holidays. Work stoppage at
a terminal due to labor dispute or other force majeure as defined by the conference preventing delivery of cargo or containers shall be excluded from the
calculation of the free time for the period of the work stoppage.
(2) Demurrage charges are incurred before the container leaves the carriers designated CY, and shall be applicable on the container commencing the next
working calendar day following expiration of the allowable free time until the consignee has taken delivery of the container or has fully stripped the container of its
contents in the carriers designated CY. Demurrage charges shall be assessed hereunder: Ordinary containers P4.00 per linear foot of the container per day
for the first five days; P8.00 per linear foot of the container per day, thereafter.
4. Demurrage defined; Magellan Marketing vs. CA
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 party to the shipping
contract.
5. Meaning of demurrage in Clause 23 clarified by Clause 29 of the bill of lading (in relation to Rule 21 of the Far East Conference Tariff No. 28-FMC
No. 12)
Herein, Telengtan contends that the bill of lading does not provide for the payment of container

demurrage, as Clause 23 of the bill of lading only says demurrage, i.e., damages for the detention of vessels, and here there is no detention of vessels.
Whatever may be the merit of Telengtans contention as to the meaning of the word demurrage in clause 23 of the bill of lading, the fact is that clause 29(a) also
of the bill of lading, in relation to Rule 21 of the Far East Conference Tariff No. 28-FMC No. 12, specifically provides for the payment by the consignee of
demurrage for the detention of containers and other equipment after the so-called free time.