G.R. No.

171092

March 15, 2010

EDNA
DIAGO
vs.
BRITISH AIRWAYS, Respondent.

LHUILLIER, Petitioner,

DECISION

Upon arrival in Rome, petitioner complained to respondents ground manager

and demanded an apology. However, the latter declared that the flight
stewards were "only doing their job."
Thus, petitioner filed the complaint for damages, praying that respondent be
ordered to pay P5 million as moral damages, P2 million as nominal
damages, P1 million as exemplary damages, P300,000.00 as attorneys
fees,P200,000.00 as litigation expenses, and cost of the suit.

DEL CASTILLO, J.:

Jurisdictio est potestas de publico introducta cum necessitate juris dicendi.
Jurisdiction is a power introduced for the public good, on account of the
necessity of dispensing justice.1
Factual Antecedents
On April 28, 2005, petitioner Edna Diago Lhuillier filed a Complaint 2 for
damages against respondent British Airways before the Regional Trial Court
(RTC) of Makati City. She alleged that on February 28, 2005, she took
respondents flight 548 from London, United Kingdom to Rome, Italy. Once
on board, she allegedly requested Julian Halliday (Halliday), one of the
respondents flight attendants, to assist her in placing her hand-carried
luggage in the overhead bin. However, Halliday allegedly refused to help and
assist her, and even sarcastically remarked that "If I were to help all 300
passengers in this flight, I would have a broken back!"
Petitioner further alleged that when the plane was about to land in Rome,
Italy, another flight attendant, Nickolas Kerrigan (Kerrigan), singled her out
from among all the passengers in the business class section to lecture on
plane safety. Allegedly, Kerrigan made her appear to the other passengers to
be ignorant, uneducated, stupid, and in need of lecturing on the safety rules
and regulations of the plane. Affronted, petitioner assured Kerrigan that she
knew the planes safety regulations being a frequent traveler. Thereupon,
Kerrigan allegedly thrust his face a mere few centimeters away from that of
the petitioner and menacingly told her that "We dont like your attitude."

On May 16, 2005, summons, together with a copy of the complaint, was
served on the respondent through Violeta Echevarria, General Manager of
Euro-Philippine Airline Services, Inc.3
On May 30, 2005, respondent, by way of special appearance through
counsel, filed a Motion to Dismiss 4 on grounds of lack of jurisdiction over the
case and over the person of the respondent. Respondent alleged that only
the courts of London, United Kingdom or Rome, Italy, have jurisdiction over
the complaint for damages pursuant to the Warsaw Convention, 5 Article 28(1)
of which provides:
An action for damages must be brought at the option of the plaintiff, either
before the court of domicile of the carrier or his principal place of business, or
where he has a place of business through which the contract has been
made, or before the court of the place of destination.
Thus, since a) respondent is domiciled in London; b) respondents principal
place of business is in London; c) petitioner bought her ticket in Italy (through
Jeepney Travel S.A.S, in Rome); 6 and d) Rome, Italy is petitioners place of
destination, then it follows that the complaint should only be filed in the
proper courts of London, United Kingdom or Rome, Italy.
Likewise, it was alleged that the case must be dismissed for lack of
jurisdiction over the person of the respondent because the summons was
erroneously served on Euro-Philippine Airline Services, Inc. which is not its
resident agent in the Philippines.
On June 3, 2005, the trial court issued an Order requiring herein petitioner to
file her Comment/Opposition on the Motion to Dismiss within 10 days from

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notice thereof, and for respondent to file a Reply thereon. 7 Instead of filing a
Comment/Opposition, petitioner filed on June 27, 2005, an Urgent Ex-Parte
Motion to Admit Formal Amendment to the Complaint and Issuance of Alias
Summons.8 Petitioner alleged that upon verification with the Securities and
Exchange Commission, she found out that the resident agent of respondent
in the Philippines is Alonzo Q. Ancheta. Subsequently, on September 9,
2005, petitioner filed a Motion to Resolve Pending Incident and Opposition to
Motion to Dismiss.9

WHEREFORE, premises considered, the present Motion to Dismiss is

hereby GRANTED and this case is hereby ordered DISMISSED.

Ruling of the Regional Trial Court

Issues

On October 14, 2005, the RTC of Makati City, Branch 132, issued an
Order10 granting respondents Motion to Dismiss. It ruled that:

I. WHETHER X X X PHILIPPINE COURTs HAVE JURISDICTION OVER A

TORTIOUS CONDUCT COMMITTED AGAINST A FILIPINO CITIZEN AND
RESIDENT BY AIRLINE PERSONNEL OF A FOREIGN CARRIER
TRAVELLING BEYOND THE TERRITORIAL LIMIT OF ANY FOREIGN
COUNTRY; AND THUS IS OUTSIDE THE AMBIT OF THE WARSAW
CONVENTION.

The Court sympathizes with the alleged ill-treatment suffered by the plaintiff.
However, our Courts have to apply the principles of international law, and are
bound by treaty stipulations entered into by the Philippines which form part of
the law of the land. One of this is the Warsaw Convention. Being a signatory
thereto, the Philippines adheres to its stipulations and is bound by its
provisions including the place where actions involving damages to plaintiff is
to be instituted, as provided for under Article 28(1) thereof. The Court finds
no justifiable reason to deviate from the indicated limitations as it will only run
counter to the provisions of the Warsaw Convention. Said adherence is in
consonance with the comity of nations and deviation from it can only be
effected through proper denunciation as enunciated in the Santos case (ibid).
Since the Philippines is not the place of domicile of the defendant nor is it the
principal place of business, our courts are thus divested of jurisdiction over
cases for damages. Neither was plaintiffs ticket issued in this country nor
was her destination Manila but Rome in Italy. It bears stressing however, that
referral to the court of proper jurisdiction does not constitute constructive
denial of plaintiffs right to have access to our courts since the Warsaw
Convention itself provided for jurisdiction over cases arising from
international transportation. Said treaty stipulations must be complied with in
good faith following the time honored principle of pacta sunt servanda.
The resolution of the propriety of service of summons is rendered moot by
the Courts want of jurisdiction over the instant case.

Petitioner filed a Motion for Reconsideration but the motion was denied in an
Order11 dated January 4, 2006.
Petitioner now comes directly before us on a Petition for Review
on Certiorari on pure questions of law, raising the following issues:

II. WHETHER x x x RESPONDENT AIR CARRIER OF PASSENGERS, IN

FILING ITS MOTION TO DISMISS BASED ON LACK OF JURISDICTION
OVER THE SUBJECT MATTER OF THE CASE AND OVER ITS PERSON
MAY BE DEEMED AS HAVING IN FACT AND IN LAW SUBMITTED ITSELF
TO THE JURISDICTION OF THE LOWER COURT, ESPECIALLY SO,
WHEN THE VERY LAWYER ARGUING FOR IT IS HIMSELF THE
RESIDENT AGENT OF THE CARRIER.
Petitioners Arguments
Petitioner argues that her cause of action arose not from the contract of
carriage, but from the tortious conduct committed by airline personnel of
respondent in violation of the provisions of the Civil Code on Human
Relations. Since her cause of action was not predicated on the contract of
carriage, petitioner asserts that she has the option to pursue this case in this
jurisdiction pursuant to Philippine laws.
Respondents Arguments

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In contrast, respondent maintains that petitioners claim for damages fell

within the ambit of Article 28(1) of the Warsaw Convention. As such, the
same can only be filed before the courts of London, United Kingdom or
Rome, Italy.

1. This Convention applies to all international carriage of persons,

luggage or goods performed by aircraft for reward. It applies equally
to gratuitous carriage by aircraft performed by an air transport
undertaking.

Our Ruling

2. For the purposes of this Convention the expression "international

carriage" means any carriage in which, according to the contract
made by the parties, the place of departure and the place of
destination, whether or not there be a break in the 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 a
territory subject to the sovereignty, suzerainty, mandate or authority
of another Power, even though that Power is not a party to this
Convention. A carriage without such an agreed stopping place
between territories subject to the sovereignty, suzerainty, mandate or
authority of the same High Contracting Party is not deemed to be
international for the purposes of this Convention. (Emphasis
supplied)

The petition is without merit.

The Warsaw Convention has the force and effect of law in this country.
It is settled that the Warsaw Convention has the force and effect of law in this
country. In Santos III v. Northwest Orient Airlines,12 we held that:
The Republic of the Philippines is a party to the Convention for the
Unification of Certain Rules Relating to International Transportation by Air,
otherwise known as the Warsaw Convention. It took effect on February 13,
1933. The Convention was concurred in by the Senate, through its
Resolution No. 19, on May 16, 1950. The Philippine instrument of accession
was signed by President Elpidio Quirino on October 13, 1950, and was
deposited with the Polish government on November 9, 1950. The Convention
became applicable to the Philippines on February 9, 1951. On September
23, 1955, President Ramon Magsaysay issued Proclamation No. 201,
declaring our formal adherence thereto, "to the end that the same and every
article and clause thereof may be observed and fulfilled in good faith by the
Republic of the Philippines and the citizens thereof."
The Convention is thus a treaty commitment voluntarily assumed by the
Philippine government and, as such, has the force and effect of law in this
country.13
The Warsaw Convention applies because the air travel, where the alleged
tortious conduct occurred, was between the United Kingdom and Italy, which
are both signatories to the Warsaw Convention.
Article 1 of the Warsaw Convention provides:

Thus, when the place of departure and the place of destination in a contract
of carriage are situated within the territories of two High Contracting Parties,
said carriage is deemed an "international carriage". The High Contracting
Parties referred to herein were the signatories to the Warsaw Convention and
those which subsequently adhered to it.14
In the case at bench, petitioners place of departure was London, United
Kingdom while her place of destination was Rome, Italy.15 Both the United
Kingdom16 and Italy17 signed and ratified the Warsaw Convention. As such,
the transport of the petitioner is deemed to be an "international carriage"
within the contemplation of the Warsaw Convention.
Since the Warsaw Convention applies in the instant case, then the
jurisdiction over the subject matter of the action is governed by the provisions
of the Warsaw Convention.
Under Article 28(1) of the Warsaw Convention, the plaintiff may bring the
action for damages before

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1. the court where the carrier is domiciled;

2. the court where the carrier has its principal place of business;
3. the court where the carrier has an establishment by which the
contract has been made; or
4. the court of the place of destination.
In this case, it is not disputed that respondent is a British corporation
domiciled in London, United Kingdom with London as its principal place of
business. Hence, under the first and second jurisdictional rules, the petitioner
may bring her case before the courts of London in the United Kingdom. In the
passenger ticket and baggage check presented by both the petitioner and
respondent, it appears that the ticket was issued in Rome, Italy.
Consequently, under the third jurisdictional rule, the petitioner has the option
to bring her case before the courts of Rome in Italy. Finally, both the
petitioner and respondent aver that the place of destination is Rome, Italy,
which is properly designated given the routing presented in the said
passenger ticket and baggage check. Accordingly, petitioner may bring her
action before the courts of Rome, Italy. We thus find that the RTC of Makati
correctly ruled that it does not have jurisdiction over the case filed by the
petitioner.
Santos III v. Northwest Orient Airlines18 applies in this case.
Petitioner contends that Santos III v. Northwest Orient Airlines 19 cited by the
trial court is inapplicable to the present controversy since the facts thereof
are not similar with the instant case.
We are not persuaded.
20

In Santos III v. Northwest Orient Airlines, Augusto Santos III, a resident of

the Philippines, purchased a ticket from Northwest Orient Airlines in San
Francisco, for transport between San Francisco and Manila via Tokyo and
back to San Francisco. He was wait-listed in the Tokyo to Manila segment of
his ticket, despite his prior reservation. Contending that Northwest Orient
Airlines acted in bad faith and discriminated against him when it canceled his

confirmed reservation and gave his seat to someone who had no better right
to it, Augusto Santos III sued the carrier for damages before the RTC.
Northwest Orient Airlines moved to dismiss the complaint on ground of lack
of jurisdiction citing Article 28(1) of the Warsaw Convention. The trial court
granted the motion which ruling was affirmed by the Court of Appeals. When
the case was brought before us, we denied the petition holding that under
Article 28(1) of the Warsaw Convention, Augusto Santos III must prosecute
his claim in the United States, that place being the (1) domicile of the
Northwest Orient Airlines; (2) principal office of the carrier; (3) place where
contract had been made (San Francisco); and (4) place of destination (San
Francisco).21
We further held that Article 28(1) of the Warsaw Convention is jurisdictional in
character. Thus:
A number of reasons tends to support the characterization of Article 28(1) as
a jurisdiction and not a venue provision. First, the wording of Article 32, which
indicates the places where the action for damages "must" be brought,
underscores the mandatory nature of Article 28(1). Second, this
characterization is consistent with one of the objectives of the Convention,
which is to "regulate in a uniform manner the conditions of international
transportation by air." Third, the Convention does not contain any provision
prescribing rules of jurisdiction other than Article 28(1), which means that the
phrase "rules as to jurisdiction" used in Article 32 must refer only to Article
28(1). In fact, the last sentence of Article 32 specifically deals with the
exclusive enumeration in Article 28(1) as "jurisdictions," which, as such,
cannot be left to the will of the parties regardless of the time when the
damage occurred.
xxxx
In other words, where the matter is governed by the Warsaw Convention,
jurisdiction takes on a dual concept. Jurisdiction in the international sense
must be established in accordance with Article 28(1) of the Warsaw
Convention, following which the jurisdiction of a particular court must be
established pursuant to the applicable domestic law. Only after the question
of which court has jurisdiction is determined will the issue of venue be taken

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up. This second question shall be governed by the law of the court to which
the case is submitted.22
Contrary to the contention of petitioner, Santos III v. Northwest Orient
Airlines23 is analogous to the instant case because (1) the domicile of
respondent is London, United Kingdom; 24 (2) the principal office of
respondent airline is likewise in London, United Kingdom; 25 (3) the ticket was
purchased in Rome, Italy;26 and (4) the place of destination is Rome,
Italy.27 In addition, petitioner based her complaint on Article 217628 of the Civil
Code onquasi-delict and Articles 1929 and 2130 of the Civil Code on Human
Relations. In Santos III v. Northwest Orient Airlines, 31 Augusto Santos III
similarly posited that Article 28 (1) of the Warsaw Convention did not apply if
the action is based on tort. Hence, contrary to the contention of the petitioner,
the factual setting of Santos III v. Northwest Orient Airlines 32 and the instant
case are parallel on the material points.
Tortious conduct as ground for the petitioners complaint is within the purview
of the Warsaw Convention.
Petitioner contends that in Santos III v. Northwest Orient Airlines, 33 the cause
of action was based on a breach of contract while her cause of action arose
from the tortious conduct of the airline personnel and violation of the Civil
Code provisions on Human Relations.34 In addition, she claims that our
pronouncement in Santos III v. Northwest Orient Airlines 35 that "the allegation
of willful misconduct resulting in a tort is insufficient to exclude the case from
the comprehension of the Warsaw Convention," is more of an obiter dictum
rather than the ratio decidendi. 36 She maintains that the fact that said acts
occurred aboard a plane is merely incidental, if not irrelevant. 37
We disagree with the position taken by the petitioner. Black defines obiter
dictum as "an opinion entirely unnecessary for the decision of the case" and
thus "are not binding as precedent." 38 In Santos III v. Northwest Orient
Airlines,39 Augusto Santos III categorically put in issue the applicability of
Article 28(1) of the Warsaw Convention if the action is based on tort.
In the said case, we held that the allegation of willful misconduct resulting in
a tort is insufficient to exclude the case from the realm of the Warsaw
Convention. In fact, our ruling that a cause of action based on tort did not

bring the case outside the sphere of the Warsaw Convention was our ratio
decidendi in disposing of the specific issue presented by Augusto Santos III.
Clearly, the contention of the herein petitioner that the said ruling is an obiter
dictum is without basis.
Relevant to this particular issue is the case of Carey v. United
Airlines,40 where the passenger filed an action against the airline arising from
an incident involving the former and the airlines flight attendant during an
international flight resulting to a heated exchange which included insults and
profanity. The United States Court of Appeals (9th Circuit) held that the
"passenger's action against the airline carrier arising from alleged
confrontational incident between passenger and flight attendant on
international flight was governed exclusively by the Warsaw Convention,
even though the incident allegedly involved intentional misconduct by the
flight attendant."41
In Bloom v. Alaska Airlines,42 the passenger brought nine causes of action
against the airline in the state court, arising from a confrontation with the
flight attendant during an international flight to Mexico. The United States
Court of Appeals (9th Circuit) held that the "Warsaw Convention governs
actions arising from international air travel and provides the exclusive remedy
for conduct which falls within its provisions." It further held that the said
Convention "created no exception for an injury suffered as a result of
intentional conduct" 43 which in that case involved a claim for intentional
infliction of emotional distress.
It is thus settled that allegations of tortious conduct committed against an
airline passenger during the course of the international carriage do not bring
the case outside the ambit of the Warsaw Convention.
Respondent, in seeking remedies from the trial court through special
appearance of counsel, is not deemed to have voluntarily submitted itself to
the jurisdiction of the trial court.
Petitioner argues that respondent has effectively submitted itself to the
jurisdiction of the trial court when the latter stated in its Comment/Opposition
to the Motion for Reconsideration that "Defendant [is at a loss] x x x how the
plaintiff arrived at her erroneous impression that it is/was Euro-Philippines

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Airlines Services, Inc. that has been making a special appearance since x x x
British Airways x x x has been clearly specifying in all the pleadings that it
has filed with this Honorable Court that it is the one making a special
appearance."44
In refuting the contention of petitioner, respondent cited La Naval Drug
Corporation v. Court of Appeals45 where we held that even if a party
"challenges the jurisdiction of the court over his person, as by reason of
absence or defective service of summons, and he also invokes other
grounds for the dismissal of the action under Rule 16, he is not deemed to be
in estoppel or to have waived his objection to the jurisdiction over his
person."46
This issue has been squarely passed upon in the recent case of Garcia v.
Sandiganbayan,47 where we reiterated our ruling in La Naval Drug
Corporation v. Court of Appeals48 and elucidated thus:
Special Appearance to Question a Courts Jurisdiction Is Not
Voluntary Appearance
The second sentence of Sec. 20, Rule 14 of the Revised Rules of Civil
Procedure clearly provides:
Sec. 20. Voluntary appearance. The defendants voluntary appearance in
the action shall be equivalent to service of summons. The inclusion in a
motion to dismiss of other grounds aside from lack of jurisdiction over the
person of the defendant shall not be deemed a voluntary appearance.
Thus, a defendant who files a motion to dismiss, assailing the jurisdiction of
the court over his person, together with other grounds raised therein, is not
deemed to have appeared voluntarily before the court. What the rule on
voluntary appearance the first sentence of the above-quoted rule means
is that the voluntary appearance of the defendant in court is without
qualification, in which case he is deemed to have waived his defense of lack
of jurisdiction over his person due to improper service of summons.

The pleadings filed by petitioner in the subject forfeiture cases, however, do

not show that she voluntarily appeared without qualification. Petitioner filed
the following pleadings in Forfeiture I: (a) motion to dismiss; (b) motion for
reconsideration and/or to admit answer; (c) second motion for
reconsideration; (d) motion to consolidate forfeiture case with plunder case;
and (e) motion to dismiss and/or to quash Forfeiture I. And in Forfeiture II: (a)
motion to dismiss and/or to quash Forfeiture II; and (b) motion for partial
reconsideration.
The foregoing pleadings, particularly the motions to dismiss, were filed by
petitioner solely for special appearance with the purpose of challenging the
jurisdiction of the SB over her person and that of her three children.
Petitioner asserts therein that SB did not acquire jurisdiction over her person
and of her three children for lack of valid service of summons through
improvident substituted service of summons in both Forfeiture I and
Forfeiture II. This stance the petitioner never abandoned when she filed her
motions for reconsideration, even with a prayer to admit their attached
Answer Ex Abundante Ad Cautelam dated January 22, 2005 setting forth
affirmative defenses with a claim for damages. And the other subsequent
pleadings, likewise, did not abandon her stance and defense of lack of
jurisdiction due to improper substituted services of summons in the forfeiture
cases. Evidently, from the foregoing Sec. 20, Rule 14 of the 1997 Revised
Rules on Civil Procedure, petitioner and her sons did not voluntarily appear
before the SB constitutive of or equivalent to service of summons.
Moreover, the leading La Naval Drug Corp. v. Court of Appeals applies to the
instant case. Said case elucidates the current view in our jurisdiction that a
special appearance before the courtchallenging its jurisdiction over the
person through a motion to dismiss even if the movant invokes other
groundsis not tantamount to estoppel or a waiver by the movant of his
objection to jurisdiction over his person; and such is not constitutive of a
voluntary submission to the jurisdiction of the court.1avvphi1
Thus, it cannot be said that petitioner and her three children voluntarily
appeared before the SB to cure the defective substituted services of
summons. They are, therefore, not estopped from questioning the jurisdiction
of the SB over their persons nor are they deemed to have waived such
defense of lack of jurisdiction. Consequently, there being no valid substituted

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services of summons made, the SB did not acquire jurisdiction over the
persons of petitioner and her children. And perforce, the proceedings in the
subject forfeiture cases, insofar as petitioner and her three children are
concerned, are null and void for lack of jurisdiction. (Emphasis supplied)
In this case, the special appearance of the counsel of respondent in filing the
Motion to Dismiss and other pleadings before the trial court cannot be
deemed to be voluntary submission to the jurisdiction of the said trial court.
We hence disagree with the contention of the petitioner and rule that there
was no voluntary appearance before the trial court that could constitute
estoppel or a waiver of respondents objection to jurisdiction over its person.
WHEREFORE, the petition is DENIED. The October 14, 2005 Order of the
Regional Trial Court of Makati City, Branch 132, dismissing the complaint for
lack of jurisdiction, is AFFIRMED.
SO ORDERED.

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G.R. No. 149547

July 4, 2008

PHILIPPINE
AIRLINES,
INC., petitioner,
vs.
HON. ADRIANO SAVILLO, Presiding Judge of RTC Branch 30 , Iloilo
City, and SIMPLICIO GRIO,respondents.
DECISION
CHICO-NAZARIO, J.:
This is a Petition for Review on Certiorari under Rule 45 of the Rules of
Court, assailing the Decision1 dated 17 August 2001, rendered by the Court
of Appeals in CA-G.R. SP No. 48664, affirming in toto the Order2 dated 9
June 1998, of Branch 30 of the Regional Trial Court (RTC) of Iloilo City,
dismissing the Motion to Dismiss filed by petitioner Philippine Airlines Inc.
(PAL) in the case entitled, Simplicio Grio v. Philippine Airlines, Inc. and
Singapore Airlines, docketed as Civil Case No. 23773.
PAL is a corporation duly organized under Philippine law, engaged in the
business of providing air carriage for passengers, baggage and cargo. 3
Public respondent Hon. Adriano Savillo is the presiding judge of Branch 30 of
the Iloilo RTC, where Civil Case No. 23773 was filed; while private
respondent Simplicio Grio is the plaintiff in the aforementioned case.
The facts are undisputed.
Private respondent was invited to participate in the 1993 ASEAN Seniors
Annual Golf Tournament held in Jakarta, Indonesia. He and several
companions decided to purchase their respective passenger tickets from PAL
with the following points of passage: MANILA-SINGAPORE-JAKARTASINGAPORE-MANILA. Private respondent and his companions were made
to understand by PAL that its plane would take them from Manila to
Singapore, while Singapore Airlines would take them from Singapore to
Jakarta.4

On 3 October 1993, private respondent and his companions took the PAL
flight to Singapore and arrived at about 6:00 oclock in the evening. Upon
their arrival, they proceeded to the Singapore Airlines office to check-in for
their flight to Jakarta scheduled at 8:00 oclock in the same evening.
Singapore Airlines rejected the tickets of private respondent and his group
because they were not endorsed by PAL. It was explained to private
respondent and his group that if Singapore Airlines honored the tickets
without PALs endorsement, PAL would not pay Singapore Airlines for their
passage. Private respondent tried to contact PALs office at the airport, only
to find out that it was closed.5
Stranded at the airport in Singapore and left with no recourse, private
respondent was in panic and at a loss where to go; and was subjected to
humiliation, embarrassment, mental anguish, serious anxiety, fear and
distress. Eventually, private respondent and his companions were forced to
purchase tickets from Garuda Airlines and board its last flight bound for
Jakarta. When they arrived in Jakarta at about 12:00 oclock midnight, the
party who was supposed to fetch them from the airport had already left and
they had to arrange for their transportation to the hotel at a very late hour.
After the series of nerve-wracking experiences, private respondent became ill
and was unable to participate in the tournament. 6
Upon his return to the Philippines, private respondent brought the matter to
the attention of PAL. He sent a demand letter to PAL on 20 December 1993
and another to Singapore Airlines on 21 March 1994. However, both airlines
disowned liability and blamed each other for the fiasco. On 15 August 1997,
private respondent filed a Complaint for Damages before the RTC docketed
as Civil Case No. 23773, seeking compensation for moral damages in the
amount of P1,000,000.00 and attorneys fees.7
Instead of filing an answer to private respondents Complaint, PAL filed a
Motion to Dismiss8 dated 18 September 1998 on the ground that the said
complaint was barred on the ground of prescription under Section 1(f) of Rule
16 of the Rules of Court.9 PAL argued that the Warsaw
Convention,10 particularly Article 29 thereof,11 governed this case, as it
provides that any claim for damages in connection with the international
transportation of persons is subject to the prescription period of two years.
Since the Complaint was filed on 15 August 1997, more than three years

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after PAL received the demand letter on 25 January 1994, it was already
barred by prescription.
On 9 June 1998, the RTC issued an Order12 denying the Motion to Dismiss. It
maintained that the provisions of the Civil Code and other pertinent laws of
the Philippines, not the Warsaw Convention, were applicable to the present
case.
The Court of Appeals, in its assailed Decision dated 17 August 2001, likewise
dismissed the Petition for Certiorari filed by PAL and affirmed the 9 June
1998 Order of the RTC. It pronounced that the application of the Warsaw
Convention must not be construed to preclude the application of the Civil
Code and other pertinent laws. By applying Article 1144 of the Civil
Code,13 which allowed for a ten-year prescription period, the appellate court
declared that the Complaint filed by private respondent should not be
dismissed.14
Hence, the present Petition, in which petitioner raises the following issues:
I
THE COURT OF APPEALS ERRED IN NOT GIVING DUE COURSE
TO THE PETITION AS RESPONDENT JUDGE COMMITED GRAVE
ABUSE OF DISCRETION AMOUNTING TO LACK OF
JURSIDICTION IN DENYING PALS MOTION TO DISMISS.
II
THE COURT OF APPEALS ERRED IN NOT APPLYING THE
PROVISIONS OF THE WARSAW CONVENTION DESPITE THE
FACT THAT GRIOS CAUSE OF ACTION AROSE FROM A
BREACH
OF
CONTRACT
FOR
INTERNATIONAL
AIR
TRANSPORT.
III
THE COURT OF APPEALS ERRED IN NOT HOLDING THAT THE
COMPLAINT FILED BY GRIO BEYOND THE TWO (2)-YEAR

PERIOD PROVIDED UNDER THE WARSAW CONVENTION IS

ALREADY BARRED BY PRESCRIPTION.15
The petition is without merit.
In determining whether PALs Motion to Dismiss should have been granted
by the trial court, it must be ascertained if all the claims made by the private
respondent in his Complaint are covered by the Warsaw Convention, which
effectively bars all claims made outside the two-year prescription period
provided under Article 29 thereof. If the Warsaw Convention covers all of
private respondents claims, then Civil Case No. 23773 has already
prescribed and should therefore be dismissed. On the other hand, if some, if
not all, of respondents claims are outside the coverage of the Warsaw
Convention, the RTC may still proceed to hear the case.
The Warsaw Convention applies to "all international transportation of
persons, baggage or goods performed by any aircraft for hire." It seeks to
accommodate or balance the interests of passengers seeking recovery for
personal injuries and the interests of air carriers seeking to limit potential
liability. It employs a scheme of strict liability favoring passengers and
imposing damage caps to benefit air carriers. 16 The cardinal purpose of the
Warsaw Convention is to provide uniformity of rules governing claims arising
from international air travel; thus, it precludes a passenger from maintaining
an action for personal injury damages under local law when his or her claim
does not satisfy the conditions of liability under the Convention. 17
Article 19 of the Warsaw Convention provides for liability on the part of a
carrier for "damages occasioned by delay in the transportation by air of
passengers, baggage or goods." Article 24 excludes other remedies by
further providing that "(1) in the cases covered by articles 18 and 19, any
action for damages, however founded, can only be brought subject to the
conditions and limits set out in this convention." Therefore, a claim covered
by the Warsaw Convention can no longer be recovered under local law, if the
statute of limitations of two years has already lapsed.
Nevertheless, this Court notes that jurisprudence in the Philippines and the
United States also recognizes that the Warsaw Convention does not
"exclusively regulate" the relationship between passenger and carrier on an

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international flight. This Court finds that the present case is substantially
similar to cases in which the damages sought were considered to be outside
the coverage of the Warsaw Convention.
In United Airlines v. Uy,18 this Court distinguished between the (1) damage to
the passengers baggage and (2) humiliation he suffered at the hands of the
airlines employees. The first cause of action was covered by the Warsaw
Convention which prescribes in two years, while the second was covered by
the provisions of the Civil Code on torts, which prescribes in four years.
Similar distinctions were made in American jurisprudence. In Mahaney v. Air
France,19 a passenger was denied access to an airline flight between New
York and Mexico, despite the fact that she held a confirmed reservation. The
court therein ruled that if the plaintiff were to claim damages based solely on
the delay she experienced for instance, the costs of renting a van, which
she had to arrange on her own as a consequence of the delay the
complaint would be barred by the two-year statute of limitations. However,
where the plaintiff alleged that the airlines subjected her to unjust
discrimination or undue or unreasonable preference or disadvantage, an act
punishable under the United States laws, then the plaintiff may claim purely
nominal compensatory damages for humiliation and hurt feelings, which are
not provided for by the Warsaw Convention. In another case, Wolgel v.
Mexicana Airlines,20 the court pronounced that actions for damages for the
"bumping off" itself, rather than the incidental damages due to the delay, fall
outside the Warsaw Convention and do not prescribe in two years.
In the Petition at bar, private respondents Complaint alleged that both PAL
and Singapore Airlines were guilty of gross negligence, which resulted in his
being subjected to "humiliation, embarrassment, mental anguish, serious
anxiety, fear and distress."21 The emotional harm suffered by the private
respondent as a result of having been unreasonably and unjustly prevented
from boarding the plane should be distinguished from the actual damages
which resulted from the same incident. Under the Civil Code provisions on
tort,22 such emotional harm gives rise to compensation where gross
negligence or malice is proven.
The instant case is comparable to the case of Lathigra v. British Airways.23

In Lathigra, it was held that the airlines negligent act of reconfirming the
passengers reservation days before departure and failing to inform the latter
that the flight had already been discontinued is not among the acts covered
by the Warsaw Convention, since the alleged negligence did not occur during
the performance of the contract of carriage but, rather, days before the
scheduled flight.
In the case at hand, Singapore Airlines barred private respondent from
boarding the Singapore Airlines flight because PAL allegedly failed to
endorse the tickets of private respondent and his companions, despite PALs
assurances to respondent that Singapore Airlines had already confirmed their
passage. While this fact still needs to be heard and established by adequate
proof before the RTC, an action based on these allegations will not fall under
the Warsaw Convention, since the purported negligence on the part of PAL
did not occur during the performance of the contract of carriage but days
before the scheduled flight. Thus, the present action cannot be dismissed
based on the statute of limitations provided under Article 29 of the Warsaw
Convention.
Had the present case merely consisted of claims incidental to the airlines
delay in transporting their passengers, the private respondents Complaint
would have been time-barred under Article 29 of the Warsaw Convention.
However, the present case involves a special species of injury resulting from
the failure of PAL and/or Singapore Airlines to transport private respondent
from Singapore to Jakarta the profound distress, fear, anxiety and
humiliation that private respondent experienced when, despite PALs earlier
assurance that Singapore Airlines confirmed his passage, he was prevented
from boarding the plane and he faced the daunting possibility that he would
be stranded in Singapore Airport because the PAL office was already closed.
These claims are covered by the Civil Code provisions on tort, and not within
the purview of the Warsaw Convention. Hence, the applicable prescription
period is that provided under Article 1146 of the Civil Code:
Art. 1146. The following actions must be instituted within four years:
(1) Upon an injury to the rights of the plaintiff;

10 | B R I N A S

(2) Upon a quasi-delict.

Private respondents Complaint was filed with the RTC on 15 August 1997,
which was less than four years since PAL received his extrajudicial demand
on 25 January 1994. Thus, private respondents claims have not yet
prescribed and PALs Motion to Dismiss must be denied.
Moreover, should there be any doubt as to the prescription of private
respondents Complaint, the more prudent action is for the RTC to continue
hearing the same and deny the Motion to Dismiss. Where it cannot be
determined with certainty whether the action has already prescribed or not,
the defense of prescription cannot be sustained on a mere motion to dismiss
based on what appears to be on the face of the complaint. 24 And where the
ground on which prescription is based does not appear to be indubitable, the
court may do well to defer action on the motion to dismiss until after trial on
the merits.25
IN VIEW OF THE FOREGOING, the instant Petition is DENIED. The
assailed Decision of the Court of Appeals in CA-G.R. SP No. 48664,
promulgated on 17 August 2001 is AFFIRMED. Costs against the petitioner.
SO ORDERED.

11 | B R I N A S

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

AGUSTINO
B.
ONG
YIU, petitioner,
vs.
HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES,
INC., respondents.

MELENCIO-HERRERA, J.:
In this Petition for Review by Certiorari, petitioner, a practicing lawyer and
businessman, seeks a reversal of the Decision of the Court of Appeals in CAG.R. No. 45005-R, which reduced his claim for damages for breach of
contract of transportation.
The facts are as follows:
On August 26, 1967, petitioner was a fare paying passenger of respondent
Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R, from Mactan
Cebu, bound for Butuan City. He was scheduled to attend the trial of Civil
Case No. 1005 and Spec. Procs. No. 1125 in the Court of First Instance,
Branch II, thereat, set for hearing on August 28-31, 1967. As a passenger, he
checked in one piece of luggage, a blue "maleta" for which he was issued
Claim Check No. 2106-R (Exh. "A"). The plane left Mactan Airport, Cebu, at
about 1:00 o'clock P.M., and arrived at Bancasi airport, Butuan City, at past
2:00 o'clock P.M., of the same day. Upon arrival, petitioner claimed his
luggage but it could not be found. According to petitioner, it was only after
reacting indignantly to the loss that the matter was attended to by the porter
clerk, Maximo Gomez, which, however, the latter denies, At about 3:00
o'clock P.M., PAL Butuan, sent a message to PAL, Cebu, inquiring about the
missing luggage, which message was, in turn relayed in full to the Mactan
Airport teletype operator at 3:45 P.M. (Exh. "2") that same afternoon. It must
have been transmitted to Manila immediately, for at 3:59 that same
afternoon, PAL Manila wired PAL Cebu advising that the luggage had been
over carried to Manila aboard Flight No. 156 and that it would be forwarded
to Cebu on Flight No. 345 of the same day. Instructions were also given that
the luggage be immediately forwarded to Butuan City on the first available

flight (Exh. "3"). At 5:00 P.M. of the same afternoon, PAL Cebu sent a
message to PAL Butuan that the luggage would be forwarded on Fright No.
963 the following day, August 27, 196'(. However, this message was not
received by PAL Butuan as all the personnel had already left since there
were no more incoming flights that afternoon.
In the meantime, petitioner was worried about the missing luggage because
it contained vital documents needed for trial the next day. At 10:00 o'clock
that evening, petitioner wired PAL Cebu demanding the delivery of his
baggage before noon the next day, otherwise, he would hold PAL liable for
damages, and stating that PAL's gross negligence had caused him undue
inconvenience, worry, anxiety and extreme embarrassment (Exh. "B"). This
telegram was received by the Cebu PAL supervisor but the latter felt no need
to wire petitioner that his luggage had already been forwarded on the
assumption that by the time the message reached Butuan City, the luggage
would have arrived.
Early in the morning of the next day, August 27, 1967, petitioner went to the
Bancasi Airport to inquire about his luggage. He did not wait, however, for the
morning flight which arrived at 10:00 o'clock that morning. This flight carried
the missing luggage. The porter clerk, Maximo Gomez, paged petitioner, but
the latter had already left. A certain Emilio Dagorro a driver of a "colorum"
car, who also used to drive for petitioner, volunteered to take the luggage to
petitioner. As Maximo Gomez knew Dagorro to be the same driver used by
petitioner whenever the latter was in Butuan City, Gomez took the luggage
and placed it on the counter. Dagorro examined the lock, pressed it, and it
opened. After calling the attention of Maximo Gomez, the "maleta" was
opened, Gomez took a look at its contents, but did not touch them. Dagorro
then delivered the "maleta" to petitioner, with the information that the lock
was open. Upon inspection, petitioner found that a folder containing certain
exhibits, transcripts and private documents in Civil Case No. 1005 and Sp.
Procs. No. 1126 were missing, aside from two gift items for his parents-inlaw. Petitioner refused to accept the luggage. Dagorro returned it to the
porter clerk, Maximo Gomez, who sealed it and forwarded the same to PAL
Cebu.
Meanwhile, petitioner asked for postponement of the hearing of Civil Case
No. 1005 due to loss of his documents, which was granted by the Court

12 | B R I N A S

(Exhs. "C" and "C-1"). Petitioner returned to Cebu City on August 28, 1967.
In a letter dated August 29, 1967 addressed to PAL, Cebu, petitioner called
attention to his telegram (Exh. "D"), demanded that his luggage be produced
intact, and that he be compensated in the sum of P250,000,00 for actual and
moral damages within five days from receipt of the letter, otherwise, he would
be left with no alternative but to file suit (Exh. "D").

way of knowing the real contents of your baggage when

same was loaded.
We realized the inconvenience you encountered of this
incident but we trust that you will give us another opportunity
to be of better service to you.

On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu,
went to petitioner's office to deliver the "maleta". In the presence of Mr. Jose
Yap and Atty. Manuel Maranga the contents were listed and receipted for by
petitioner (Exh. "E").

Very truly

On September 5, 1967, petitioner sent a tracer letter to PAL Cebu inquiring

about the results of the investigation which Messrs. de Leon, Navarsi, and
Agustin had promised to conduct to pinpoint responsibility for the
unauthorized opening of the "maleta" (Exh. "F").

(Sgd) JE
AGUSTI

The following day, September 6, 1967, PAL sent its reply hereinunder quoted
verbatim:

Cebu

Dear Atty. Ong Yiu:

This is with reference to your September 5, 1967, letter to
Mr. Ricardo G. Paloma, Acting Manager, Southern
Philippines.
First of all, may we apologize for the delay in informing you
of the result of our investigation since we visited you in your
office last August 31, 1967. Since there are stations other
than Cebu which are involved in your case, we have to
communicate and await replies from them. We regret to
inform you that to date we have not found the supposedly
lost folder of papers nor have we been able to pinpoint the
personnel who allegedly pilferred your baggage.
You must realize that no inventory was taken of the cargo
upon loading them on any plane. Consequently, we have no

PHILIPP
LINES, I

Branch S

(Exhibit G, Folder of Exhibits) 1

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

13 | B R I N A S

Hence, this Petition for Review by Certiorari, filed on May 2, 1975, with
petitioner making the following Assignments of Error:
I. THE HONORABLE COURT OF APPEALS ERRED IN
HOLDING RESPONDENT PAL GUILTY ONLY OF SIMPLE
NEGLIGENCE AND NOT BAD FAITH IN THE BREACH OF
ITS
CONTRACT
OF
TRANSPORTATION
WITH
PETITIONER.
II.
THE
HONORABLE
COURT
OF
APPEALS
MISCONSTRUED THE EVIDENCE AND THE LAW WHEN
IT REVERSED THE DECISION OF THE LOWER COURT
AWARDING TO PETITIONER MORAL DAMAGES IN THE
AMOUNT OF P80,000.00, EXEMPLARY DAMAGES OF
P30,000.00,
AND
P5,000.00
REPRESENTING
ATTORNEY'S FEES, AND ORDERED RESPONDENT PAL
TO COMPENSATE PLAINTIFF THE SUM OF P100.00
ONLY, CONTRARY TO THE EXPLICIT PROVISIONS OF
ARTICLES 2220, 2229, 2232 AND 2234 OF THE CIVIL
CODE OF THE PHILIPPINES.
On July 16, 1975, this Court gave due course to the Petition.
There is no dispute that PAL incurred in delay in the delivery of petitioner's
luggage. The question is the correctness of respondent Court's conclusion
that there was no gross negligence on the part of PAL and that it had not
acted fraudulently or in bad faith as to entitle petitioner to an award of moral
and exemplary damages.
From the facts of the case, we agree with respondent Court that 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.

14 | B R I N A S

In the absence of a wrongful act or omission or of fraud or bad faith,

petitioner is not entitled to moral damages.

We agree with the foregoing finding. The pertinent Condition of Carriage

printed at the back of the plane ticket reads:

Art. 2217. Moral damages include physical suffering, mental

anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and
similar injury. Though incapable of pecuniary computation,
moral damages may be recovered if they are the proximate
result of the defendant's wrongful act of omission.

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.

Art. 2220. Willful injury to property may be a legal ground for

awarding moral damages if the court should find that, under
the circumstances, such damages are justly due. The same
rule applies to breaches of contract where the defendant
acted fraudulently or in bad faith.

There is no dispute that petitioner did not declare any higher value for his
luggage, much less did he pay any additional transportation charge.

Petitioner is neither entitled to exemplary damages. In contracts, as provided

for in Article 2232 of the Civil Code, exemplary damages can be granted if
the defendant acted in a wanton, fraudulent, reckless, oppressive, or
malevolent manner, which has not been proven in this case.
Petitioner further contends that respondent Court committed grave error
when it limited PAL's carriage liability to the amount of P100.00 as stipulated
at the back of the ticket. In this connection, respondent Court opined:
As a general proposition, the plaintiff's maleta having been
pilfered while in the custody of the defendant, it is presumed
that the defendant had been negligent. The liability, however,
of PAL for the loss, in accordance with the stipulation written
on the back of the ticket, Exhibit 12, is limited to P100.00 per
baggage, plaintiff not having declared a greater value, and
not having called the attention of the defendant on its true
value and paid the tariff therefor. The validity of this
stipulation is not questioned by the plaintiff. They are printed
in reasonably and fairly big letters, and are easily readable.
Moreover, plaintiff had been a frequent passenger of PAL
from Cebu to Butuan City and back, and he, being a lawyer
and businessman, must be fully aware of these conditions. 4

But petitioner argues that there is nothing in the evidence to show that he
had actually entered into a contract with PAL limiting the latter's liability for
loss or delay of the baggage of its passengers, and that Article 1750* of the
Civil Code has not been complied with.
While it may be true that petitioner had not signed the plane ticket (Exh.
"12"), he is nevertheless bound by the provisions thereof. "Such provisions
have been held to be a part of the contract of carriage, and valid and binding
upon the passenger regardless of the latter's lack of knowledge or assent to
the regulation". 5 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. 6 And as held in Randolph v. American Airlines, 103 Ohio App. 172,
144 N.E. 2d 878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483,
"a contract limiting liability upon an agreed valuation does not offend against
the policy of the law forbidding one from contracting against his own
negligence.
Considering, therefore, that petitioner had failed to declare a higher value for
his baggage, he cannot be permitted a recovery in excess of
P100.00.Besides, passengers are advised not to place valuable items inside
their baggage but "to avail of our V-cargo service " (Exh. "1"). I t is likewise to

15 | B R I N A S

be noted that there is nothing in the evidence to show the actual value of the
goods allegedly lost by petitioner.
There is another matter involved, raised as an error by PAL the fact that
on October 24, 1974 or two months after the promulgation of the Decision of
the appellate Court, petitioner's widow filed a Motion for Substitution claiming
that petitioner died on January 6, 1974 and that she only came to know of the
adverse Decision on October 23, 1974 when petitioner's law partner informed
her that he received copy of the Decision on August 28, 1974. Attached to
her Motion was an Affidavit of petitioner's law partner reciting facts
constitutive of excusable negligence. The appellate Court noting that all
pleadings had been signed by petitioner himself allowed the widow "to take
such steps as she or counsel may deem necessary." She then filed a Motion
for Reconsideration over the opposition of PAL which alleged that the Court
of Appeals Decision, promulgated on August 22, 1974, had already become
final and executory since no appeal had been interposed therefrom within the
reglementary period.
Under the circumstances, considering the demise of petitioner himself, who
acted as his own counsel, it is best that technicality yields to the interests of
substantial justice. Besides, in the 'last analysis, no serious prejudice has
been caused respondent PAL.
In fine, we hold that the conclusions drawn by respondent Court from the
evidence on record are not erroneous.
WHEREFORE, for lack of merit, the instant Petition is hereby denied, and the
judgment sought to be reviewed hereby affirmed in toto.
No costs.
SO ORDERED.

16 | B R I N A S

[G.R. No. 122494. October 8, 1998]

EVERETT STEAMSHIP CORPORATION, petitioner, vs. COURT OF
APPEALS and HERNANDEZ TRADING CO. INC.,respondents.
DECISION

Private respondent rejected the offer and thereafter instituted a suit for
collection docketed as Civil Case No. C-15532, against petitioner before the
Regional Trial Court of Caloocan City, Branch 126.
At the pre-trial conference, both parties manifested that they have no
testimonial evidence to offer and agreed instead to file their respective
memoranda.

MARTINEZ, J.:
Petitioner Everett Steamship Corporation, through this petition for
review, seeks the reversal of the decision[1] of the Court of Appeals, dated
June 14, 1995, in CA-G.R. No. 428093, which affirmed the decision of the
Regional Trial Court of Kalookan City, Branch 126, in Civil Case No. C15532, finding petitioner liable to private respondent Hernandez Trading Co.,
Inc. for the value of the lost cargo.
Private respondent imported three crates of bus spare parts marked as
MARCO C/No. 12, MARCO C/No. 13 and MARCO C/No. 14, from its
supplier, Maruman Trading Company, Ltd. (Maruman Trading), a foreign
corporation based in Inazawa, Aichi, Japan. The crates were shipped from
Nagoya, Japan to Manila on board ADELFAEVERETTE, a vessel owned by
petitioners principal, Everett Orient Lines. The said crates were covered
byBill of Lading No. NGO53MN.
Upon arrival at the port of Manila, it was discovered that the crate
marked MARCO C/No. 14 was missing. This was confirmed and admitted by
petitioner in its letter of January 13, 1992 addressed to private respondent,
which thereafter made a formal claim upon petitioner for the value of the lost
cargo amounting to One Million Five Hundred Fifty Two Thousand Five
Hundred (Y1,552,500.00) Yen, the amount shown in an Invoice No. MTM941, dated November 14, 1991. However, petitioner offered to pay only One
Hundred Thousand (Y100,000.00) Yen, the maximum amount stipulated
under Clause 18 of the covering bill of lading which limits the liability of
petitioner.

On July 16, 1993, the trial court rendered judgment [2] in favor of private
respondent, ordering petitioner to pay: (a) Y1,552,500.00; (b) Y20,000.00 or
its peso equivalent representing the actual value of the lost cargo and the
material and packaging cost; (c) 10% of the total amount as an award for and
as contingent attorneys fees; and (d) to pay the cost of the suit. The trial
court ruled:
Considering defendants categorical admission of loss and its failure
to overcome the presumption of negligence and fault, the Court
conclusively finds defendant liable to the plaintiff. The next point of
inquiry the Court wants to resolve is the extent of the liability of the
defendant. As stated earlier, plaintiff contends that defendant
should be held liable for the whole value for the loss of the goods in
the amount of Y1,552,500.00 because the terms appearing at the
back of the bill of lading was so written in fine prints and that the
same was not signed by plaintiff or shipper thus, they are not bound
by the clause stated in paragraph 18 of the bill of lading. On the
other hand, defendant merely admitted that it lost the shipment but
shall be liable only up to the amount of Y100,000.00.
The Court subscribes to the provisions of Article 1750 of the New
Civil Code Art. 1750. A contract fixing the sum that may be recovered
by the owner or shipper for the loss, destruction or
deterioration of the goods is valid, if it is reasonable and
just under the circumstances, and has been fairly and freely
agreed upon.

17 | B R I N A S

It is required, however, that the contract must be reasonable and

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

Never having entered into a contract with the appellant, appellee

should therefore not be bound by any of the terms and conditions in
the bill of lading.
Hence, it follows that the appellee may recover the full value of the
shipment lost, the basis of which is not the breach of contract as
appellee was never a privy to the any contract with the appellant,
but is based on Article 1735 of the New Civil Code, there being no
evidence to prove satisfactorily that the appellant has overcome the
presumption of negligence provided for in the law.
Petitioner now comes to us arguing that the Court of Appeals erred
(1) in ruling that the consent of the consignee to the terms and conditions of
the bill of lading is necessary to make such stipulations binding upon it; (2) in
holding that the carriers limited package liability as stipulated in the bill of
lading does not apply in the instant case; and (3) in allowing private
respondent to fully recover the full alleged value of its lost cargo.
We shall first resolve the validity of the limited liability clause in the bill of
lading.
A stipulation in the bill of lading limiting the common carriers liability for
loss or destruction of a cargo to a certain sum, unless the shipper or owner
declares a greater value, is sanctioned by law, particularly Articles 1749 and
1750 of the Civil Code which provide:
ART. 1749. A stipulation that the common carriers liability is limited
to the value of the goods appearing in the bill of lading, unless the
shipper or owner declares a greater value, is binding.
ART. 1750. A contract fixing the sum that may be recovered by the
owner or shipper for the loss, destruction, or deterioration of the
goods is valid, if it is reasonable and just under the circumstances,
and has been freely and fairly agreed upon.
Such limited-liability clause has also been consistently upheld by this
Court in a number of cases.[3] Thus, in Sea Land Service, Inc. vs
Intermediate Appellate Court[4], we ruled:

18 | B R I N A S

It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea
Act did not exist, the validity and binding effect of the liability limitation clause
in the bill of lading here are nevertheless fully sustainable on the basis alone
of the cited Civil Code Provisions. That said stipulation is just and reasonable
is arguable from the fact that it echoes Art. 1750 itself in providing a limit to
liability only if a greater value is not declared for the shipment in the bill of
lading. To hold otherwise would amount to questioning the justness and
fairness of the law itself, and this the private respondent does not pretend to
do. But over and above that consideration, the just and reasonable character
of such stipulation is implicit in it giving the shipper or owner the option of
avoiding accrual of liability limitation by the simple and surely far from
onerous expedient of declaring the nature and value of the shipment in the
bill of lading..
Pursuant to the afore-quoted provisions of law, it is required that the
stipulation limiting the common carriers liability for loss must be reasonable
and just under the circumstances, and has been freely and fairly agreed
upon.
The bill of lading subject of the present controversy specifically provides,
among others:
18. All claims for which the carrier may be liable shall be adjusted
and settled on the basis of the shippers net invoice cost plus freight
and insurance premiums, if paid, and in no event shall the carrier be
liable for any loss of possible profits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in
any connection with, goods in an amount exceeding One Hundred
Thousand Yen in Japanese Currency (Y100,000.00) or its
equivalent in any other currency per package or customary freight
unit (whichever is least) unless the value of the goods higher than
this amount is declared in writing by the shipper before receipt of
the goods by the carrier and inserted in the Bill of Lading and extra
freight is paid as required. (Emphasis supplied)
The above stipulations are, to our mind, reasonable and just. In the bill
of lading, the carrier made it clear that its liability would only be up to One

Hundred Thousand (Y100,000.00) Yen. However, the shipper, Maruman

Trading, had the option to declare a higher valuation if the value of its
cargo was higher than the limited liability of the carrier. Considering
that the shipper did not declare a higher valuation, it had itself to blame
for not complying with the stipulations.
The trial courts ratiocination that private respondent could not have fairly
and freely agreed to the limited liability clause in the bill of lading because the
said conditions were printed in small letters does not make the bill of lading
invalid.
We ruled in PAL, Inc. vs. Court of Appeals [5] that the jurisprudence on
the matter reveals the consistent holding of the court that contracts of
adhesion are not invalid per se and that it has on numerous occasions
upheld the binding effect thereof. Also, in Philippine American General
Insurance Co., Inc. vs. Sweet Lines , Inc.[6] this Court , speaking through
the learned Justice Florenz D. Regalado, held:
x x x Ong Yiu vs. Court of Appeals, et.al., instructs us that contracts
of adhesion wherein one party imposes a ready-made form of
contract on the other x x x are contracts not entirely prohibited. The
one who adheres to the contract is in reality free to reject it entirely;
if he adheres he gives his consent. In the present case, not even an
allegation of ignorance of a party excuses non-compliance with the
contractual stipulations since the responsibility for ensuring full
comprehension of the provisions of a contract of carriage devolves
not on the carrier but on the owner, shipper, or consignee as the
case may be. (Emphasis supplied)
It was further explained in Ong Yiu vs Court of Appeals[7] that
stipulations in contracts of adhesion are valid and binding.
While it may be true that petitioner had not signed the plane ticket x
x, he is nevertheless bound by the provisions thereof. Such
provisions have been held to be a part of the contract of carriage,
and valid and binding upon the passenger regardless of the latters
lack of knowledge or assent to the regulation. It is what is known as
a contract of adhesion, in regards which it has been said that

19 | B R I N A S

contracts of adhesion wherein one party imposes a ready-made

form of contract on the other, as the plane ticket in the case at bar,
are contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres, he gives
his consent. x x x , a contract limiting liability upon an agreed
valuation does not offend against the policy of the law forbidding
one from contracting against his own negligence. (Emphasis
supplied)
Greater vigilance, however, is required of the courts when dealing with
contracts of adhesion in that the said contracts must be carefully scrutinized
in order to shield the unwary (or weaker party) from deceptive schemes
contained in ready-made covenants, [8] such as the bill of lading in
question. The stringent requirement which the courts are enjoined to observe
is in recognition of Article 24 of the Civil Code which mandates that (i)n all
contractual, property or other relations, when one of the parties is at a
disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age or other handicap, the courts
must be vigilant for his protection.
The shipper, Maruman Trading, we assume, has been extensively
engaged in the trading business. It can not be said to be ignorant of the
business transactions it entered into involving the shipment of its goods to its
customers. The shipper could not have known, or should know the
stipulations in the bill of lading and there it should have declared a higher
valuation of the goods shipped. Moreover, Maruman Trading has not been
heard to complain that it has been deceived or rushed into agreeing to ship
the cargo in petitioners vessel. In fact, it was not even impleaded in this case.
The next issue to be resolved is whether or not private respondent, as
consignee, who is not a signatory to the bill of lading is bound by the
stipulations thereof.
Again, in Sea-Land Service, Inc. vs. Intermediate Appellate
Court (supra), we held that even if the consignee was not a signatory to the
contract of carriage between the shipper and the carrier, the consignee can
still be bound by the contract. Speaking through Mr. Chief Justice Narvasa,
we ruled:

To begin with, there is no question of the right, in principle, of

a consignee in a bill of lading to recover from the carrier or shipper
for loss of, or damage to goods being transported under said
bill, although that document may have been- as in practice it
oftentimes is-drawn up only by the consignor and the
carrier without the intervention of the consignee. x x x.
x x x the right of a party in the same situation as respondent
here, to recover for loss of a shipment consigned to him under
a bill of lading drawn up only by and between the shipper and
the carrier, springs from either a relation of agency that may
exist between him and the shipper or consignor, or his status
as stranger in whose favor some stipulation is made in said
contract, and who becomes a party thereto when he demands
fulfillment of that stipulation, in this case the delivery of the
goods or cargo shipped. In neither capacity can he assert
personally, in bar to any provision of the bill of lading, the
alleged circumstance that fair and free agreement to such
provision was vitiated by its being in such fine print as to be
hardly readable. Parenthetically, it may be observed that in one
comparatively recent case (Phoenix Assurance Company vs.
Macondray & Co., Inc., 64 SCRA 15) where this Court found that a
similar package limitation clause was printed in the smallest
type on the back of the bill of lading, it nonetheless ruled that
the consignee was bound thereby on the strength of authority
holding that such provisions on liability limitation are as much
a part of a bill of lading as though physically in it and as
though placed therein by agreement of the parties.
There can, therefore, be no doubt or equivocation about the validity
and enforceability of freely-agreed-upon stipulations in a contract of
carriage or bill of lading limiting the liability of the carrier to an
agreed valuation unless the shipper declares a higher value and
inserts it into said contract or bill. This proposition, moreover,
rests upon an almost uniform weight of authority. (Underscoring
supplied)

20 | B R I N A S

When private respondent formally claimed reimbursement for the

missing goods from petitioner and subsequently filed a case against the latter
based on the very same bill of lading, it (private respondent) accepted the
provisions of the contract and thereby made itself a party thereto, or at least
has come to court to enforce it.[9] Thus, private respondent cannot now reject
or disregard the carriers limited liability stipulation in the bill of lading. In other
words, private respondent is bound by the whole stipulations in the bill of
lading and must respect the same.

WHEREFORE, the decision of the Court of Appeals dated June 14,

1995 in C.A.-G.R. CV No. 42803 is hereby REVERSED and SET ASIDE.
SO ORDERED.

Private respondent, however, insists that the carrier should be liable for
the full value of the lost cargo in the amount of Y1,552,500.00, considering
that the shipper, Maruman Trading, had "fully declared the shipment x x x,
the contents of each crate, the dimensions, weight and value of the
contents,"[10] as shown in the commercial Invoice No. MTM-941.
This claim was denied by petitioner, contending that it did not know of
the contents, quantity and value of "the shipment which consisted of three
pre-packed crates described in Bill of Lading No. NGO-53MN merely as 3
CASES SPARE PARTS.[11]
The bill of lading in question confirms petitioners contention. To defeat
the carriers limited liability, the aforecited Clause 18 of the bill of lading
requires that the shipper should have declared in writing a higher
valuation of its goods before receipt thereof by the carrier and insert the
said declaration in the bill of lading, with the extra freight paid. These
requirements in the bill of lading were never complied with by the shipper,
hence, the liability of the carrier under the limited liability clause stands. The
commercial Invoice No. MTM-941 does not in itself sufficiently and
convincingly show that petitioner has knowledge of the value of the cargo as
contended by private respondent. No other evidence was proffered by private
respondent to support is contention. Thus, we are convinced that petitioner
should be liable for the full value of the lost cargo.
In fine, the liability of petitioner for the loss of the cargo is limited to One
Hundred Thousand (Y100,000.00) Yen, pursuant to Clause 18 of the bill of
lading.

21 | B R I N A S

[G.R. No. 71929 : December 4, 1990.]

192 SCRA 9
ALITALIA, Petitioner, vs. INTERMEDIATE APPELLATE COURT and
FELIPA E. PABLO, Respondents.
DECISION
NARVASA, J.:
Dr. Felipa Pablo an associate professor in the University of the
Philippines, 1 and a research grantee of the Philippine Atomic Energy
Agency was invited to take part at a meeting of the Department of
Research and Isotopes of the Joint FAO-IAEA Division of Atomic Energy in
Food and Agriculture of the United Nations in Ispra, Italy. 2 She was invited in
view of her specialized knowledge in "foreign substances in food and the
agriculture environment." She accepted the invitation, and was then
scheduled by the organizers, to read a paper on "The Fate of Radioactive
Fusion Products Contaminating Vegetable Crops." 3 The program
announced that she would be the second speaker on the first day of the
meeting. 4 To fulfill this engagement, Dr. Pablo booked passage on petitioner
airline, ALITALIA.
She arrived in Milan on the day before the meeting in accordance with the
itinerary and time table set for her by ALITALIA. She was however told by the
ALITALIA personnel there at Milan that her luggage was "delayed inasmuch
as the same . . . (was) in one of the succeeding flights from Rome to Milan."
5 Her luggage consisted of two (2) suitcases: one contained her clothing and
other personal items; the other, her scientific papers, slides and other
research material. But the other flights arriving from Rome did not have her
baggage on board.
By then feeling desperate, she went to Rome to try to locate her bags
herself. There, she inquired about her suitcases in the domestic and
international airports, and filled out the forms prescribed by ALITALIA for
people in her predicament. However, her baggage could not be found.
Completely distraught and discouraged, she returned to Manila without
attending the meeting in Ispra, Italy. : nad
Once back in Manila she demanded that ALITALIA make reparation for the
damages thus suffered by her. ALITALIA offered her "free airline tickets to
compensate her for any alleged damages. . . ." She rejected the offer, and

forthwith commenced the action 6 which has given rise to the present
appellate proceedings.
As it turned out, Prof. Pablo's suitcases were in fact located and forwarded to
Ispra, 7 Italy, but only on the day after her scheduled appearance and
participation at the U.N. meeting there. 8 Of course Dr. Pablo was no longer
there to accept delivery; she was already on her way home to Manila. And for
some reason or other, the suitcases were not actually restored to Prof. Pablo
by ALITALIA until eleven (11) months later, and four (4) months after
institution of her action. 9
After appropriate proceedings and trial, the Court of First Instance rendered
judgment in Dr. Pablo's favor: 10
"(1) Ordering the defendant (ALITALIA) to pay . . . (her) the sum of
TWENTY THOUSAND PESOS (P20,000.00), Philippine Currency,
by way of nominal damages;
(2) Ordering the defendant to pay . . . (her) the sum of FIVE
THOUSAND PESOS (P5,000.00), Philippine Currency, as and for
attorney's fees; (and)
(3) Ordering the defendant to pay the costs of the suit."
ALITALIA appealed to the Intermediate Appellate Court but failed to obtain a
reversal of the judgment. 11 Indeed, the Appellate Court not only affirmed the
Trial Court's decision but also increased the award of nominal damages
payable by ALITALIA to P40,000.00. 12 That increase it justified as follows:
13
"Considering the circumstances, as found by the Trial Court and the
negligence committed by defendant, the amount of P20,000.00
under present inflationary conditions as awarded . . . to the plaintiff
as nominal damages, is too little to make up for the plaintiff's
frustration and disappointment in not being able to appear at said
conference; and for the embarrassment and humiliation she suffered
from the academic community for failure to carry out an official
mission for which she was singled out by the faculty to represent her
institution and the country. After weighing carefully all the
considerations, the amount awarded to the plaintiff for nominal
damages and attorney's fees should be increased to the cost of her
round trip air fare or at the present rate of peso to the dollar at
P40,000,00."
ALITALIA has appealed to this Court on Certiorari. Here, it seeks to make
basically the same points it tried to make before the Trial Court and the
Intermediate Appellate Court, i.e.:

22 | B R I N A S

1) that the Warsaw Convention should have been applied to limit

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

packages concerned. Nevertheless, when the loss, damage or delay

of a part of the registered baggage or cargo, or of an object
contained therein, affects the value of other packages covered by the
same baggage check or the same air way bill, the total weight of
such package or packages shall also be taken into consideration in
determining the limit of liability.
3. As regards objects of which the passenger takes charge himself
the liability of the carrier is limited to 5000 francs per passenger.
4. The limits prescribed . . shall not prevent the court from awarding,
in accordance with its own law, in addition, the whole or part of the
court costs and of the other expenses of litigation incurred by the
plaintiff. The foregoing provision shall not apply if the amount of the
damages awarded, excluding court costs and other expenses of the
litigation, does not exceed the sum which the carrier has offered in
writing to the plaintiff within a period of six months from the date of
the occurrence causing the damage, or before the commencement
of the action, if that is later.
The Warsaw Convention however denies to the carrier availment "of the
provisions which exclude or limit his liability, if the damage is caused by his
wilful misconduct or by such default on his part as, in accordance with the
law of the court seized of the case, is considered to be equivalent to wilful
misconduct," or "if the damage is (similarly) caused . . by any agent of the
carrier acting within the scope of his employment." 22 The Hague Protocol
amended the Warsaw Convention by removing the provision that if the airline
took all necessary steps to avoid the damage, it could exculpate itself
completely, 23 and declaring the stated limits of liability not applicable "if it is
proved that the damage resulted from an act or omission of the carrier, its
servants or agents, done with intent to cause damage or recklessly and with
knowledge that damage would probably result." The same deletion was
effected by the Montreal Agreement of 1966, with the result that a passenger
could recover unlimited damages upon proof of wilful misconduct. 24
The Convention does not thus operate as an exclusive enumeration of the
instances of an airline's liability, or as an absolute limit of the extent of that
liability. Such a proposition is not borne out by the language of the
Convention, as this Court has now, and at an earlier time, pointed out. 25
Moreover, slight reflection readily leads to the conclusion that it should be
deemed a limit of liability only in those cases where the cause of the death or
injury to person, or destruction, loss or damage to property or delay in its
transport is not attributable to or attended by any wilful misconduct, bad faith,
recklessness, or otherwise improper conduct on the part of any official or
employee for which the carrier is responsible, and there is otherwise no
special or extraordinary form of resulting injury. The Convention's provisions,

23 | B R I N A S

in short, do not "regulate or exclude liability for other breaches of contract by

the carrier" 26 or misconduct of its officers and employees, or for some
particular or exceptional type of damage. Otherwise, "an air carrier would be
exempt from any liability for damages in the event of its absolute refusal, in
bad faith, to comply with a contract of carriage, which is absurd." 27 Nor may
it for a moment be supposed that if a member of the aircraft complement
should inflict some physical injury on a passenger, or maliciously destroy or
damage the latter's property, the Convention might successfully be pleaded
as the sole gauge to determine the carrier's liability to the passenger. Neither
may the Convention be invoked to justify the disregard of some extraordinary
sort of damage resulting to a passenger and preclude recovery therefor
beyond the limits set by said Convention. It is in this sense that the
Convention has been applied, or ignored, depending on the peculiar facts
presented by each case.:-cralaw
In Pan American World Airways, Inc. v. I.A.C., 28 for example, the Warsaw
Convention was applied as regards the limitation on the carrier's liability,
there being a simple loss of baggage without any otherwise improper
conduct on the part of the officials or employees of the airline or other special
injury sustained by the passenger.
On the other hand, the Warsaw Convention has invariably been held
inapplicable, or as not restrictive of the carrier's liability, where there was
satisfactory evidence of malice or bad faith attributable to its officers and
employees. 29 Thus, an air carrier was sentenced to pay not only
compensatory but also moral and exemplary damages, and attorney's fees,
for instance, where its employees rudely put a passenger holding a first-class
ticket in the tourist or economy section, 30 or ousted a brown Asiatic from
the plane to give his seat to a white man, 31 or gave the seat of a passenger
with a confirmed reservation to another, 32 or subjected a passenger to
extremely rude, even barbaric treatment, as by calling him a "monkey." 33
In the case at bar, no bad faith or otherwise improper conduct may be
ascribed to the employees of petitioner airline; and Dr. Pablo's luggage was
eventually returned to her, belatedly, it is true, but without appreciable
damage. The fact is, nevertheless, that some special species of injury was
caused to Dr. Pablo because petitioner ALITALIA misplaced her baggage and
failed to deliver it to her at the time appointed a breach of its contract of
carriage, to be sure with the result that she was unable to read the paper
and make the scientific presentation (consisting of slides, autoradiograms or
films, tables and tabulations) that she had painstakingly labored over, at the
prestigious international conference, to attend which she had traveled
hundreds of miles, to her chagrin and embarrassment and the
disappointment and annoyance of the organizers. She felt, not unreasonably,
that the invitation for her to participate at the conference, extended by the
Joint FAO/IAEA Division of Atomic Energy in Food and Agriculture of the

United Nations, was a singular honor not only to herself, but to the University
of the Philippines and the country as well, an opportunity to make some sort
of impression among her colleagues in that field of scientific activity. The
opportunity to claim this honor or distinction was irretrievably lost to her
because of Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound
distress and anxiety, which gradually turned to panic and finally despair, from
the time she learned that her suitcases were missing up to the time when,
having gone to Rome, she finally realized that she would no longer be able to
take part in the conference. As she herself put it, she "was really shocked
and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under
the circumstances be restricted to that prescribed by the Warsaw Convention
for delay in the transport of baggage.
She is not, of course, entitled to be compensated for loss or damage to her
luggage. As already mentioned, her baggage was ultimately delivered to her
in Manila, tardily but safely. She is however entitled to nominal damages
which, as the law says, is adjudicated in order that a right of the plaintiff,
which has been violated or invaded by the defendant, may be vindicated and
recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered and this Court agrees that the respondent Court of Appeals
correctly set the amount thereof at P40,000.00. As to the purely technical
argument that the award to her of such nominal damages is precluded by her
omission to include a specific claim therefor in her complaint, it suffices to
draw attention to her general prayer, following her plea for moral and
exemplary damages and attorney's fees, "for such other and further just and
equitable relief in the premises," which certainly is broad enough to
comprehend an application as well for nominal damages. Besides, petitioner
should have realized that the explicit assertion, and proof, that Dr. Pablo's
right had been violated or invaded by it absent any claim for actual or
compensatory damages, the prayer thereof having been voluntarily deleted
by Dr. Pablo upon the return to her of her baggage necessarily raised the
issue of nominal damages.: rd
This Court also agrees that respondent Court of Appeals correctly awarded
attorney's fees to Dr. Pablo, and the amount of P5,000.00 set by it is
reasonable in the premises. The law authorizes recovery of attorney's fees
inter alia where, as here, "the defendant's act or omission has compelled the
plaintiff to litigate with third persons or to incur expenses to protect his
interest," 34 or "where the court deems it just and equitable." 35
WHEREFORE, no error being perceived in the challenged decision of the
Court of Appeals, it appearing on the contrary to be entirely in accord with the

24 | B R I N A S

facts and the law, said decision is hereby AFFIRMED, with costs against the
petitioner.
SO ORDERED.

25 | B R I N A S

[G.R. No. 152122. July 30, 2003]

number 297:4402:004:278:5 for air transportation covering Manila-TaipeiHongkong-Manila. Said ticket was exclusively endorseable to Philippine
Airlines, Ltd. (PAL for brevity).

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

DECISION
PANGANIBAN, J.:
A common carrier has a peculiar relationship with and an exacting
responsibility to its passengers. For reasons of public interest and policy, the
ticket-issuing airline acts as principal in a contract of carriage and is thus
liable for the acts and the omissions of any errant carrier to which it may
have endorsed any sector of the entire, continuous trip.
The Case
Before the Court is a Petition for Review on Certiorari [1] under Rule 45 of
the Rules of Court, seeking to reverse the August 7, 2001 Decision [2] and the
February 7, 2002 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No.
45832. The challenged Decision disposed as follows:
WHEREFORE, premises considered, the assailed Decision dated July 5,
1991 of Branch 31, Regional Trial Court, National Capital Judicial Region,
Manila, in Civil Case No. 82-13690, is hereby MODIFIED by deleting that
portion regarding defendants-appellants liabilities for the payment of the
actual damages amounting to HK$14,128.80 and US$2,000.00 while all
other respects are AFFIRMED. Costs against defendants-appellants. [4]
The assailed
Reconsideration.

Resolution

denied

Petitioners

Motion

for

Partial

The Facts
The facts are narrated by the CA[5] as follows:
On September 18, 1981, Daniel Chiok (hereafter referred to as Chiok)
purchased from China Airlines, Ltd. (CAL for brevity) airline passenger ticket

Subsequently, on November 21, 1981, Chiok took his trip from Manila to
Taipei using [the] CAL ticket. Before he left for said trip, the trips covered by
the ticket were pre-scheduled and confirmed by the former. When he arrived
in Taipei, he went to the CAL office and confirmed his Hongkong to Manila
trip on board PAL Flight No. PR 311. The CAL office attached a yellow sticker
appropriately indicating that his flight status was OK.
When Chiok reached Hongkong, he went to the PAL office and sought to
reconfirm his flight back to Manila. The PAL office confirmed his return trip on
board Flight No. PR 311 and attached its own sticker. On November 24,
1981, Chiok proceeded to Hongkong International Airport for his return trip to
Manila. However, upon reaching the PAL counter, Chiok saw a poster stating
that PAL Flight No. PR 311 was cancelled because of a typhoon in Manila.He
was then informed that all the confirmed ticket holders of PAL Flight No. PR
311 were automatically booked for its next flight, which was to leave the next
day. He then informed PAL personnel that, being the founding director of the
Philippine Polysterene Paper Corporation, he ha[d] to reach Manila on
November 25, 1981 because of a business option which he ha[d] to execute
on said date.
On November 25, 1981, Chiok went to the airport. Cathay Pacific stewardess
Lok Chan (hereafter referred to as Lok) ha[d] taken and received Chioks
plane ticket and his luggage. Lok called the attention of Carmen Chan
(hereafter referred to as Carmen), PALs terminal supervisor, and informed
the latter that Chioks name was not in the computer list of
passengers. Subsequently, Carmen informed Chiok that his name did not
appear in PALs computer list of passengers and therefore could not be
permitted to board PAL Flight No. PR 307.
Meanwhile, Chiok requested Carmen to put into writing the alleged reason
why he was not allowed to take his flight. The latter then wrote the following,
to wit: PAL STAFF CARMEN CHAN CHKD WITH R/C KENNY AT 1005H NO
SUCH NAME IN COMPUTER FOR 311/24 NOV AND 307/25 NOV. The

26 | B R I N A S

latter sought to recover his luggage but found only 2 which were placed at
the end of the passengers line. Realizing that his new Samsonite luggage
was missing, which contained cosmetics worth HK$14,128.80, he
complained to Carmen.
Thereafter, Chiok proceeded to PALs Hongkong office and confronted PALs
reservation officer, Carie Chao (hereafter referred to as Chao), who
previously confirmed his flight back to Manila. Chao told Chiok that his name
was on the list and pointed to the latter his computer number listed on the
PAL confirmation sticker attached to his plane ticket, which number
was R/MN62.
Chiok then decided to use another CAL ticket with No. 297:4402:004:370:5
and asked Chao if this ticket could be used to book him for the said flight.The
latter, once again, booked and confirmed the formers trip, this time on board
PAL Flight No. PR 311 scheduled to depart that evening. Later, Chiok went to
the PAL check-in counter and it was Carmen who attended to him. As this
juncture, Chiok had already placed his travel documents, including his clutch
bag, on top of the PAL check-in counter.
Thereafter, Carmen directed PAL personnel to transfer counters. In the
ensuing commotion, Chiok lost his clutch bag containing the following, to
wit: (a) $2,000.00; (b) HK$2,000.00; (c) Taipei $8,000.00; (d) P2,000.00; (e) a
three-piece set of gold (18 carats) cross pens valued at P3,500; (f) a Cartier
watch worth about P7,500.00; (g) a tie clip with a garnet birthstone and
diamond worth P1,800.00; and (h) a [pair of] Christian Dior reading
glasses.Subsequently, he was placed on stand-by and at around 7:30 p.m.,
PAL personnel informed him that he could now check-in.
Consequently, Chiok as plaintiff, filed a Complaint on November 9, 1982 for
damages, against PAL and CAL, as defendants, docketed as Civil Case No.
82-13690, with Branch 31, Regional Trial Court, National Capital Judicial
Region, Manila.
He alleged therein that despite several confirmations of his flight, defendant
PAL refused to accommodate him in Flight No. 307, for which reason he lost
the business option aforementioned. He also alleged that PALs personnel,
specifically Carmen, ridiculed and humiliated him in the presence of so many

people. Further, he alleged that defendants are solidarily liable for the
damages he suffered, since one is the agent of the other.[6]
The Regional Trial Court (RTC) of Manila held CAL and PAL jointly and
severally liable to respondent. It did not, however, rule on their respective
cross-claims. It disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiff and against
the defendants to jointly and severally pay:
1. Actual damages in the amount of HK$14,128.80 or its
equivalent in Philippine Currency at the time of the
loss of the luggage consisting of cosmetic products;
2. US$2,000.00 or its equivalent at the time of the loss of the
clutch bag containing the money;
3. P200,000.00 by way of moral damages;
4. P50,000.00 by way of exemplary damages or corrective
damages;
5. Attorney[]s fees equivalent to 10% of the amounts due and
demandable and awarded in favor of the plaintiff;
and
6. The costs of this proceedings.[7]
The two carriers appealed the RTC Decision to the CA.
Ruling of the Court of Appeals
Affirming the RTC, the Court of Appeals debunked petitioners claim that
it had merely acted as an issuing agent for the ticket covering the Hong
Kong-Manila leg of respondents journey. In support of its Decision, the CA
quoted a purported ruling of this Court in KLM Royal Dutch Airlines v. Court
of Appeals[8] as follows:

27 | B R I N A S

Article 30 of the Warsaw providing that in case of transportation to be

performed by various successive carriers, the passenger can take action only
against the carrier who performed the transportation during which the
accident or the delay occurred presupposes the occurrence of either an
accident or delay in the course of the air trip, and does not apply if the
damage is caused by the willful misconduct on the part of the carriers
employee or agent acting within the scope of his employment.
It would be unfair and inequitable to charge a passenger with automatic
knowledge or notice of a condition which purportedly would excuse the
carrier from liability, where the notice is written at the back of the ticket in
letters so small that one has to use a magnifying glass to read the words. To
preclude any doubt that the contract was fairly and freely agreed upon when
the passenger accepted the passage ticket, the carrier who issued the ticket
must inform the passenger of the conditions prescribed in the ticket or, in the
very least, ascertain that the passenger read them before he accepted the
passage ticket.Absent any showing that the carriers officials or employees
discharged this responsibility to the passenger, the latter cannot be bound by
the conditions by which the carrier assumed the role of a mere ticket-issuing
agent for other airlines and limited its liability only to untoward occurrences in
its own lines.
Where the passage tickets provide that the carriage to be performed
thereunder by several successive carriers is to be regarded as a single
operation, the carrier which issued the tickets for the entire trip in effect
guaranteed to the passenger that the latter shall have sure space in the
various carriers which would ferry him through the various segments of the
trip, and the ticket-issuing carrier assumes full responsibility for the entire trip
and shall be held accountable for the breach of that guaranty whether the
breach occurred in its own lines or in those of the other carriers. [9]

The CA, however, deleted the RTCs award of actual damages

amounting to HK$14,128.80 and US$2,000.00, because the lost piece of
luggage and clutch bag had not actually been checked in or delivered to PAL
for transportation to Manila.
On August 28, 2001, petitioner filed a Motion for Partial
Reconsideration, contending that the appellate court had erroneously relied
on a mere syllabus of KLM v. CA, not on the actual ruling therein. Moreover,
it argued that respondent was fully aware that the booking for the PAL sector
had been made only upon his request; and that only PAL, not CAL, was
liable for the actual carriage of that segment. Petitioner likewise prayed for a
ruling on its cross-claim against PAL, inasmuch as the latters employees had
acted negligently, as found by the trial court.
Denying the Motion, the appellate court ruled that petitioner had failed to
raise any new matter or issue that would warrant a modification or a reversal
of the Decision. As to the alleged misquotation, the CA held that while the
portion it had cited appeared to be different from the wording of the actual
ruling, the variance was more apparent than real since the difference [was]
only in form and not in substance.[10]
CAL and PAL filed separate Petitions to assail the CA Decision. In its
October 3, 2001 Resolution, this Court denied PALs appeal, docketed as GR
No. 149544, for failure to serve the CA a copy of the Petition as required by
Section 3, Rule 45, in relation to Section 5(d) of Rule 56 and paragraph 2 of
Revised Circular No. 1-88 of this Court. PALs Motion for Reconsideration
was denied with finality on January 21, 2002.
Only the appeal of CAL[11] remains in this Court.
Issues

On PALs appeal, the appellate court held that the carrier had reneged
on its obligation to transport respondent when, in spite of the confirmations
he had secured for Flight PR 311, his name did not appear in the
computerized list of passengers. Ruling that the airlines negligence was the
proximate cause of his excoriating experience, the appellate court sustained
the award of moral and exemplary damages.

In its Memorandum, petitioner raises the following issues for the Courts
consideration:
1. The Court of Appeals committed judicial misconduct in finding
liability against the petitioner on the basis of a misquotation from
KLM Royal Dutch Airlines vs. Court of Appeals, et al., 65 SCRA

28 | B R I N A S

237 and in magnifying its misconduct by denying the petitioners

Motion for Reconsideration on a mere syllabus, unofficial at that.

are independent of and separate from each other and cannot be mixed in the
same proceedings.

2. The Court of Appeals committed an error of law when it did not

apply applicable precedents on the case before it.

By merely including the lapse as an assigned error here without any

adequate and proper administrative case therefor, petitioner cannot expect
the imposition of an administrative sanction.

3. The Court of Appeals committed a non sequitur when it did not

rule on the cross-claim of the petitioner.[12]

In the case at bar, we can only determine whether the error in quotation
would be sufficient to reverse or modify the CA Decision.

The Courts Ruling

Applicability of KLM v. CA
The Petition is not meritorious.
First Issue:
Alleged Judicial Misconduct
Petitioner charges the CA with judicial misconduct for quoting from and
basing its ruling against the two airlines on an unofficial syllabus of this
Courts ruling in KLM v. CA. Moreover, such misconduct was allegedly
aggravated when the CA, in an attempt to justify its action, held that the
difference between the actual ruling and the syllabus was more apparent
than real.[13]
We agree with petitioner that the CA committed a lapse when it relied
merely on the unofficial syllabus of our ruling in KLM v. CA. Indeed, lawyers
and litigants are mandated to quote decisions of this Court accurately. [14] By
the same token, judges should do no less by strictly abiding by this rule when
they quote cases that support their judgments and decisions. Canon 3 of the
Code of Judicial Conduct enjoins them to perform official duties diligently by
being faithful to the law and maintaining their professional competence.
However, since this case is not administrative in nature, we cannot rule
on the CA justices administrative liability, if any, for this lapse.First, due
process requires that in administrative proceedings, the respondents must
first be given an opportunity to be heard before sanctions can be
imposed. Second, the present action is an appeal from the CAs Decision, not
an administrative case against the magistrates concerned. These two suits

In KLM v. CA, the petitioner therein issued tickets to the Mendoza

spouses for their world tour. The tour included a Barcelona-Lourdes route,
which was serviced by the Irish airline Aer Lingus. At the KLM office in
Frankfurt, Germany, they obtained a confirmation from Aer Lingus of their
seat reservations on its Flight 861. On the day of their departure, however,
the airline rudely off-loaded them.
When sued for breach of contract, KLM sought to be excused for the
wrongful conduct of Aer Lingus by arguing that its liability for damages was
limited only to occurrences on its own sectors. To support its argument, it
cited Article 30 of the Warsaw Convention, stating that when transportation
was to be performed by various successive carriers, the passenger could
take action only against the carrier that had performed the transportation
when the accident or delay occurred.
In holding KLM liable for damages, we ruled as follows:
1. The applicability insisted upon by the KLM of article 30 of the Warsaw
Convention cannot be sustained. That article presupposes the occurrence of
either an accident or a delay, neither of which took place at the Barcelona
airport; what is here manifest, instead, is that the Aer Lingus, through its
manager there, refused to transport the respondents to their planned and
contracted destination.
2. The argument that the KLM should not be held accountable for the tortious
conduct of Aer Lingus because of the provision printed on the respondents'

29 | B R I N A S

tickets expressly limiting the KLM's liability for damages only to occurrences
on its own lines is unacceptable. As noted by the Court of Appeals that
condition was printed in letters so small that one would have to use a
magnifying glass to read the words. Under the circumstances, it would be
unfair and inequitable to charge the respondents with automatic knowledge
or notice of the said condition so as to preclude any doubt that it was fairly
and freely agreed upon by the respondents when they accepted the passage
tickets issued to them by the KLM. As the airline which issued those tickets
with the knowledge that the respondents would be flown on the various legs
of their journey by different air carriers, the KLM was chargeable with the
duty and responsibility of specifically informing the respondents of conditions
prescribed in their tickets or, in the very least, to ascertain that the
respondents read them before they accepted their passage tickets. A
thorough search of the record, however, inexplicably fails to show that any
effort was exerted by the KLM officials or employees to discharge in a proper
manner this responsibility to the respondents. Consequently, we hold that the
respondents cannot be bound by the provision in question by which KLM
unilaterally assumed the role of a mere ticket-issuing agent for other airlines
and limited its liability only to untoward occurrences on its own lines.
3. Moreover, as maintained by the respondents and the Court of Appeals, the
passage tickets of the respondents provide that the carriage to be performed
thereunder by several successive carriers is to be regarded as a single
operation, which is diametrically incompatible with the theory of the KLM that
the respondents entered into a series of independent contracts with the
carriers which took them on the various segments of their trip. This position
of KLM we reject. The respondents dealt exclusively with the KLM which
issued them tickets for their entire trip and which in effect guaranteed to them
that they would have sure space in Aer Lingus flight 861. The respondents,
under that assurance of the internationally prestigious KLM, naturally had the
right to expect that their tickets would be honored by Aer Lingus to which, in
the legal sense, the KLM had indorsed and in effect guaranteed the
performance of its principal engagement to carry out the respondents'
scheduled itinerary previously and mutually agreed upon between the
parties.
4. The breach of that guarantee was aggravated by the discourteous and
highly arbitrary conduct of an official of the Aer Lingus which the KLM had

engaged to transport the respondents on the Barcelona-Lourdes segment of

their itinerary. It is but just and in full accord with the policy expressly embodied
in our civil law which enjoins courts to be more vigilant for the protection of a
contracting party who occupies an inferior position with respect to the other
contracting party, that the KLM should be held responsible for the abuse, injury
and embarrassment suffered by the respondents at the hands of a supercilious
boor of the Aer Lingus.[15]
In the instant case, the CA ruled that under the contract of
transportation, petitioner -- as the ticket-issuing carrier (like KLM) -- was
liable regardless of the fact that PAL was to perform or had performed the
actual carriage. It elucidated on this point as follows:
By the very nature of their contract, defendant-appellant CAL is clearly liable
under the contract of carriage with [respondent] and remains to be so,
regardless of those instances when actual carriage was to be performed by
another carrier. The issuance of a confirmed CAL ticket in favor of
[respondent] covering his entire trip abroad concretely attests to this. This
also serves as proof that defendant-appellant CAL, in effect guaranteed that
the carrier, such as defendant-appellant PAL would honor his ticket, assure
him of a space therein and transport him on a particular segment of his trip. [16]
Notwithstanding the errant quotation, we have found after careful
deliberation that the assailed Decision is supported in substance byKLM v.
CA. The misquotation by the CA cannot serve as basis for the reversal of its
ruling.
Nonetheless, to avert similar incidents in the future, this Court hereby
exhorts members of the bar and the bench to refer to and quote from the
official repository of our decisions, the Philippine Reports, whenever
practicable.[17] In the absence of this primary source, which is still being
updated, they may resort to unofficial sources like the SCRA. [18] We remind
them that the Courts ponencia, when used to support a judgment or ruling,
should be quoted accurately.[19]
Second Issue:
Liability of the Ticket-Issuing Airline

30 | B R I N A S

We now come to the main issue of whether CAL is liable for damages.
Petitioner posits that the CA Decision must be annulled, not only because it
was rooted on an erroneous quotation, but also because it disregarded
jurisprudence,
notably China
Airlines
v.
Intermediate
Appellate
Court[20] and China Airlines v. Court of Appeals.[21]
Jurisprudence Supports
CA Decision
It is significant to note that the contract of air transportation was
between petitioner and respondent, with the former endorsing to PAL the
Hong Kong-to-Manila segment of the journey. Such contract of carriage has
always been treated in this jurisdiction as a single operation. This
jurisprudential rule is supported by the Warsaw Convention, [22] to which the
Philippines is a party, and by the existing practices of the International Air
Transport Association (IATA).
Article 1, Section 3 of the Warsaw Convention states:
Transportation to be performed by several successive air carriers shall be
deemed, for the purposes of this Convention, to be one undivided
transportation, if it has been regarded by the parties as a single operation,
whether it has been agreed upon under the form of a single contract or of a
series of contracts, and it shall not lose its international character merely
because one contract or a series of contracts is to be performed entirely
within a territory subject to the sovereignty, suzerainty, mandate, or authority
of the same High Contracting Party.[23]
Article 15 of IATA-Recommended Practice similarly provides:
Carriage to be performed by several successive carriers under one ticket, or
under a ticket and any conjunction ticket issued therewith, is regarded as a
single operation.
In American Airlines v. Court of Appeals,[24] we have noted that under a
general pool partnership agreement, the ticket-issuing airline is the principal
in a contract of carriage, while the endorsee-airline is the agent.

x x x Members of the IATA are under a general pool partnership agreement

wherein they act as agent of each other in the issuance of tickets to
contracted passengers to boost ticket sales worldwide and at the same time
provide passengers easy access to airlines which are otherwise inaccessible
in some parts of the world. Booking and reservation among airline members
are allowed even by telephone and it has become an accepted practice
among them. A member airline which enters into a contract of carriage
consisting of a series of trips to be performed by different carriers is
authorized to receive the fare for the whole trip and through the required
process of interline settlement of accounts by way of the IATA clearing house
an airline is duly compensated for the segment of the trip serviced. Thus,
when the petitioner accepted the unused portion of the conjunction tickets,
entered it in the IATA clearing house and undertook to transport the private
respondent over the route covered by the unused portion of the conjunction
tickets, i.e., Geneva to New York, the petitioner tacitly recognized its
commitment under the IATA pool arrangement to act as agent of the principal
contracting airline, Singapore Airlines, as to the segment of the trip the
petitioner agreed to undertake. As such, the petitioner thereby assumed the
obligation to take the place of the carrier originally designated in the original
conjunction ticket. The petitioners argument that it is not a designated carrier
in the original conjunction tickets and that it issued its own ticket is not
decisive of its liability. The new ticket was simply a replacement for the
unused portion of the conjunction ticket, both tickets being for the same
amount of US$ 2,760 and having the same points of departure and
destination. By constituting itself as an agent of the principal carrier the
petitioners undertaking should be taken as part of a single operation under
the contract of carriage executed by the private respondent and Singapore
Airlines in Manila.[25]
Likewise, as the principal in the contract of carriage, the petitioner
in British Airways v. Court of Appeals[26] was held liable, even when the
breach of contract had occurred, not on its own flight, but on that of another
airline. The Decision followed our ruling in Lufthansa German Airlines v.
Court of Appeals,[27] in which we had held that the obligation of the ticketissuing airline remained and did not cease, regardless of the fact that another
airline had undertaken to carry the passengers to one of their destinations.

31 | B R I N A S

In the instant case, following the jurisprudence cited above, PAL acted
as the carrying agent of CAL. In the same way that we ruled against British
Airways and Lufthansa in the aforementioned cases, we also rule that CAL
cannot evade liability to respondent, even though it may have been only a
ticket issuer for the Hong Kong-Manila sector.
Moral and Exemplary Damages
Both the trial and the appellate courts found that respondent had
satisfactorily proven the existence of the factual basis for the damages
adjudged against petitioner and PAL. As a rule, the findings of fact of the CA
affirming those of the RTC will not be disturbed by this Court. [28] Indeed, the
Supreme Court is not a trier of facts. As a rule also, only questions of law -as in the present recourse -- may be raised in petitions for review under Rule
45.
Moral damages cannot be awarded in breaches of carriage contracts,
except in the two instances contemplated in Articles 1764 and 2220 of the
Civil Code, which we quote:
Article 1764. Damages in cases comprised in this Section shall be awarded
in accordance with Title XVIII of this Book, concerning Damages. Article
2206 shall also apply to the death of a passenger caused by the breach of
contract by a common carrier.
xxxxxxxxx
Article 2220. Willful injury to property may be a legal ground for awarding
moral damages if the court should find that, under the circumstances, such
damages are justly due. The same rule applies to breaches of contract
where the defendant acted fraudulently or in bad faith. (Italics supplied)
There is no occasion for us to invoke Article 1764 here. We must
therefore determine if CAL or its agent (PAL) is guilty of bad faith that would
entitle respondent to moral damages.
In Lopez v. Pan American World Airways, [29] we defined bad faith as a
breach of a known duty through some motive of interest or ill will.

In the case at bar, the known duty of PAL was to transport herein
respondent from Hong Kong to Manila. That duty arose when its agent
confirmed his reservation for Flight PR 311, [30] and it became demandable
when he presented himself for the trip on November 24, 1981.
It is true that due to a typhoon, PAL was unable to transport respondent
on Flight PR 311 on November 24, 1981. This fact, however, did not
terminate the carriers responsibility to its passengers. PAL voluntarily
obligated itself to automatically transfer all confirmed passengers of PR 311
to the next available flight, PR 307, on the following day. [31] That responsibility
was subsisting when respondent, holding a confirmed ticket for the former
flight, presented himself for the latter.
The records amply establish that he secured repeated confirmations of
his PR 311 flight on November 24, 1981. Hence, he had every reason to
expect that he would be put on the replacement flight as a confirmed
passenger. Instead, he was harangued and prevented from boarding the
original and the replacement flights. Thus, PAL breached its duty to transport
him. After he had been directed to pay the terminal fee, his pieces of luggage
were removed from the weighing-in counter despite his protestations. [32]
It is relevant to point out that the employees of PAL were utterly
insensitive to his need to be in Manila on November 25, 1981, and to the
likelihood that his business affairs in the city would be jeopardized because
of a mistake on their part. It was that mistake that had caused the omission
of his name from the passenger list despite his confirmed flight ticket. By
merely looking at his ticket and validation sticker, it is evident that the glitch
was the airlines fault. However, no serious attempt was made by PAL to
secure the all-important transportation of respondent to Manila on the
following day. To make matters worse, PAL allowed a group of non-revenue
passengers, who had no confirmed tickets or reservations, to board Flight PR
307.[33]
Time and time again, this Court has stressed that the business of
common carriers is imbued with public interest and duty; therefore, the law
governing them imposes an exacting standard.[34] In Singson v. Court of
Appeals,[35] we said:

32 | B R I N A S

x x x [T]he carrier's utter lack of care and sensitivity to the needs of its
passengers, clearly constitutive of gross negligence, recklessness and
wanton disregard of the rights of the latter, [are] acts evidently
indistinguishable or no different from fraud, malice and bad faith. As the rule
now stands, where in breaching the contract of carriage the defendant airline
is shown to have acted fraudulently, with malice or in bad faith, the award of
moral and exemplary damages, in addition to actual damages, is proper.
[36]
(Italics supplied)

flights if this flight is cancelled or not operating due to typhoon

or other reasons[?] In other words, are they not notified of the
cancellation?
A I think all these passengers were not notified because of a
typhoon and Philippine Airlines Reservation were [sic] not able
to call every passenger by phone.
Atty. Fruto:

In Saludo v. Court of Appeals,[37] the Court reminded airline companies

that due to the nature of their business, they must not merely give cursory
instructions to their personnel to be more accommodating towards
customers, passengers and the general public; they mustrequire them to be
so.
The acts of PALs employees, particularly Chan, clearly fell short of the
extraordinary standard of care that the law requires of common carriers. [38] As
narrated in Chans oral deposition, [39] the manner in which the airline
discharged its responsibility to respondent and its other passengers
manifested a lack of the requisite diligence and due regard for their welfare.
The pertinent portions of the Oral Deposition are reproduced as follows:
Q Now you said that flight PR 311 on 24th November was
cancelled due to [a] typhoon and naturally the passengers on
said flight had to be accommodated on the first flight the
following day or the first flight subsequently. [W]ill you tell the
Honorable Deposition Officer the procedure followed by
Philippine Airlines in the handling of passengers of cancelled
flight[s] like that of PR 311 which was cancelled due to [a]
typhoon?
A The procedure will be: all the confirmed passengers from [PR]
311 24th November [are] automatically transfer[red] to [PR]
307, 25th November[,] as a protection for all disconfirmed
passengers.
Q Aside from this procedure[,] what do you do with the passengers
on the cancelled flight who are expected to check-in on the

Q Did you say were not notified?

A I believe they were not, but believe me, I was on day-off.
Atty. Calica:
Q Per procedure, what should have been done by Reservations
Office when a flight is cancelled for one reason or another?
A If there is enough time, of course, Reservations Office x x x
call[s] up all the passengers and tell[s] them the reason. But if
there [is] no time[,] then the Reservations Office will not be
able to do that.[40]
xxxxxxxxx
Q I see. Miss Chan, I [will] show you a ticket which has been
marked as Exh. A and A-1. Will you please go over this ticket
and tell the court whether this is the ticket that was used
precisely by Mr. Chiok when he checked-in at [F]light 307, 25
November 81?
A [Are you] now asking me whether he used this ticket with this
sticker?
Q No, no, no. That was the ticket he used.
A Yes, [are you] asking me whether I saw this ticket?

33 | B R I N A S

Atty. Fruto: Yes.

A I believe I saw it.
Q You saw it, O.K. Now of course you will agree with me Miss
Chan that this yellow stub here which has been marked as
Exh. A-1-A, show[s] that the status on flight 311, 24th
November, is O.K., correct?

Q So that since following the O.K. status of Mr. Chioks reservation

[on] flight 311, [he] was also automatically transferred to flight
307 the following day?
A Should be.
Q Should be. O.K. Now do you remember how many passengers x
x x were transferred from flight 311, 24 November to flight 307,
25 November 81?

A Yes.
Q You agree with me. And you will also agree with me that in this
ticket of flight 311, on this, another sticker Exh. A-1-B for 24
November is O.K.?

A I can only give you a very brief idea because that was supposed
to be air bus so it should be able to accommodate 246 people;
but how many [exactly], I dont know.[42]
xxxxxxxxx

A May I x x x look at them. Yes, it says O.K. x x x, but [there is] no

validation.
Q O.K. Miss Chan what do you understand by these entries here R
bar M N 6 V?[41]

Q So, between six and eight oclock in the evening of 25 November

81, Mr. Chiok already told you that he just [came] from the
Swire Building where Philippine Airlines had [its] offices and
that he told you that his space for 311 25 November 81 was
confirmed?

A This is what we call a computer reference.

A Yes.
Q I see. This is a computer reference showing that the name of Mr.
Chiok has been entered in Philippine Airlines computer, and
this is his computer number.

Q That is what he told you. He insisted on that flight?

A Yes.

A Yes.
Q Now you stated in your answer to the procedure taken, that all
confirmed passengers on flight 311, 24 November[,] were
automatically transferred to 307 as a protection for the
passengers, correct?

Q And did you not try to call up Swire Building-- Philippine Airlines
and verify indeed if Mr. Chiok was there?
A Swire House building is not directly under Philippine Airlines. it is
just an agency for selling Philippine Airlines ticket. And
besides around six o clock theyre close[d] in Central.

A Correct.
Q So this Swire Building is an agency authorized by Philippine
Airlines to issue tickets for and on behalf of Philippine Airlines
and also...

34 | B R I N A S

A Yes.
Q And also to confirm spaces for and on behalf of Philippine
Airlines.
A Yes.[43]
Under the foregoing circumstances, we cannot apply our 1989 ruling
in China Airlines v. Intermediate Appellate Court,[44] which petitioner urges us
to adopt. In that case, the breach of contract and the negligence of the carrier
in effecting the immediate flight connection for therein private respondent
was incurred in good faith.[45] Having found no gross negligence or
recklessness, we thereby deleted the award of moral and exemplary
damages against it.[46]
This Courts 1992 ruling in China Airlines v. Court of Appeals[47] is
likewise inapplicable. In that case, we found no bad faith or malice in the
airlines breach of its contractual obligation. [48] We held that, as shown by the
flow of telexes from one of the airlines offices to the others, petitioner therein
had exercised diligent efforts in assisting the private respondent change his
flight schedule. In the instant case, petitioner failed to exhibit the same care
and sensitivity to respondents needs.
In Singson v. Court of Appeals,[49] we said:
x x x Although the rule is that moral damages predicated upon a breach of
contract of carriage may only be recoverable in instances where the mishap
results in the death of a passenger, or where the carrier is guilty of fraud or
bad faith, there are situations where the negligence of the carrier is so gross
and reckless as to virtually amount to bad faith, in which case, the passenger
likewise becomes entitled to recover moral damages.
In the present case, we stress that respondent had repeatedly secured
confirmations of his PR 311 flight on November 24, 1981 -- initially from CAL
and subsequently from the PAL office in Hong Kong. The status of this flight
was marked OK on a validating sticker placed on his ticket. That sticker also
contained the entry RMN6V. Ms Chan explicitly acknowledged that such

entry was a computer reference that meant that respondents name had been
entered in PALs computer.
Since the status of respondent on Flight PR 311 was OK, as a matter of
right testified to by PALs witness, he should have been automatically
transferred to and allowed to board Flight 307 the following day. Clearly
resulting from negligence on the part of PAL was its claim that his name was
not included in its list of passengers for the November 24, 1981 PR 311 flight
and, consequently, in the list of the replacement flight PR 307. Since he had
secured confirmation of his flight -- not only once, but twice -- by personally
going to the carriers offices where he was consistently assured of a seat
thereon -- PALs negligence was so gross and reckless that it amounted to
bad faith.
In view of the foregoing, we rule that moral and exemplary [50] damages
were properly awarded by the lower courts.[51]
Third Issue:
Propriety of the Cross-Claim
We now look into the propriety of the ruling on CALs cross-claim against
PAL. Petitioner submits that the CA should have ruled on the cross-claim,
considering that the RTC had found that it was PALs employees who had
acted negligently.
Section 8 of Rule 6 of the Rules of Court reads:
Sec. 8. Cross-claim. - A cross claim is any claim by one party against a coparty arising out of the transaction or occurrence that is the subject matter
either of the original action or of a counterclaim therein. Such cross-claim
may include a claim that the party against whom it is asserted is or may be
liable to the cross-claimant for all or part of a claim asserted in the action
against the cross-claimant.
For purposes of a ruling on the cross-claim, PAL is an indispensable
party. In BA Finance Corporation v. CA,[52] the Court stated:

35 | B R I N A S

x x x. An indispensable party is one whose interest will be affected by the

courts action in the litigation, and without whom no final determination of the
case can be had. The partys interest in the subject matter of the suit and in
the relief sought are so inextricably intertwined with the other parties that his
legal presence as a party to the proceeding is an absolute necessity. In his
absence there cannot be a resolution of the dispute of the parties before the
courtwhich is effective, complete, or equitable.
xxxxxxxxx
Without the presence of indispensable parties to a suit or proceeding,
judgment of a court cannot attain real finality.
PALs interest may be affected by any ruling of this Court on CALs crossclaim. Hence, it is imperative and in accordance with due process and fair
play that PAL should have been impleaded as a party in the present
proceedings, before this Court can make a final ruling on this matter.
Although PAL was petitioners co-party in the case before the RTC and
the CA, petitioner failed to include the airline in the present recourse. Hence,
the Court has no jurisdiction over it. Consequently, to make any ruling on the
cross-claim in the present Petition would not be legally feasible because
PAL, not being a party in the present case, cannot be bound thereby.[53]
WHEREFORE, the Petition is DENIED. Costs against petitioner.
SO ORDERED.

36 | B R I N A S

G.R. No. 101538 June 23, 1992

AUGUSTO BENEDICTO SANTOS III, represented by his father and legal
guardian,
Augusto
Benedicto
Santos, petitioner,
vs.
NORTHWEST
ORIENT
AIRLINES
and
COURT
OF
APPEALS, respondents.

On March 12, 1987, the petitioner sued NOA for damages in the Regional
Trial Court of Makati. On April 13, 1987, NOA moved to dismiss the complaint
on the ground of lack of jurisdiction. Citing the above-quoted article, it
contended that the complaint could be instituted only in the territory of one of
the High Contracting Parties, before:
1. the court of the domicile of the carrier;
2. the court of its principal place of business;

CRUZ, J.:

3. the court where it has a place of business through which

the contract had been made;

This case involves the Proper interpretation of Article 28(1) of the Warsaw
Convention, reading as follows:
Art. 28. (1) An action for damage must be brought at the
option of the plaintiff, in the territory of one of the High
Contracting Parties, either before the court of the domicile of
the carrier or of his principal place of business, or where he
has a place of business through which the contract has been
made, or before the court at the place of destination.
The petitioner is a minor and a resident of the Philippines. Private respondent
Northwest Orient Airlines (NOA) is a foreign corporation with principal office
in Minnesota, U.S.A. and licensed to do business and maintain a branch
office in the Philippines.
On October 21, 1986, the petitioner purchased from NOA a round-trip ticket
in San Francisco. U.S.A., for his flight from San Francisco to Manila via
Tokyo and back. The scheduled departure date from Tokyo was December
20, 1986. No date was specified for his return to San Francisco. 1

4. the court of the place of destination.

The private respondent contended that the Philippines was not its domicile
nor was this its principal place of business. Neither was the petitioner's ticket
issued in this country nor was his destination Manila but San Francisco in the
United States.
On February 1, 1988, the lower court granted the motion and dismissed the
case. 2 The petitioner appealed to the Court of Appeals, which affirmed the
decision of the lower court. 3 On June 26, 1991, the petitioner filed a motion
for reconsideration, but the same was denied. 4 The petitioner then came to
this Court, raising substantially the same issues it submitted in the Court of
Appeals.
The assignment of errors may be grouped into two major issues, viz:
(1) the constitutionality of Article 28(1) of the Warsaw Convention; and
(2) the jurisdiction of Philippine courts over the case.

On December 19, 1986, the petitioner checked in at the NOA counter in the
San Francisco airport for his scheduled departure to Manila. Despite a
previous confirmation and re-confirmation, he was informed that he had no
reservation for his flight from Tokyo to Manila. He therefore had to be waitlisted.

The petitioner also invokes Article 24 of the Civil Code on the protection of
minors.
I

37 | B R I N A S

THE ISSUE OF CONSTITUTIONALITY

A. The petitioner claims that the lower court erred in not
ruling that Article 28(1) of the Warsaw Convention violates
the constitutional guarantees of due process and equal
protection.
The Republic of the Philippines is a party to the Convention for the
Unification of Certain Rules Relating to International Transportation by Air,
otherwise known as the Warsaw Convention. It took effect on February 13,
1933. The Convention was concurred in by the Senate, through its
Resolution No. 19, on May 16, 1950. The Philippine instrument of accession
was signed by President Elpidio Quirino on October 13, 1950, and was
deposited with the Polish government on November 9, 1950. The Convention
became applicable to the Philippines on February 9, 1951. On September
23, 1955, President Ramon Magsaysay issued Proclamation No. 201,
declaring our formal adherence thereto. "to the end that the same and every
article and clause thereof may be observed and fulfilled in good faith by the
Republic of the Philippines and the citizens thereof." 5
The Convention is thus a treaty commitment voluntarily assumed by the
Philippine government and, as such, has the force and effect of law in this
country.
The petitioner contends that Article 28(1) cannot be applied in the present
case because it is unconstitutional. He argues that there is no substantial
distinction between a person who purchases a ticket in Manila and a person
who purchases his ticket in San Francisco. The classification of the places in
which actions for damages may be brought is arbitrary and irrational and thus
violates the due process and equal protection clauses.
It is well-settled that courts will assume jurisdiction over a constitutional
question only if it is shown that the essential requisites of a judicial inquiry
into such a question are first satisfied. Thus, there must be an actual case or
controversy involving a conflict of legal rights susceptible of judicial
determination; the constitutional question must have been opportunely raised
by the proper party; and the resolution of the question is unavoidably
necessary to the decision of the case itself. 6

Courts generally avoid having to decide a constitutional question. This

attitude is based on the doctrine of separation of powers, which enjoins upon
the departments of the government a becoming respect for each other's acts.
The treaty which is the subject matter of this petition was a joint legislativeexecutive act. The presumption is that it was first carefully studied and
determined to be constitutional before it was adopted and given the force of
law in this country.
The petitioner's allegations are not convincing enough to overcome this
presumption. Apparently, the Convention considered the four places
designated in Article 28 the most convenient forums for the litigation of any
claim that may arise between the airline and its passenger, as distinguished
from all other places. At any rate, we agree with the respondent court that
this case can be decided on other grounds without the necessity of resolving
the constitutional issue.
B. The petitioner claims that the lower court erred in not
ruling that Art. 28(1) of the Warsaw Convention is
inapplicable because of a fundamental change in the
circumstances that served as its basis.
The petitioner goes at great lengths to show that the provisions in the
Convention were intended to protect airline companies under "the conditions
prevailing then and which have long ceased to exist." He argues that in view
of the significant developments in the airline industry through the years, the
treaty has become irrelevant. Hence, to the extent that it has lost its basis for
approval, it has become unconstitutional.
The petitioner is invoking the doctrine of rebus sic stantibus. According to
Jessup, "this doctrine constitutes an attempt to formulate a legal principle
which would justify non-performance of a treaty obligation if the conditions
with relation to which the parties contracted have changed so materially and
so unexpectedly as to create a situation in which the exaction of performance
would be unreasonable." 7 The key element of this doctrine is the vital
change in the condition of the contracting parties that they could not have
foreseen at the time the treaty was concluded.

38 | B R I N A S

The Court notes in this connection the following observation made in Day v.
Trans World Airlines, Inc.: 8
The Warsaw drafters wished to create a system of liability
rules that would cover all the hazards of air travel . . . The
Warsaw delegates knew that, in the years to come, civil
aviation would change in ways that they could not foresee.
They wished to design a system of air law that would be both
durable and flexible enough to keep pace with these
changes . . . The ever-changing needs of the system of civil
aviation can be served within the framework they created.
It is true that at the time the Warsaw Convention was drafted, the airline
industry was still in its infancy. However, that circumstance alone is not
sufficient justification for the rejection of the treaty at this time. The changes
recited by the petitioner were, realistically, not entirely unforeseen although
they were expected in a general sense only. In fact, the Convention itself,
anticipating such developments, contains the following significant provision:
Article 41. Any High Contracting Party shall be entitled not
earlier than two years after the coming into force of this
convention to call for the assembling of a new international
conference in order to consider any improvements which
may be made in this convention. To this end, it will
communicate with the Government of the French Republic
which will take the necessary measures to make
preparations for such conference.
But the more important consideration is that the treaty has not been rejected
by the Philippine government. The doctrine of rebus sic stantibus does not
operate automatically to render the treaty inoperative. There is a necessity
for a formal act of rejection, usually made by the head of State, with a
statement of the reasons why compliance with the treaty is no longer
required.
In lieu thereof, the treaty may be denounced even without an expressed
justification for this action. Such denunciation is authorized under its Article
39, viz:

Article 39. (1) Any one of the High Contracting Parties may
denounce this convention by a notification addressed to the
Government of the Republic of Poland, which shall at once
inform the Government of each of the High Contracting
Parties.
(2) Denunciation shall take effect six months after the
notification of denunciation, and shall operate only as
regards the party which shall have proceeded to
denunciation.
Obviously. rejection of the treaty, whether on the ground of rebus sic
stantibus or pursuant to Article 39, is not a function of the courts but of the
other branches of government. This is a political act. The conclusion and
renunciation of treaties is the prerogative of the political departments and
may not be usurped by the judiciary. The courts are concerned only with the
interpretation and application of laws and treaties in force and not with their
wisdom or efficacy.
C. The petitioner claims that the lower court erred in ruling
that the plaintiff must sue in the United States, because this
would deny him the right to access to our courts.
The petitioner alleges that the expenses and difficulties he will incur in filing a
suit in the United States would constitute a constructive denial of his right to
access to our courts for the protection of his rights. He would consequently
be deprived of this vital guaranty as embodied in the Bill of Rights.
Obviously, the constitutional guaranty of access to courts refers only to
courts with appropriate jurisdiction as defined by law. It does not mean that a
person can go to any court for redress of his grievances regardless of the
nature or value of his claim. If the petitioner is barred from filing his complaint
before our courts, it is because they are not vested with the appropriate
jurisdiction under the Warsaw Convention, which is part of the law of our
land.
II

39 | B R I N A S

THE ISSUE OF JURISDICTION.

A. The petitioner claims that the lower court erred in not
ruling that Article 28(1) of the Warsaw Convention is a rule
merely of venue and was waived by defendant when it did
not move to dismiss on the ground of improper venue.
By its own terms, the Convention applies to all international transportation of
persons performed by aircraft for hire.
International transportation is defined in paragraph (2) of Article 1 as follows:
(2) For the purposes of this convention, the expression
"international transportation" shall mean any transportation in
which, according to the contract made by the parties, the
place of departure and the place of destination, whether or
not there be a break in the transportation or a transshipment,
are situated [either] within the territories of two High
Contracting Parties . . .
Whether the transportation is "international" is determined by the contract of
the parties, which in the case of passengers is the ticket. When the contract
of carriage provides for the transportation of the passenger between certain
designated terminals "within the territories of two High Contracting Parties,"
the provisions of the Convention automatically apply and exclusively govern
the rights and liabilities of the airline and its passenger.
Since the flight involved in the case at bar is international, the same being
from the United States to the Philippines and back to the United States, it is
subject to the provisions of the Warsaw Convention, including Article 28(1),
which enumerates the four places where an action for damages may be
brought.
Whether Article 28(1) refers to jurisdiction or only to venue is a question over
which authorities are sharply divided. While the petitioner cites several cases
holding that Article 28(1) refers to venue rather than jurisdiction, 9 there are
later cases cited by the private respondent supporting the conclusion that the
provision is jurisdictional. 10

Venue and jurisdiction are entirely distinct matters. Jurisdiction may not be
conferred by consent or waiver upon d court which otherwise would have no
jurisdiction over the subject-matter of an action; but the venue of an action as
fixed by statute may be changed by the consent of the parties and an
objection that the plaintiff brought his suit in the wrong county may be waived
by the failure of the defendant to make a timely objection. In either case, the
court may render a valid judgment. Rules as to jurisdiction can never be left
to the consent or agreement of the parties, whether or not a prohibition exists
against their alteration. 11
A number of reasons tends to support the characterization of Article 28(1) as
a jurisdiction and not a venue provision. First, the wording of Article 32, which
indicates the places where the action for damages "must" be brought,
underscores the mandatory nature of Article 28(1). Second, this
characterization is consistent with one of the objectives of the Convention,
which is to "regulate in a uniform manner the conditions of international
transportation by air." Third, the Convention does not contain any provision
prescribing rules of jurisdiction other than Article 28(1), which means that the
phrase "rules as to jurisdiction" used in Article 32 must refer only to Article
28(1). In fact, the last sentence of Article 32 specifically deals with the
exclusive enumeration in Article 28(1) as "jurisdictions," which, as such,
cannot be left to the will of the parties regardless of the time when the
damage occurred.
This issue was analyzed in the leading case of Smith v. Canadian Pacific
Airways, Ltd., 12 where it was held:
. . . Of more, but still incomplete, assistance is the wording of
Article 28(2), especially when considered in the light of
Article 32. Article 28(2) provides that "questions
ofprocedure shall be governed by the law of the court to
which the case is submitted" (Emphasis supplied). Section
(2) thus may be read to leave for domestic decision
questions regarding the suitability and location of a particular
Warsaw Convention case.
In other words, where the matter is governed by the Warsaw Convention,
jurisdiction takes on a dual concept. Jurisdiction in the international sense

40 | B R I N A S

must be established in accordance with Article 28(1) of the Warsaw

Convention, following which the jurisdiction of a particular court must be
established pursuant to the applicable domestic law. Only after the question
of which court has jurisdiction is determined will the issue of venue be taken
up. This second question shall be governed by the law of the court to which
the case is submitted.
The petitioner submits that since Article 32 states that the parties are
precluded "before the damages occurred" from amending the rules of Article
28(1) as to the place where the action may be brought, it would follow that
the Warsaw Convention was not intended to preclude them from doing so
"after the damages occurred."
Article 32 provides:
Art. 32. Any clause contained in the contract and all special
agreements entered into before the damage occurred by
which the parties purport to infringe the rules laid down by
this convention, whether by deciding the law to be applied,
or by altering the rules as to jurisdiction, shall be null and
void. Nevertheless for the transportation of goods, arbitration
clauses shall be allowed, subject to this convention, if the
arbitration is to take place within one of the jurisdictions
referred to in the first paragraph of Article 28.
His point is that since the requirements of Article 28(1) can be waived "after
the damages (shall have) occurred," the article should be regarded as
possessing the character of a "venue" and not of a "jurisdiction" provision.
Hence, in moving to dismiss on the ground of lack of jurisdiction, the private
respondent has waived improper venue as a ground to dismiss.
The foregoing examination of Article 28(1) in relation to Article 32 does not
support this conclusion. In any event, we agree that even
granting arguendo that Article 28(1) is a venue and not a jurisdictional
provision, dismissal of the case was still in order. The respondent court was
correct in affirming the ruling of the trial court on this matter, thus:

Santos' claim that NOA waived venue as a ground of its

motion to dismiss is not correct. True it is that NOA averred
in its MOTION TO DISMISS that the ground thereof is "the
Court has no subject matter jurisdiction to entertain the
Complaint" which SANTOS considers as equivalent to "lack
of jurisdiction over the subject matter . . ." However, the gist
of NOA's argument in its motion is that the Philippines is not
the proper place where SANTOS could file the action
meaning that the venue of the action is improperly laid. Even
assuming then that the specified ground of the motion is
erroneous, the fact is the proper ground of the motion
improper venue has been discussed therein.
Waiver cannot be lightly inferred. In case of doubt, it must be resolved in
favor of non-waiver if there are special circumstances justifying this
conclusion, as in the petition at bar. As we observed in Javier vs.
Intermediate Court of Appeals: 13
Legally, of course, the lack of proper venue was deemed
waived by the petitioners when they failed to invoke it in their
original motion to dismiss. Even so, the motivation of the
private respondent should have been taken into account by
both the trial judge and the respondent court in arriving at
their decisions.
The petitioner also invokes KLM Royal Dutch Airlines v. RTC, 14 a decision of
our Court of Appeals, where it was held that Article 28(1) is a venue
provision. However, the private respondent avers that this was in effect
reversed by the case of Aranas v. United Airlines, 15 where the same court
held that Article 28(1) is a jurisdictional provision. Neither of these cases is
binding on this Court, of course, nor was either of them appealed to us.
Nevertheless, we here express our own preference for the later case of
Aranas insofar as its pronouncements on jurisdiction conform to the
judgment we now make in this petition.
B. The petitioner claims that the lower court erred in not
ruling that under Article 28(1) of the Warsaw Convention,

41 | B R I N A S

this case was properly filed in the Philippines, because

Manila was the destination of the plaintiff.

as in the Aanestad case, also left open. Consequently, Manila and not San
Francisco should be considered the petitioner's destination.

The Petitioner contends that the facts of this case are analogous to those
in Aanestad v. Air Canada. 16 In that case, Mrs. Silverberg purchased a
round-trip ticket from Montreal to Los Angeles and back to Montreal. The
date and time of departure were specified but not of the return flight. The
plane crashed while on route from Montreal to Los Angeles, killing Mrs.
Silverberg. Her administratrix filed an action for damages against Air Canada
in the U.S. District Court of California. The defendant moved to dismiss for
lack of jurisdiction but the motion was denied thus:

The private respondent for its part invokes the ruling in Butz v. British
Airways, 17 where the United States District Court (Eastern District of
Pennsylvania) said:

. . . It is evident that the contract entered into between Air

Canada and Mrs. Silverberg as evidenced by the ticket
booklets and the Flight Coupon No. 1, was a contract for Air
Canada to carry Mrs. Silverberg to Los Angeles on a certain
flight, a certain time and a certain class, but that the time for
her to return remained completely in her power. Coupon No.
2 was only a continuing offer by Air Canada to give her a
ticket to return to Montreal between certain dates. . . .
The only conclusion that can be reached then, is that "the
place of destination" as used in the Warsaw Convention is
considered by both the Canadian C.T.C. and the United
States C.A.B. to describe at least two "places of
destination," viz.,
the
"place
of
destination"
of
a particular flight either an "outward destination" from the
"point of origin" or from the "outward point of destination" to
any place in Canada.
Thus the place of destination under Art. 28 and Art. 1 of the
Warsaw Convention of the flight on which Mrs. Silverberg
was killed, was Los Angeles according to the ticket, which
was the contract between the parties and the suit is properly
filed in this Court which has jurisdiction.
The Petitioner avers that the present case falls squarely under the above
ruling because the date and time of his return flight to San Francisco were,

. . . Although the authorities which addressed this precise

issue are not extensive, both the cases and the
commentators are almost unanimous in concluding that the
"place of destination" referred to in the Warsaw Convention
"in a trip consisting of several parts . . . is the ultimate
destination that is accorded treaty jurisdiction." . . .
But apart from that distinguishing feature, I cannot agree
with the Court's analysis in Aanestad; whether the return
portion of the ticket is characterized as an option or a
contract, the carrier was legally bound to transport the
passenger back to the place of origin within the prescribed
time and. the passenger for her part agreed to pay the fare
and, in fact, did pay the fare. Thus there was mutuality of
obligation and a binding contract of carriage, The fact that
the passenger could forego her rights under the contract
does not make it any less a binding contract. Certainly, if the
parties did not contemplate the return leg of the journey, the
passenger would not have paid for it and the carrier would
not have issued a round trip ticket.
We agree with the latter case. The place of destination, within the meaning of
the Warsaw Convention, is determined by the terms of the contract of
carriage or, specifically in this case, the ticket between the passenger and
the carrier. Examination of the petitioner's ticket shows that his ultimate
destination is San Francisco. Although the date of the return flight was left
open, the contract of carriage between the parties indicates that NOA was
bound to transport the petitioner to San Francisco from Manila. Manila should
therefore be considered merely an agreed stopping place and not the
destination.

42 | B R I N A S

The petitioner submits that the Butz case could not have overruled the
Aanestad case because these decisions are from different jurisdictions. But
that is neither here nor there. In fact, neither of these cases is controlling on
this Court. If we have preferred the Butz case, it is because, exercising our
own freedom of choice, we have decided that it represents the better, and
correct, interpretation of Article 28(1).
Article 1(2) also draws a distinction between a "destination" and an "agreed
stopping place." It is the "destination" and not an "agreed stopping place" that
controls for purposes of ascertaining jurisdiction under the Convention.
The contract is a single undivided operation, beginning with the place of
departure and ending with the ultimate destination. The use of the singular in
this expression indicates the understanding of the parties to the Convention
that every contract of carriage has one place of departure and one place of
destination. An intermediate place where the carriage may be broken is not
regarded as a "place of destination."
C. The petitioner claims that the lower court erred in not
ruling that under Art. 28(1) of the Warsaw Convention, this
case was properly filed in the Philippines because the
defendant has its domicile in the Philippines.
The petitioner argues that the Warsaw Convention was originally written in
French and that in interpreting its provisions, American courts have taken the
broad view that the French legal meaning must govern. 18 In French, he says,
the "domicile" of the carrier means every place where it has a branch office.
The private respondent notes, however, that in Compagnie Nationale Air
France vs. Giliberto, 19 it was held:
The plaintiffs' first contention is that Air France is domiciled in
the United States. They say that the domicile of a
corporation includes any country where the airline carries on
its business on "a regular and substantial basis," and that the
United States qualifies under such definition. The meaning of
domicile cannot, however, be so extended. The domicile of a
corporation is customarily regarded as the place where it is

incorporated, and the courts have given the meaning to the

term as it is used in article 28(1) of the Convention.
(See Smith v. Canadian Pacific Airways, Ltd. (2d Cir. 1971),
452 F2d 798, 802; Nudo v. Societe Anonyme Belge d'
Exploitation de la Navigation Aerienne Sabena Belgian
World Airlines (E.D. pa. 1962). 207 F. Supp, 191; Karfunkel
v. Compagnie Nationale Air France (S.D.N.Y. 1977), 427 F.
Suppl. 971, 974). Moreover, the structure of article 28(1),
viewed as a whole, is also incompatible with the plaintiffs'
claim. The article, in stating that places of business are
among the bases of the jurisdiction, sets out two places
where an action for damages may be brought; the country
where the carrier's principal place of business is located, and
the country in which it has a place of business through which
the particular contract in question was made, that is, where
the ticket was bought, Adopting the plaintiffs' theory would at
a minimum blur these carefully drawn distinctions by creating
a third intermediate category. It would obviously introduce
uncertainty into litigation under the article because of the
necessity of having to determine, and without standards or
criteria, whether the amount of business done by a carrier in
a particular country was "regular" and "substantial." The
plaintiff's request to adopt this basis of jurisdiction is in effect
a request to create a new jurisdictional standard for the
Convention.
Furthermore, it was argued in another case

20

that:

. . . In arriving at an interpretation of a treaty whose sole

official language is French, are we bound to apply French
law? . . . We think this question and the underlying choice of
law
issue
warrant
some
discussion
. . . We do not think this statement can be regarded as a
conclusion that internal French law is to be "applied" in the
choice of law sense, to determine the meaning and scope of
the Convention's terms. Of course, French legal usage must
be considered in arriving at an accurate English translation
of the French. But when an accurate English translation is

43 | B R I N A S

made and agreed upon, as here, the inquiry into meaning

does not then revert to a quest for a past or present French
law to be "applied" for revelation of the proper scope of the
terms. It does not follow from the fact that the treaty is written
in French that in interpreting it, we are forever chained to
French law, either as it existed when the treaty was written or
in its present state of development. There is no suggestion in
the treaty that French law was intended to govern the
meaning of Warsaw's terms, nor have we found any
indication to this effect in its legislative history or from our
study of its application and interpretation by other courts.
Indeed, analysis of the cases indicates that the courts, in
interpreting and applying the Warsaw Convention, have, not
considered themselves bound to apply French law simply
because the Convention is written in French. . . .
We agree with these rulings.
Notably, the domicile of the carrier is only one of the places where the
complaint is allowed to be filed under Article 28(1). By specifying the three
other places, to wit, the principal place of business of the carrier, its place of
business where the contract was made, and the place of destination, the
article clearly meant that these three other places were not comprehended in
the term "domicile."
D. The petitioner claims that the lower court erred in not
ruling that Art. 28(1) of the Warsaw Convention does not
apply to actions based on tort.
The petitioner alleges that the gravamen of the complaint is that private
respondent acted arbitrarily and in bad faith, discriminated against the
petitioner, and committed a willful misconduct because it canceled his
confirmed reservation and gave his reserved seat to someone who had no
better right to it. In short. the private respondent committed a tort.
Such allegation, he submits, removes the present case from the coverage of
the Warsaw Convention. He argues that in at least two American cases, 21 it

was held that Article 28(1) of the Warsaw Convention does not apply if the
action is based on tort.
This position is negated by Husserl v. Swiss Air Transport Company, 22 where
the article in question was interpreted thus:
. . . Assuming for the present that plaintiff's claim is "covered"
by Article 17, Article 24 clearly excludes any relief not
provided for in the Convention as modified by the Montreal
Agreement. It does not, however, limit the kind of cause of
action on which the relief may be founded; rather it provides
that any action based on the injuries specified in Article 17
"however founded," i.e., regardless of the type of action on
which relief is founded, can only be brought subject to the
conditions and limitations established by the Warsaw
System. Presumably, the reason for the use of the phrase
"however founded," in two-fold: to accommodate all of the
multifarious bases on which a claim might be founded in
different countries, whether under code law or common law,
whether under contract or tort, etc.; and to include all bases
on which a claim seeking relief for an injury might be
founded in any one country. In other words, if the injury
occurs as described in Article 17, any relief available is
subject to the conditions and limitations established by the
Warsaw System, regardless of the particular cause of action
which forms the basis on which a plaintiff could seek
relief . . .
The private respondent correctly contends that the allegation of willful
misconduct resulting in a tort is insufficient to exclude the case from the
comprehension of the Warsaw Convention. The petitioner has apparently
misconstrued the import of Article 25(l) of the Convention, which reads as
follows:
Art. 25 (1). The carrier shall not be entitled to avail himself of
the provisions of this Convention which exclude or limit his
liability. if the damage is caused by his willful misconduct or
by such default on his part as, in accordance with the law of

44 | B R I N A S

the court to which the case is submitted, is considered to be

equivalent to willful misconduct.
It is understood under this article that the court called upon to determine the
applicability of the limitation provision must first be vested with the
appropriate jurisdiction. Article 28(1) is the provision in the Convention which
defines that jurisdiction. Article 22 23 merely fixes the monetary ceiling for the
liability of the carrier in cases covered by the Convention. If the carrier is
indeed guilty of willful misconduct, it can avail itself of the limitations set forth
in this article. But this can be done only if the action has first been
commenced properly under the rules on jurisdiction set forth in Article 28(1).
III
THE ISSUE OF PROTECTION TO MINORS
The petitioner calls our attention to Article 24 of the Civil Code, which states:
Art. 24. In all contractual property or other relations, when
one of the parties is at a disadvantage on account of his
moral dependence, ignorance, indigence, mental weakness,
tender age or other handicap, the courts must be vigilant for
his protection.
Application of this article to the present case is misplaced. The above
provision assumes that the court is vested with jurisdiction to rule in favor of
the disadvantaged minor, As already explained, such jurisdiction is absent in
the case at bar.

In the event a US citizen temporarily residing abroad

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

CONCLUSION
A number of countries have signified their concern over the problem of
citizens being denied access to their own courts because of the restrictive
provision of Article 28(1) of the Warsaw Convention. Among these is the
United States, which has proposed an amendment that would enable the
passenger to sue in his own domicile if the carrier does business in that
jurisdiction. The reason for this proposal is explained thus:

45 | B R I N A S

[G.R. No. 127768. November 19, 1999]

UNITED AIRLINES, petitioner, vs. WILLIE J. UY, respondent.
DECISION
BELLOSILLO, J.:
UNITED AIRLINES assails in this petition for review on certiorari under
Rule 45 the 29 August 1995 Decision of the Court of Appeals in CA-G.R. CV
No. 39761 which reversed the 7 August 1992 order issued by the trial court in
Civil Case No. Q-92-12410[1] granting petitioner's motion to dismiss based on
prescription of cause of action. The issues sought to be resolved are whether
the notice of appeal to the appellate court was timely filed, and whether Art.
29 of the Warsaw Convention[2] should apply to the case at bar.
On 13 October 1989 respondent Willie J. Uy, a revenue passenger on
United Airlines Flight No. 819 for the San Francisco - Manila route, checked
in together with his luggage one piece of which was found to be overweight
at the airline counter. To his utter humiliation, an employee of petitioner
rebuked him saying that he should have known the maximum weight
allowance to be 70 kgs. per bag and that he should have packed his things
accordingly. Then, in a loud voice in front of the milling crowd, she told
respondent to repack his things and transfer some of them from the
overweight luggage to the lighter ones. Not wishing to create further scene,
respondent acceded only to find his luggage still overweight. The airline then
billed him overweight charges which he offered to pay with a miscellaneous
charge order (MCO) or an airline pre-paid credit. However, the airlines
employee, and later its airport supervisor, adamantly refused to honor the
MCO pointing out that there were conflicting figures listed on it. Despite the
explanation from respondent that the last figure written on the MCO
represented his balance, petitioners employees did not accommodate
him. Faced with the prospect of leaving without his luggage, respondent paid
the overweight charges with his American Express credit card.
Respondents troubles did not end there. Upon arrival in Manila, he
discovered that one of his bags had been slashed and its contents stolen. He

particularized his losses to be around US $5,310.00. In a letter dated 16

October 1989 respondent bewailed the insult, embarrassment and
humiliating treatment he suffered in the hands of United Airlines employees,
notified petitioner of his loss and requested reimbursement thereof. Petitioner
United Airlines, through Central Baggage Specialist Joan Kroll, did not refute
any of respondents allegations and mailed a check representing the payment
of his loss based on the maximum liability of US $9.70 per
pound. Respondent, thinking the amount to be grossly inadequate to
compensate him for his losses, as well as for the indignities he was
subjected to, sent two (2) more letters to petitioner airline, one dated 4
January 1990 through a certain Atty. Pesigan, and another dated 28 October
1991 through Atty. Ramon U. Ampil demanding an out-of-court settlement
of P1,000,000.00. Petitioner United Airlines did not accede to his demands.
Consequently, on 9 June 1992 respondent filed a complaint for
damages against United Airlines alleging that he was a person of good
station, sitting in the board of directors of several top 500 corporations and
holding senior executive positions for such similar firms; [3] that petitioner
airline accorded him ill and shabby treatment to his extreme embarrassment
and humiliation; and, as such he should be paid moral damages of at
least P1,000,000.00, exemplary damages of at least P500,000.00, plus
attorney's fees of at least P50,000.00. Similarly, he alleged that the damage
to his luggage and its stolen contents amounted to around $5,310.00, and
requested reimbursement therefor.
United Airlines moved to dismiss the complaint on the ground that
respondents cause of action had prescribed, invoking Art. 29 of the Warsaw
Convention which provides Art. 29 (1) The right to damages shall be extinguished if an action is not
brought within two (2) years, reckoned from the date of arrival at the
destination, or from the date on which the aircraft ought to have arrived, or
from the date on which the transportation stopped.
(2) The method of calculating the period of limitation shall be determined by
the law of the court to which the case is submitted.

46 | B R I N A S

Respondent countered that par. (1) of Art. 29 of the Warsaw Convention

must be reconciled with par. (2) thereof which states that "the method of
calculating the period of limitation shall be determined by the law of the court
to which the case is submitted." Interpreting thus, respondent noted that
according to Philippine laws the prescription of actions is interrupted "when
they are filed before the court, when there is a written extrajudicial demand
by the creditors, and when there is any written acknowledgment of the debt
by the debtor."[4] Since he made several demands upon United Airlines: first,
through his personal letter dated 16 October 1989; second, through a letter
dated 4 January 1990 from Atty. Pesigan; and, finally, through a letter dated
28 October 1991 written for him by Atty. Ampil, the two (2)-year period of
limitation had not yet been exhausted.
On 2 August 1992 the trial court ordered the dismissal of the action
holding that the language of Art. 29 is clear that the action must be brought
within two (2) years from the date of arrival at the destination. It held that
although the second paragraph of Art. 29 speaks of deference to the law of
the local court in "calculating the period of limitation," the same does not refer
to the local forums rules in interrupting the prescriptive period but only to the
rules of determining the time in which the action may be deemed
commenced, and within our jurisdiction the action shall be deemed "brought"
or commenced by the filing of a complaint. Hence, the trial court concluded
that Art. 29 excludes the application of our interruption rules.
Respondent received a copy of the dismissal order on 17 August
1992. On 31 August 1992, or fourteen (14) days later, he moved for the
reconsideration of the trial courts order. The trial court denied the motion and
respondent received copy of the denial order on 28 September 1992. Two (2)
days later, on 1 October 1992 respondent filed his notice of appeal.
United Airlines once again moved for the dismissal of the case this time
pointing out that respondents fifteen (15)-day period to appeal had already
elapsed. Petitioner argued that having used fourteen (14) days of the
reglementary period for appeal, respondent Uy had only one (1) day
remaining to perfect his appeal, and since he filed his notice of appeal two
(2) days later, he failed to meet the deadline.

In its questioned Decision dated 29 August 1995 [5] the appellate court
gave due course to the appeal holding that respondents delay of two (2) days
in filing his notice of appeal did not hinder it from reviewing the appealed
order of dismissal since jurisprudence dictates that an appeal may be
entertained despite procedural lapses anchored on equity and justice.
On the applicability of the Warsaw Convention, the appellate court ruled
that the Warsaw Convention did not preclude the operation of the Civil Code
and other pertinent laws. Respondents failure to file his complaint within the
two (2)-year limitation provided in the Warsaw Convention did not bar his
action since he could still hold petitioner liable for breach of other provisions
of the Civil Code which prescribe a different period or procedure for
instituting an action. Further, under Philippine laws, prescription of actions is
interrupted where, among others, there is a written extrajudicial demand by
the creditors, and since respondent Uy sent several demand letters to
petitioner United Airlines, the running of the two (2)-year prescriptive period
was in effect suspended. Hence, the appellate court ruled that respondents
cause of action had not yet prescribed and ordered the records remanded to
the Quezon City trial court for further proceedings.
Petitioner now contends that the appellate court erred in assuming
jurisdiction over respondent's appeal since it is clear that the notice of appeal
was filed out of time. It argues that the courts relax the stringent rule on
perfection of appeals only when there are extraordinary circumstances, e.g.,
when the Republic stands to lose hundreds of hectares of land already titled
and used for educational purposes; when the counsel of record was already
dead; and wherein appellant was the owner of the trademark for more than
thirty (30) years, and the circumstances of the present case do not compare
to the above exceptional cases.[6]
Section 1 of Rule 45 of the 1997 Rules of Civil Procedure provides that
"a party may appeal by certiorari, from a judgment of the Court of Appeals, by
filing with the Supreme Court a petition for certiorari, within fifteen (15) days
from notice of judgment or of the denial of his motion for reconsideration filed
in due time x x x x" This Rule however should not be interpreted as "to
sacrifice the substantial right of the appellant in the sophisticated altar of
technicalities with impairment of the sacred principles of justice." [7] It should
be borne in mind that the real purpose behind the limitation of the period of

47 | B R I N A S

appeal is to forestall or avoid an unreasonable delay in the administration of

justice. Thus, we have ruled that delay in the filing of a notice of appeal does
not justify the dismissal of the appeal where the circumstances of the case
show that there is no intent to delay the administration of justice on the part
of appellant's counsel,[8] or when there are no substantial rights affected, [9] or
when appellant's counsel committed a mistake in the computation of the
period of appeal, an error not attributable to negligence or bad faith. [10]
In the instant case, respondent filed his notice of appeal two (2) days
later than the prescribed period. Although his counsel failed to give the
reason for the delay, we are inclined to give due course to his appeal due to
the unique and peculiar facts of the case and the serious question of law it
poses. In the now almost trite but still good principle, technicality, when it
deserts its proper office as an aid to justice and becomes its great hindrance
and chief enemy, deserves scant consideration.[11]
Petitioner likewise contends that the appellate court erred in ruling that
respondent's cause of action has not prescribed since delegates to the
Warsaw Convention clearly intended the two (2)-year limitation incorporated
in Art. 29 as an absolute bar to suit and not to be made subject to the various
tolling provisions of the laws of the forum. Petitioner argues that in construing
the second paragraph of Art. 29 private respondent cannot read into it
Philippine rules on interruption of prescriptive periods and state that his
extrajudicial demand has interrupted the period of prescription. [12] American
jurisprudence has declared that "Art. 29 (2) was not intended to permit
forums to consider local limitation tolling provisions but only to let local law
determine whether an action had been commenced within the two-year
period, since the method of commencing a suit varies from country to
country."[13]
Within our jurisdiction we have held that the Warsaw Convention can be
applied, or ignored, depending on the peculiar facts presented by each case.
[14]
Thus, we have ruled that the Convention's provisions do not regulate or
exclude liability for other breaches of contract by the carrier or misconduct of
its officers and employees, or for some particular or exceptional type of
damage.[15] Neither may the Convention be invoked to justify the disregard of
some extraordinary sort of damage resulting to a passenger and preclude
recovery therefor beyond the limits set by said Convention. [16] Likewise, we

have held that the Convention does not preclude the operation of the Civil
Code and other pertinent laws. [17] It does not regulate, much less exempt, the
carrier from liability for damages for violating the rights of its passengers
under the contract of carriage, especially if willful misconduct on the part of
the carrier's employees is found or established.[18]
Respondent's complaint reveals that he is suing on two (2) causes of
action: (a) the shabby and humiliating treatment he received from petitioner's
employees at the San Francisco Airport which caused him extreme
embarrassment and social humiliation; and, (b) the slashing of his luggage
and the loss of his personal effects amounting to US $5,310.00.
While his second cause of action - an action for damages arising from
theft or damage to property or goods - is well within the bounds of the
Warsaw Convention, his first cause of action -an action for damages arising
from the misconduct of the airline employees and the violation of
respondent's rights as passenger - clearly is not.
Consequently, insofar as the first cause of action is concerned,
respondent's failure to file his complaint within the two (2)-year limitation of
the Warsaw Convention does not bar his action since petitioner airline may
still be held liable for breach of other provisions of the Civil Code which
prescribe a different period or procedure for instituting the action, specifically,
Art. 1146 thereof which prescribes four (4) years for filing an action based on
torts.
As for respondent's second cause of action, indeed the travaux
preparatories of the Warsaw Convention reveal that the delegates thereto
intended the two (2)-year limitation incorporated in Art. 29 as an absolute bar
to suit and not to be made subject to the various tolling provisions of the laws
of the forum. This therefore forecloses the application of our own rules on
interruption of prescriptive periods. Article 29, par. (2), was intended only to
let local laws determine whether an action had been commenced within the
two (2)-year period, and within our jurisdiction an action shall be deemed
commenced upon the filing of a complaint. Since it is indisputable that
respondent filed the present action beyond the two (2)-year time frame his
second cause of action must be barred. Nonetheless, it cannot be doubted
that respondent exerted efforts to immediately convey his loss to petitioner,

48 | B R I N A S

even employed the services of two (2) lawyers to follow up his claims, and
that the filing of the action itself was delayed because of petitioner's evasion.

airline itself. Thus, private respondent's second cause of action cannot be

considered as time-barred under Art. 29 of the Warsaw Convention.

In this regard, Philippine Airlines, Inc. v. Court of Appeals[19] is

instructive. In this case of PAL, private respondent filed an action for
damages against petitioner airline for the breakage of the front glass of the
microwave oven which she shipped under PAL Air Waybill No. 0-79-10130083.Petitioner averred that, the action having been filed seven (7) months after
her arrival at her port of destination, she failed to comply with par. 12, subpar.
(a) (1), of the Air Waybill which expressly provided that the person entitled to
delivery must make a complaint to the carrier in writing in case of visible
damage to the goods, immediately after discovery of the damage and at the
latest within 14 days from receipt of the goods. Despite non-compliance
therewith the Court held that by private respondent's immediate submission
of a formal claim to petitioner, which however was not immediately
entertained as it was referred from one employee to another, she was
deemed to have substantially complied with the requirement. The Court
noted that with private respondent's own zealous efforts in pursuing her claim
it was clearly not her fault that the letter of demand for damages could only
be filed, after months of exasperating follow-up of the claim, on 13 August
1990, and that if there was any failure at all to file the formal claim within the
prescriptive period contemplated in the Air Waybill, this was largely because
of the carrier's own doing, the consequences of which could not in all fairness
be attributed to private respondent.

WHEREFORE, the assailed Decision of the Court of Appeals reversing

and setting aside the appealed order of the trial court granting the motion to
dismiss the complaint, as well as its Resolution denying reconsideration, is
AFFIRMED. Let the records of the case be remanded to the court of origin
for further proceedings taking its bearings from this disquisition.
SO ORDERED.

In the same vein must we rule upon the circumstances brought before
us. Verily, respondent filed his complaint more than two (2) years later,
beyond the period of limitation prescribed by the Warsaw Convention for
filing a claim for damages. However, it is obvious that respondent was
forestalled from immediately filing an action because petitioner airline gave
him the runaround, answering his letters but not giving in to his
demands. True, respondent should have already filed an action at the first
instance when his claims were denied by petitioner but the same could only
be due to his desire to make an out-of-court settlement for which he cannot
be faulted. Hence, despite the express mandate of Art. 29 of the Warsaw
Convention that an action for damages should be filed within two (2) years
from the arrival at the place of destination, such rule shall not be applied in
the instant case because of the delaying tactics employed by petitioner

49 | B R I N A S

[G.R. No. 116863. February 12, 1998]

The Facts

KENG HUA PAPER PRODUCTS CO. INC., petitioner, vs. COURT OF

APPEALS; REGIONAL TRIAL COURT OF MANILA, BR. 21; and
SEA-LAND SERVICE, INC., respondents.

The factual antecedents of this case as found by the Court of Appeals

are as follows:

DECISION
PANGANIBAN, J.:
What is the nature of a bill of lading? When does a bill of lading become
binding on a consignee? Will an alleged overshipment justify the consignees
refusal to receive the goods described in the bill of lading? When may
interest be computed on unpaid demurrage charges?

Statement of the Case

These are the main questions raised in this petition assailing the
Decision[1] of the Court of Appeals[2] promulgated on May 20, 1994 in C.A.G.R. CV No. 29953 affirming in toto the decision[3] dated September 28, 1990
in Civil Case No. 85-33269 of the Regional Trial Court of Manila, Branch
21. The dispositive portion of the said RTC decision reads:
WHEREFORE, the Court finds by preponderance of evidence that
Plaintiff has proved its cause of action and right to
relief.Accordingly, judgment is hereby rendered in favor of the
Plaintiff and against Defendant, ordering the Defendant to pay
plaintiff:
1. The sum of P67,340.00 as demurrage charges, with interest at the legal
rate from the date of the extrajudicial demand until fully paid;
2. A sum equivalent to ten (10%) percent of the total amount due as
Attorneys fees and litigation expenses.
Send copy to respective counsel of the parties.
SO ORDERED.[4]

Plaintiff (herein private respondent), a shipping company, is a

foreign corporation licensed to do business in the Philippines. On
June 29, 1982, plaintiff received at its Hong Kong terminal a sealed
container, Container No. SEAU 67523, containing seventy-six
bales of unsorted waste paper for shipment to defendant (herein
petitioner), Keng Hua Paper Products, Co. in Manila. A bill of
lading (Exh. A) to cover the shipment was issued by the plaintiff.
On July 9, 1982, the shipment was discharged at the Manila
International Container Port. Notices of arrival were transmitted to
the defendant but the latter failed to discharge the shipment from
the container during the free time period or grace period. The said
shipment remained inside the plaintiffs container from the moment
the free time period expired on July 29, 1982 until the time when
the shipment was unloaded from the container on November 22,
1983, or a total of four hundred eighty-one (481) days. During the
481-day period, demurrage charges accrued. Within the same
period, letters demanding payment were sent by the plaintiff to the
defendant who, however, refused to settle its obligation which
eventually amounted to P67,340.00. Numerous demands were
made on the defendant but the obligation remained
unpaid. Plaintiff thereafter commenced this civil action for
collection and damages.
In its answer, defendant, by way of special and affirmative defense,
alleged that it purchased fifty (50) tons of waste paper from the
shipper in Hong Kong, Ho Kee Waste Paper, as manifested in
Letter of Credit No. 824858 (Exh. 7. p. 110. Original Record)
issued by Equitable Banking Corporation, with partial shipment
permitted; that under the letter of credit, the remaining balance of
the shipment was only ten (10) metric tons as shown in Invoice No.
H-15/82 (Exh. 8, p. 111, Original Record); that the shipment plaintiff
was asking defendant to accept was twenty (20) metric tons which
is ten (10) metric tons more than the remaining balance; that if
defendant were to accept the shipment, it would be violating
Central Bank rules and regulations and custom and tariff laws; that
plaintiff had no cause of action against the defendant because the

50 | B R I N A S

latter did not hire the former to carry the merchandise; that the
cause of action should be against the shipper which contracted the
plaintiffs services and not against defendant; and that the
defendant duly notified the plaintiff about the wrong shipment
through a letter dated January 24, 1983 (Exh. D for plaintiff, Exh. 4
for defendant, p. 5. Folder of Exhibits).
As previously mentioned, the RTC found petitioner liable for demurrage,
attorneys fees and expenses of litigation. The petitioner appealed to the
Court of Appeals, arguing that the lower court erred in (1) awarding the sum
of P67,340 in favor of the private respondent,(2) rejecting petitioners
contention that there was overshipment, (3) ruling that petitioners recourse
was against the shipper, and (4)computing legal interest from date of
extrajudicial demand.[5]
Respondent Court of Appeals denied the appeal and affirmed the lower
courts decision in toto. In a subsequent resolution,[6] it also denied the
petitioners motion for reconsideration.
Hence, this petition for review.[7]

The Issues
In its memorandum, petitioner submits the following issues:
I. Whether or not petitioner had accepted the bill of lading;
II. Whether or not the award of the sum of P67,340.00 to private respondent
was proper;
III. Whether or not petitioner was correct in not accepting the overshipment;
IV. Whether or not the award of legal interest from the date of private
respondents extrajudicial demand was proper;[8]
In the main, the case revolves around the question of whether petitioner
was bound by the bill of lading. We shall, thus, discuss the above four issues
as they intertwine with this main question.

The Courts Ruling

The petition is partly meritorious. We affirm petitioners liability for

demurrage, but modify the interest rate thereon.

Main Issue: Liability Under the Bill of Lading

A bill of lading serves two functions. First, it is a receipt for the goods
shipped. Second, it is a contract by which three parties, namely, the shipper,
the carrier, and the consignee undertake specific responsibilities and assume
stipulated obligations.[9] A bill of lading delivered and accepted constitutes the
contract of carriage even though not signed,[10] because the (a)cceptance of a
paper containing the terms of a proposed contract generally constitutes an
acceptance of the contract and of all of its terms and conditions of which the
acceptor has actual or constructive notice. [11] In a nutshell, the acceptance of
a bill of lading by the shipper and the consignee, with full knowledge of its
contents, gives rise to the presumption that the same was a perfected and
binding contract.[12]
In the case at bar, both lower courts held that the bill of lading was a
valid and perfected contract between the shipper (Ho Kee), the consignee
(Petitioner Keng Hua), and the carrier (Private Respondent SeaLand). Section 17 of the bill of lading provided that the shipper and the
consignee were liable for the payment of demurrage charges for the failure to
discharge the containerized shipment beyond the grace period allowed by
tariff rules. Applying said stipulation, both lower courts found petitioner
liable. The aforementioned section of the bill of lading reads:
17. COOPERAGE FINES. The shipper and consignee shall be
liable for, indemnify the carrier and ship and hold them harmless
against, and the carrier shall have a lien on the goods for, all
expenses and charges for mending cooperage, baling, repairing or
reconditioning the goods, or the van, trailers or containers, and all
expenses incurred in protecting, caring for or otherwise made for
the benefit of the goods, whether the goods be damaged or not,
and for any payment, expense, penalty fine, dues, duty, tax or
impost, loss, damage, detention, demurrage, or liability of
whatsoever nature, sustained or incurred by or levied upon the
carrier or the ship in connection with the goods or by reason of the
goods being or having been on board, or because of shippers
failure to procure consular or other proper permits, certificates or
any papers that may be required at any port or place or shippers
failure to supply information or otherwise to comply with all laws,
regulations and requirements of law in connection with the goods
of from any other act or omission of the shipper or
consignee: (Underscoring supplied.)

51 | B R I N A S

Petitioner contends, however, that it should not be bound by the bill of

lading because it never gave its consent thereto. Although petitioner admits
physical acceptance of the bill of lading, it argues that its subsequent actions
belie the finding that it accepted the terms and conditions printed therein.
[13]
Petitioner cites as support the Notice of Refused or On Hand Freight it
received on November 2, 1982 from private respondent, which
acknowledged that petitioner declined to accept the shipment. Petitioner
adds that it sent a copy of the said notice to the shipper on December 29,
1982. Petitioner points to its January 24, 1983 letter to the private
respondent, stressing that its acceptance of the bill of lading would be
tantamount to an act of smuggling as the amount it had imported (with full
documentary support) was only (at that time) for 10,000 kilograms and not for
20,313 kilograms as stated in the bill of lading and could lay them vulnerable
to legal sanctions for violation of customs and tariff as well as Central Bank
laws.[14] Petitioner further argues that the demurrage was a consequence of
the shippers mistake of shipping more than what was bought. The
discrepancy in the amount of waste paper it actually purchased, as reflected
in the invoice vis--vis the excess amount in the bill of lading, allegedly
justifies its refusal to accept the shipment.[15]

Petitioner Bound by the Bill of Lading

We are not persuaded. Petitioner admits that it received the bill of lading
immediately after the arrival of the shipment [16] on July 8, 1982.[17] Having
been afforded an opportunity to examine the said document, petitioner did
not immediately object to or dissent from any term or stipulation therein. It
was only six months later, on January 24, 1983, that petitioner sent a letter to
private respondent saying that it could not accept the shipment. Petitioners
inaction for such a long period conveys the clear inference that it accepted
the terms and conditions of the bill of lading. Moreover, said letter spoke only
of petitioners inability to use the delivery permit, i.e. to pick up the cargo, due
to the shippers failure to comply with the terms and conditions of the letter of
credit, for which reason the bill of lading and other shipping documents were
returned by the banks to the shipper.[18] The letter merely proved petitioners
refusal to pick up the cargo, not its rejection of the bill of lading.
Petitioners reliance on the Notice of Refused or On Hand Freight, as
proof of its nonacceptance of the bill of lading, is of no consequence. Said
notice was not written by petitioner; it was sent by private respondent to
petitioner in November 1982, or four months after petitioner received the bill
of lading. If the notice has any legal significance at all, it is to highlight
petitioners prolonged failure to object to the bill of lading. Contrary to
petitioners contention, the notice and the letter support not belie the findings

of the two lower courts that the bill of lading was impliedly accepted by
petitioner.
As aptly stated by Respondent Court of Appeals:
In the instant case, (herein petitioner) cannot and did not allege
non-receipt of its copy of the bill of lading from the shipper. Hence,
the terms and conditions as well as the various entries contained
therein were brought to its knowledge. (Herein petitioner) accepted
the bill of lading without interposing any objection as to its
contents. This raises the presumption that (herein petitioner)
agreed to the entries and stipulations imposed therein.
Moreover, it is puzzling that (herein petitioner) allowed months to
pass, six (6) months to be exact, before notifying (herein private
respondent) of the wrong shipment. It was only on January 24,
1983 that (herein petitioner) sent (herein private respondent) such
a letter of notification (Exh D for plaintiff, Exh. 4 for defendant; p. 5,
Folder of Exhibits). Thus, for the duration of those six months
(herein private respondent never knew the reason for (herein
petitioners) refusal to discharge the shipment.
After accepting the bill of lading, receiving notices of arrival of the
shipment, failing to object thereto, (herein petitioner) cannot now
deny that it is bound by the terms in the bill of lading. If it did not
intend to be bound, (herein petitioner) would not have waited for
six months to lapse before finally bringing the matter to (herein
private respondents attention. The most logical reaction in such a
case would be to immediately verify the matter with the other
parties involved. In this case, however, (herein petitioner)
unreasonably detained (herein private respondents) vessel to the
latters prejudice.[19]
Petitioners attempt to evade its obligation to receive the shipment on the
pretext that this may cause it to violate customs, tariff and central bank laws
must likewise fail. Mere apprehension of violating said laws, without a clear
demonstration that taking delivery of the shipment has become legally
impossible,[20] cannot defeat the petitioners contractual obligation and liability
under the bill of lading.
In any event, the issue of whether petitioner accepted the bill of lading
was raised for the first time only in petitioners memorandum before this
Court. Clearly, we cannot now entertain an issue raised for the very first time
on appeal, in deference to the well-settled doctrine that (a)n issue raised for
the first time on appeal and not raised timely in the proceedings in the lower
court is barred by estoppel. Questions raised on appeal must be within the

52 | B R I N A S

issues framed by the parties and, consequently, issues not raised in the trial
court cannot be raised for the first time on appeal.[21]

testimony of Counsel Sofronio Larcia as regards said letter of April 24, 1983
elucidates,viz:

In the case at bar, the prolonged failure of petitioner to receive and

discharge the cargo from the private respondents vessel constitutes a
violation of the terms of the bill of lading. It should thus be liable for
demurrage to the former.

Q Now, after you sent this letter, do you know what happened?

In The Apollon,[22] Justice Story made the following relevant comment on

the nature of demurrage:

Q So, what happened to the shipment?

In truth, demurrage is merely an allowance or compensation for

the delay or detention of a vessel. It is often a matter of contract,
but not necessarily so. The very circumstance that in ordinary
commercial voyages, a particular sum is deemed by the parties a
fair compensation for delays, is the very reason why it is, and
ought to be, adopted as a measure of compensation, in cases ex
delicto.What fairer rule can be adopted than that which founds
itself upon mercantile usage as to indemnity, and fixes a
recompense upon the deliberate consideration of all the
circumstances attending the usual earnings and expenditures in
common voyages? It appears to us that an allowance, by way of
demurrage, is the true measure of damages in all cases of mere
detention, for that allowance has reference to the ships expenses,
wear and tear, and common employment.[23]

Amount of Demurrage Charges

Petitioner argues that it is not obligated to pay any demurrage charges
because, prior to the filing of the complaint, private respondent made no
demand for the sum of P67,340. Moreover, private respondents loss and
prevention manager, Loi Gillera, demanded P50,260, but its counsel,
Sofronio Larcia, subsequently asked for a different amount of P37,800.
Petitioners position is puerile. The amount of demurrage charges in the
sum of P67,340 is a factual conclusion of the trial court that was affirmed by
the Court of Appeals and, thus, binding on this Court. [24] Besides such factual
finding is supported by the extant evidence. [25] The apparent discrepancy was
a result of the variance of the dates when the two demands were
made. Necessarily, the longer the cargo remained unclaimed, the higher the
demurrage. Thus, while in his letter dated April 24, 1983, [26] private
respondents counsel demanded payment of only P37,800, the additional
demurrage incurred by petitioner due to its continued refusal to receive
delivery of the cargo ballooned to P67,340 by November 22, 1983. The

A Defendant continued to refuse to take delivery of the shipment and the

shipment stayed at the port for a longer period.

A The shipment incurred additional demurrage charges which amounted

to P67,340.00 as of November 22, 1983 or more than a year after almost a year after the shipment arrived at the port.
Q So, what did you do?
A We requested our collection agency to pursue the collection of this
amount.[27]
Bill of Lading Separate from
Other Letter of Credit Arrangements
In a letter of credit, there are three distinct and independent
contracts: (1) the contract of sale between the buyer and the seller, (2) the
contract of the buyer with the issuing bank, and (3) the letter of credit proper
in which the bank promises to pay the seller pursuant to the terms and
conditions stated therein. Few things are more clearly settled in law than that
the three contracts which make up the letter of credit arrangement are to be
maintained in a state of perpetual separation. [28] A transaction involving the
purchase of goods may also require, apart from a letter of credit, a contract
of transportation specially when the seller and the buyer are not in the same
locale or country, and the goods purchased have to be transported to the
latter.
Hence, the contract of carriage, as stipulated in the bill of lading in the
present case, must be treated independently of the contract of sale between
the seller and the buyer, and the contract for the issuance of a letter of credit
between the buyer and the issuing bank. Any discrepancy between the
amount of the goods described in the commercial invoice in the contract of
sale and the amount allowed in the letter of credit will not affect the validity
and enforceability of the contract of carriage as embodied in the bill of
lading. As the bank cannot be expected to look beyond the documents
presented to it by the seller pursuant to the letter of credit, [29] neither can the
carrier be expected to go beyond the representations of the shipper in the bill
of lading and to verify their accuracy vis--vis the commercial invoice and the
letter of credit. Thus, the discrepancy between the amount of goods indicated
in the invoice and the amount in the bill of lading cannot negate petitioners
obligation to private respondent arising from the contract of

53 | B R I N A S

transportation. Furthermore, private respondent, as carrier, had no

knowledge of the contents of the container. The contract of carriage was
under the arrangement known as Shippers Load And Count, and the shipper
was solely responsible for the loading of the container while the carrier was
oblivious to the contents of the shipment. Petitioners remedy in case of
overshipment lies against the seller/shipper, not against the carrier.

Payment of Interest
Petitioner posits that it first knew of the demurrage claim of P67,340
only when it received, by summons, private respondents complaint.Hence,
interest may not be allowed to run from the date of private respondents
extrajudicial demands on March 8, 1983 for P50,260 or on April 24, 1983
for P37,800, considering that, in both cases, there was no demand for
interest.[30] We agree.
Jurisprudence teaches us:
2. When an obligation, not constituting a loan or forbearance of money, is
breached, an interest on the amount of damages awarded may be imposed
at the discretion of the court at the rate of 6% per annum. No interest,
however, shall be adjudged on unliquidated claims or damages except when
or until the demand can be established
with
reasonable
certainty. Accordingly, where the demand is established with reasonable
certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code) but when such certainty
cannot be so reasonably established at the time the demand is made, the
interest shall begin to run only from the date the judgment of the court is
made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal
interest shall, in any case, be on the amount finally adjudged.

cannot be deemed to have been established with reasonable certainty until

the trial court rendered its judgment. Indeed, (u)nliquidated damages or
claims, it is said, are those which are not or cannot be known until definitely
ascertained, assessed and determined by the courts after presentation of
proof.[32] Consequently, the legal interest rate is six percent, to be computed
from September 28, 1990, the date of the trial courts decision. And in
accordance withPhilippine Natonal Bank[33] and Eastern Shipping,[34] the rate
of twelve percent per annum shall be charged on the total then outstanding,
from the time the judgment becomes final and executory until its satisfaction.
Finally, the Court notes that the matter of attorneys fees was taken up
only in the dispositive portion of the trial courts decision. This falls short of
the settled requirement that the text of the decision should state the reason
for the award of attorneys fees, for without such justification, its award would
be a conclusion without a premise, its basis being improperly left to
speculation and conjecture.[35]
WHEREFORE, the assailed Decision is hereby AFFIRMED with
the MODIFICATION that the legal interest of six percent per annum shall be
computed from September 28, 1990 until its full payment before finality of
judgment. The rate of interest shall be adjusted to twelve percent per annum,
computed from the time said judgment became final and executory until full
satisfaction. The award of attorneys fees isDELETED.
SO ORDERED.

3. When the judgment of the court awarding a sum of money becomes final
and executory, the rate of legal interest, whether the case falls under
paragraph 1 or paragraph 2, above, shall be 12% per annum from such
finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.[31]
The case before us involves an obligation not arising from a loan or
forbearance of money; thus, pursuant to Article 2209 of the Civil Code, the
applicable interest rate is six percent per annum. Since the bill of lading did
not specify the amount of demurrage, and the sum claimed by private
respondent increased as the days went by, the total amount demanded

54 | B R I N A S

G.R. No. 75118 August 31, 1987

SEA-LAND
SERVICE,
INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and PAULINO CUE, doing
business under the name and style of "SEN HIAP HING," respondents.

NARVASA, J.:
The main issue here is whether or not the consignee of seaborne freight is
bound by stipulations in the covering bill of lading limiting to a fixed amount
the liability of the carrier for loss or damage to the cargo where its value is
not declared in the bill.
The factual antecedents, for the most part, are not in dispute.
On or about January 8, 1981, Sea-Land Service, Inc. (Sea-Land for brevity),
a foreign shipping and forwarding company licensed to do business in the
Philippines, received from Seaborne Trading Company in Oakland, California
a shipment consigned to Sen Hiap Hing the business name used by Paulino
Cue in the wholesale and retail trade which he operated out of an
establishment located on Borromeo and Plaridel Streets, Cebu City.
The shipper not having declared the value of the shipment, no value was
indicated in the bill of lading. The bill described the shipment only as "8
CTNS on 2 SKIDS-FILES. 1 Based on volume measurements Sea-land
charged the shipper the total amount of US$209.28 2 for freight age and
other charges. The shipment was loaded on board the MS Patriot, a vessel
owned and operated by Sea-Land, for discharge at the Port Of Cebu.
The shipment arrived in Manila on February 12, 1981, and there discharged
in Container No. 310996 into the custody of the arrastre contractor and the
customs and port authorities. 3 Sometime between February 13 and 16,
1981, after the shipment had been transferred, along with other cargoes to
Container No. 40158 near Warehouse 3 at Pier 3 in South Harbor, Manila,

awaiting trans-shipment to Cebu, it was stolen by pilferers and has never

been recovered. 4
On March 10, 1981, Paulino Cue, the consignee, made formal claim upon
Sea-Land for the value of the lost shipment allegedly amounting to
P179,643.48. 5 Sea-Land offered to settle for US$4,000.00, or its then
Philippine peso equivalent of P30,600.00. asserting that said amount
represented its maximum liability for the loss of the shipment under the
package limitation clause in the covering bill of lading. 6 Cue rejected the offer
and thereafter brought suit for damages against Sea-Land in the then Court
of First Instance of Cebu, Branch X. 7 Said Court, after trial, rendered
judgment in favor of Cue, sentencing Sea-Land to pay him P186,048.00
representing the Philippine currency value of the lost cargo, P55,814.00 for
unrealized profit with one (1%) percent monthly interest from the filing of the
complaint until fully paid, P25,000.00 for attorney's fees and P2,000.00 as
litigation expenses. 8
Sea-Land appealed to the Intermediate Appellate Court. 9 That Court
however affirmed the decision of the Trial Court xxx in all its
parts ... . 10 Sea-Land thereupon filed the present petition for review which,
as already stated, poses the question of whether, upon the facts above set
forth, it can be held liable for the loss of the shipment in any amount beyond
the limit of US$600.00 per package stipulated in the bill of lading.
To begin with, there is no question of the right, in principle, of a consignee in
a bill of lading to recover from the carrier or shipper for loss of, or damage to,
goods being transported under said bill ,although that document may have
been as in practice it oftentimes is drawn up only by the consignor and
the carrier without the intervention of the consignee. In Mendoza vs.
Philippine Air Lines, Inc. 11 the Court delved at some length into the reasons
behind this when, upon a claim made by the consignee of a motion picture
film shipped by air that he was never a party to the contract of transportation
and was a complete stranger thereto, it said:
But appellant now contends that he is not suing on a breach
of contract but on a tort as provided for in Art. 1902 of the
Civil Code. We are a little perplexed as to this new theory of
the appellant. First, he insists that the articles of the Code of

55 | B R I N A S

Commerce should be applied: that he invokes the provisions

of aid Code governing the obligations of a common carrier to
make prompt delivery of goods given to it under a contract of
transportation. Later, as already said, he says that he was
never a party to the contract of transportation and was a
complete stranger to it, and that he is now suing on a tort or
a violation of his rights as a stranger (culpa aquiliana) If he
does not invoke the contract of carriage entered into with the
defendant company, then he would hardly have any leg to
stand on. His right to prompt delivery of the can of film at the
Phil. Air Port stems and is derived from the contract of
carriage under which contract, the PAL undertook to carry
the can of film safely and to deliver it to him promptly. Take
away or ignore that contract and the obligation to carry and
to deliver and right to prompt delivery disappear. Common
carriers are not obligated by law to carry and to deliver
merchandise, and persons are not vested with the right to
prompt delivery, unless such common carriers previously
assume the obligation. Said rights and obligations are
created by a specific contract entered into by the parties. In
the present case, the findings of the trial court which as
already stated, are accepted by the parties and which we
must accept are to the effect that the LVN Pictures Inc. and
Jose Mendoza on one side, and the defendant company on
the other, entered into a contract of transportation (p. 29,
Rec. on Appeal). One interpretation of said finding is that the
LVN Pictures Inc. through previous agreement with Mendoza
acted as the latter's agent. When he negotiated with the LVN
Pictures Inc. to rent the film "Himala ng Birhen" and show it
during the Naga town fiesta, he most probably authorized
and enjoined the Picture Company to ship the film for him on
the PAL on September 17th. Another interpretation is that
even if the LVN Pictures Inc. as consignor of its own
initiative, and acting independently of Mendoza for the time
being, made Mendoza as consignee, a stranger to the
contract if that is possible, nevertheless when he, Mendoza
appeared at the Phil Air Port armed with the copy of the Air
Way Bill (Exh. 1) demanding the delivery of the shipment to

him, he thereby made himself a party to the contract of

transportation. The very citation made by appellant in his
memorandum supports this view. Speaking of the possibility
of a conflict between the order of the shipper on the one
hand and the order of the consignee on the other, as when
the shipper orders the shipping company to return or retain
the goods shipped while the consignee demands their
delivery, Malagarriga in his book Codigo de Comercio
Comentado, Vol. 1, p. 400, citing a decision of the Argentina
Court of Appeals on commercial matters, cited by Tolentino
in Vol. II of his book entitled "Commentaries and
Jurisprudence on the Commercial Laws of the Philippines" p.
209, says that the right of the shipper to countermand the
shipment terminates when the consignee or legitimate holder
of the bill of lading appears with such big of lading before the
carrier and makes himself a party to the contract. Prior to
that time he is a stranger to the contract.
Still another view of this phase of the case is that
contemplated in Art. 1257, paragraph 2, of the old Civil Code
(now Art, 1311, second paragraph) which reads thus:
Should the contract contain any stipulation
in favor of a third person, he may demand its
fulfillment provided he has given notice of
his acceptance to the person bound before
the stipulation has been revoked.
Here, the contract of carriage between the LVN Pictures Inc.
and the defendant carrier contains the stipulations of delivery
to Mendoza as consignee. His demand for the delivery of the
can of film to him at the Phil Air Port may be regarded as a
notice of his acceptance of the stipulation of the delivery in
his favor contained in the contract of carriage and delivery. In
this case he also made himself a party to the contract, or at
least has come to court to enforce it. His cause of action
must necessarily be founded on its breach.

56 | B R I N A S

Since the liability of a common carrier for loss of or damage to goods

transported by it under a contract of carriage is governed by the laws of the
country of destination 12 and the goods in question were shipped from the
United States to the Philippines, the liability of petitioner Sea-Land to the
respondent consignee is governed primarily by the Civil Code, and as
ordained by the said Code, suppletorily, in all matters not determined thereby,
by the Code of Commerce and special laws. 13 One of these suppletory
special laws is the Carriage of Goods by Sea Act, U.S. Public Act No. 521
which was made applicable to all contracts for the carriage of goods by sea
to and from Philippine ports in foreign trade by Commonwealth Act No. 65,
approved on October 22, 1936. Sec. 4(5) of said Act in part reads:
(5) Neither the carrier nor the ship shall in any event be or
become liable for any loss or damage to or in connection
with the transportation of goods in an amount exceeding
$500 per package lawful money of the United States, or in
case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency,
unless the nature and value of such goods have been
declared by the shipper before shipment and inserted in the
bill of lading. This declaration, if embodied in the bill of
lading, shall be prima facie evidence, but shall not be
conclusive on the carrier.
By agreement between the carrier, master, or agent of the
carrier, and the shipper another maximum amount than that
mentioned in this paragraph may be fixed: Provided, That
such maximum shall not be less than the figure above
named. In no event shall the carrier be liable for more than
the amount of damage actually sustained.
xxx xxx xxx
Clause 22, first paragraph, of the long form bill of lading customarily issued
by Sea-Land to its shipping clients 14 is a virtual copy of the first paragraph
of the foregoing provision. It says:

22. VALUATION. In the event of any loss, damage or delay

to or in connection with goods exceeding in actual value
$500 per package, lawful money of the United States, or in
case of goods not shipped in packages, per customary
freight unit, the value of the goods shall be deemed to be
$500 per package or per customary freight unit, as the case
may be, and the carrier's liability, if any, shall be determined
on the basis of a value of $500 per package or customary
freight unit, unless the nature and a higher value shall be
declared by the shipper in writing before shipment and
inserted in this Bill of Lading.
And in its second paragraph, the bill states:
If a value higher than $500 shag have been declared in
writing by the shipper upon delivery to the carrier and
inserted in this bill of lading and extra freight paid, if required
and in such case if the actual value of the goods per
package or per customary freight unit shall exceed such
declared value, the value shall nevertheless be deemed to
be declared value and the carrier's liability, if any, shall not
exceed the declared value and any partial loss or damage
shall be adjusted pro rata on the basis of such declared
value.
Since, as already pointed out, Article 1766 of the Civil Code expressly
subjects the rights and obligations of common carriers to the provisions of
the Code of Commerce and of special laws in matters not regulated by said
(Civil) Code, the Court fails to fathom the reason or justification for the
Appellate Court's pronouncement in its appealed Decision that the Carriage
of Goods by Sea Act " ... has no application whatsoever in this case. 15 Not
only is there nothing in the Civil Code which absolutely prohibits agreements
between shipper and carrier limiting the latter's liability for loss of or damage
to cargo shipped under contracts of carriage; it is also quite clear that said
Code in fact has agreements of such character in contemplation in providing,
in its Articles 1749 and 1750, that:

57 | B R I N A S

ART. 1749 A stipulation that the common carrier's liability is

limited to the value of the goods appearing in the bill of
lading, unless the shipper or owner declares a greater value,
is binding.
ART. 1750. A contract fixing the sum that may be recovered
by the owner or shipper for the loss, destruction, or
deterioration of the goods is valid, if it is reasonable and just
under the circumstances, and has been fairly and freely
agreed upon.
Nothing contained in section 4(5) of the Carriage of Goods by Sea Act
already quoted is repugnant to or inconsistent with any of the just-cited
provisions of the Civil Code. Said section merely gives more flesh and
greater specificity to the rather general terms of Article 1749 (without doing
any violence to the plain intent thereof) and of Article 1750, to give effect to
just agreements limiting carriers' liability for loss or damage which are freely
and fairly entered into.
It seems clear that even if said section 4(5) of the Carriage of Goods by Sea
Act did not exist, the validity and binding effect of the liability limitation clause
in the bill of lading here are nevertheless fully sustainable on the basis alone
of the cited Civil Code provisions. That said stipulation is just and reasonable
is arguable from the fact that it echoes Art. 1750 itself in providing a limit to
liability only if a greater value is not declared for the shipment in the bill of
lading. To hold otherwise would amount to questioning the justice and
fairness of that law itself, and this the private respondent does not pretend to
do. But over and above that consideration, the lust and reasonable character
of such stipulation is implicit in it giving the shipper or owner the option of
avoiding acrrual of liability limitation by the simple and surely far from
onerous expedient of declaring the nature and value of the shipment in the
bill of lading. And since the shipper here has not been heard to complaint of
having been "rushed," imposed upon or deceived in any significant way into
agreeing to ship the cargo under a bill of lading carrying such a stipulation
in fact, it does not appear that said party has been heard from at all insofar
as this dispute is concerned there is simply no ground for assuming that
its agreement thereto was not as the law would require, freely and fairly
sought and given.

The private respondent had no direct part or intervention in the execution of

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

58 | B R I N A S

before or after loading on the ship named herein and by any

route, whether within or outside the scope of the voyage or
beyond the port of discharge or destination of the goods and
without notice to the shipper or consignee. The carrier or
master may delay such transshipping or forwarding for any
reason, including but not limited to awaiting a vessel or other
means of transportation whether by the carrier or others.
Said provision obviates the necessity to offer any other justification for
offloading the shipment in question in Manila for transshipment to Cebu City,
the port of destination stipulated in the bill of lading. Nonetheless, the Court
takes note of Sea-Land's explanation that it only directly serves the Port of
Manila from abroad in the usual course of voyage of its carriers, hence its
maintenance of arrangements with a local forwarder. Aboitiz and Company,
for delivery of its imported cargo to the agreed final point of destination within
the Philippines, such arrangements not being prohibited, but in fact
recognized, by law. 18
Furthermore, this Court has also ruled 19 that the Carriage of Goods by Sea
Act is applicable up to the final port of destination and that the fact that
transshipment was made on an interisland vessel did not remove the
contract of carriage of goods from the operation of said Act.
Private respondent also contends that the aforecited Clauses 22 and 13 of
the bill of lading relied upon by petitioner Sea Land form no part of the shortform bill of lading attached to his complaint before the Trial Court and appear
only in the long form of that document which, he claims. SeaLand offered (as
its Exhibit 2) as an unused blank form with no entries or signatures therein.
He, however, admitted in the Trial Court that several times in the past
shipments had been delivered to him through Sea-Land, 20 from which the
assumption may fairly follow that by the time of the consignment now in
question, he was already reasonably apprised of the usual terms covering
contracts of carriage with said petitioner.
At any rate, as observed earlier, it has already been held that the provisions
of the Carriage of Goods by Sea Act on package limitation [sec 4(5) of the
Act hereinabove referred to] are as much a part of a bill of lading as though
actually placed therein by agreement of the parties. 21

Private respondent, by making claim for loss on the basis of the bill of lading,
to all intents and purposes accepted said bill. Having done so, he
... becomes bound by all stipulations contained therein
whether on the front or the back thereof. Respondent cannot
elude its provisions simply because they prejudice him and
take advantage of those that are beneficial. Secondly, the
fact that respondent shipped his goods on board the ship of
petitioner and paid the corresponding freight thereon shows
that he impliedly accepted the bill of lading which was issued
in connection with the shipment in question, and so it may be
said that the same is finding upon him as if it had been
actually signed by him or by any other person in his
behalf. ... 22.
There is one final consideration. The private respondent admits 23 that as
early as on April 22, 1981, Sea-Land had offered to settle his claim for
US$4,000.00, the limit of said carrier's liability for loss of the shipment under
the bill of lading. This Court having reached the conclusion that said sum is
all that is justly due said respondent, it does not appear just or equitable that
Sea-Land, which offered that amount in good faith as early as six years ago,
should, by being made to pay at the current conversion rate of the dollar to
the peso, bear for its own account all of the increase in said rate since the
time of the offer of settlement. The decision of the Regional Trial Court
awarding the private respondent P186,048.00 as the peso value of the lost
shipment is clearly based on a conversion rate of P8.00 to US$1.00, said
respondent having claimed a dollar value of $23,256.00 for said
shipment. 24 All circumstances considered, it is just and fair that Sea-Land's
dollar obligation be convertible at the same rate.
WHEREFORE, the Decision of the Intermediate Appellate Court complained
of is reversed and set aside. The stipulation in the questioned bill of lading
limiting Sea-Land's liability for loss of or damage to the shipment covered by
said bill to US$500.00 per package is held valid and binding on private
respondent. There being no question of the fact that said shipment consisted
of eight (8) cartons or packages, for the loss of which Sea-Land is therefore
liable in the aggregate amount of US$4,000.00, it is the judgment of the
Court that said petitioner discharge that obligation by paying private

59 | B R I N A S

respondent the sum of P32,000.00, the equivalent in Philippine currency of

US$4,000.00 at the conversion rate of P8.00 to $1.00. Costs against private
respondent.
SO ORDERED.

60 | B R I N A S

G.R. No. 87434 August 5, 1992

PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC. and TAGUM
PLASTICS,
INC., petitioners,
vs.
SWEET LINES, INC., DAVAO VETERANS ARRASTRE AND PORT
SERVICES, INC. and HON. COURT OF APPEALS, respondents.
De Lara, De Lunas & Rosales for petitioners.
Carlo L. Aquino for Sweet Lines, Inc.

REGALADO, J.:
A maritime suit 1 was commenced on May 12, 1978 by herein Petitioner
Philippine American General Insurance Co., Inc. (Philamgen) and Tagum
Plastics, Inc. (TPI) against private respondents Sweet Lines, Inc. (SLI) and
Davao Veterans Arrastre and Port Services, Inc. (DVAPSI), along with S.C.I.
Line (The Shipping Corporation of India Limited) and F.E. Zuellig, Inc., as codefendants in the court a quo, seeking recovery of the cost of lost or
damaged shipment plus exemplary damages, attorney's fees and costs
allegedly due to defendants' negligence, with the following factual backdrop
yielded by the findings of the court below and adopted by respondent court:
It would appear that in or about March 1977, the vessel SS
"VISHVA YASH" belonging to or operated by the foreign
common carrier, took on board at Baton Rouge, LA, two (2)
consignments of cargoes for shipment to Manila and later for
transhipment to Davao City, consisting of 600 bags Low
Density Polyethylene 631 and another 6,400 bags Low
Density Polyethylene 647, both consigned to the order of Far
East Bank and Trust Company of Manila, with arrival notice
to Tagum Plastics, Inc., Madaum, Tagum, Davao City. Said
cargoes were covered, respectively, by Bills of Lading Nos. 6
and 7 issued by the foreign common carrier (Exhs. E and F).
The necessary packing or Weight List (Exhs. A and B), as

well as the Commercial Invoices (Exhs. C and D)

accompanied the shipment. The cargoes were likewise
insured by the Tagum Plastics Inc. with plaintiff Philippine
American General Insurance Co., Inc., (Exh. G).
In the course of time, the said vessel arrived at Manila and
discharged its cargoes in the Port of Manila for transhipment
to Davao City. For this purpose, the foreign carrier awaited
and made use of the services of the vessel called M/V
"Sweet Love" owned and operated by defendant interisland
carrier.
Subject cargoes were loaded in Holds Nos. 2 and 3 of the
interisland carrier. These were commingled with similar
cargoes belonging to Evergreen Plantation and also
Standfilco.
On May 15, 1977, the shipment(s) were discharged from the
interisland carrier into the custody of the consignee. A later
survey conducted on July 8, 1977, upon the instance of the
plaintiff, shows the following:
Of the cargo covered by Bill of Lading No. 25 or (2)6,
supposed to contain 6,400 bags of Low Density
Polyethylene 647 originally inside 160 pallets, there were
delivered to the consignee 5,413 bags in good order
condition. The survey shows shortages, damages and losses
to be as follows:
Undelivered/Damaged bags as tallied during
discharge
from
vessel-173
bags;
undelivered and damaged as noted and
observed whilst stored at the pier-699 bags;
and shortlanded-110 bags (Exhs. P and P1).
Of the 600 bags of Low Density Polyethylene 631, the
survey conducted on the same day shows an actual delivery

61 | B R I N A S

to the consignee of only 507 bags in good order condition.

Likewise noted were the following losses, damages and
shortages, to wit:
Undelivered/damaged bags and tally sheets
during discharge from vessel-17 bags.
Undelivered and damaged as noted and
observed whilst stored at the pier-66 bags;
Shortlanded-10 bags.
Therefore, of said 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. Such loss from this particular
shipment is what any or all defendants may be answerable
to (sic).
As already stated, some bags were either shortlanded or
were missing, and some of the 1,080 bags were torn, the
contents thereof partly spilled or were fully/partially emptied,
but, worse, the contents thereof contaminated with foreign
matters and therefore could no longer serve their intended
purpose. The position taken by the consignee was that even
those bags which still had some contents were considered
as total losses as the remaining contents were contaminated
with foreign matters and therefore did not (sic) longer serve
the intended purpose of the material. Each bag was valued,
taking into account the customs duties and other taxes paid
as well as charges and the conversion value then of a dollar
to the peso, at P110.28 per bag (see Exhs. L and L-1 M and
O). 2
Before trial, a compromise agreement was entered into between petitioners,
as plaintiffs, and defendants S.C.I. Line and F.E. Zuellig, upon the latter's
payment of P532.65 in settlement of the claim against them. Whereupon, the
trial court in its order of August 12, 1981 3 granted plaintiffs' motion to dismiss
grounded on said amicable settlement and the case as to S.C.I. Line and

F.E. Zuellig was consequently "dismissed with prejudice and without

pronouncement as to costs."
The trial court thereafter rendered judgment in favor of herein petitioners on
this dispositive portion:
WHEREFORE, judgment is hereby rendered in favor of the
plaintiff Philippine General American Insurance Company
Inc. and against the remaining defendants, Sweet Lines Inc.
and Davao Veterans Arrastre Inc. as follows:
Defendant Sweet Lines, Inc. is ordered to pay said plaintiff
the sum of P34,902.00, with legal interest thereon from date
of extrajudicial demand on April 28, 1978 (Exh. M) until fully
paid;
Defendant Sweet Lines Inc. and Davao Veterans Arrastre
and (Port) Services Inc. are directed to pay jointly and
severally, the plaintiff the sum of P49,747.55, with legal
interest thereon from April 28, 1978 until fully paid;
Each of said defendants are ordered to pay the plaintiffs the
additional sum of P5,000 is reimbursable attorney's fees and
other litigation expenses;
Each of said defendants shall pay one-fourth (1/4) costs.

Due to the reversal on appeal by respondent court of the trial court's decision
on the ground of prescription, 5 in effect dismissing the complaint of herein
petitioners, and the denial of their motion for reconsideration, 6 petitioners
filed the instant petition for review on certiorari, faulting respondent appellate
court with the following errors: (1) in upholding, without proof, the existence
of the so-called prescriptive period; (2) granting arguendo that the said
prescriptive period does exist, in not finding the same to be null and void; and
(3) assuming arguendo that the said prescriptive period is valid and legal, in
failing to conclude that petitioners substantially complied therewith. 7

62 | B R I N A S

Parenthetically, we observe that herein petitioners are jointly pursuing this

case, considering their common interest in the shipment subject of the
present controversy, to obviate any question as to who the real party in
interest is and to protect their respective rights as insurer and insured. In any
case, there is no impediment to the legal standing of Petitioner Philamgen,
even if it alone were to sue herein private respondents in its own capacity as
insurer, it having been subrogated to all rights of recovery for loss of or
damage to the shipment insured under its Marine Risk Note No. 438734
dated March 31, 1977 8 in view of the full settlement of the claim thereunder
as evidenced by the subrogation receipt 9 issued in its favor by Far East
Bank and Trust Co., Davao Branch, for the account of petitioner TPI.
Upon payment of the loss covered by the policy, the insurer's entitlement to
subrogation pro tanto, being of the highest equity, equips it with a cause of
action against a third party in case of contractual breach. 10 Further, the
insurer's subrogatory right to sue for recovery under the bill of lading in case
of loss of or damage to the cargo is jurisprudentially upheld. 11 However, if an
insurer, in the exercise of its subrogatory right, may proceed against the
erring carrier and for all intents and purposes stands in the place and in
substitution of the consignee, a fortiori such insurer is presumed to know and
is just as bound by the contractual terms under the bill of lading as the
insured.
On the first issue, petitioners contend that it was error for the Court of
Appeals to reverse the appealed decision on the supposed ground of
prescription when SLI failed to adduce any evidence in support thereof and
that the bills of lading said to contain the shortened periods for filing a claim
and for instituting a court action against the carrier were never offered in
evidence. Considering that the existence and tenor of this stipulation on the
aforesaid periods have allegedly not been established, petitioners maintain
that it is inconceivable how they can possibly comply therewith. 12 In
refutation, SLI avers that it is standard practice in its operations to issue bills
of lading for shipments entrusted to it for carriage and that it in fact issued
bills of lading numbered MD-25 and MD-26 therefor with proof of their
existence manifest in the records of the case. 13 For its part, DVAPSI insists
on the propriety of the dismissal of the complaint as to it due to petitioners'
failure to prove its direct responsibility for the loss of and/or damage to the
cargo.14

On this point, in denying petitioner's motion for reconsideration, the Court of

Appeals resolved that although the bills of lading were not offered in
evidence, the litigation obviously revolves on such bills of lading which are
practically the documents or contracts sued upon, hence, they are inevitably
involved and their provisions cannot be disregarded in the determination of
the relative rights of the parties thereto. 15
Respondent court correctly passed upon the matter of prescription, since that
defense was so considered and controverted by the parties. This issue may
accordingly be taken cognizance of by the court even if not inceptively raised
as a defense so long as its existence is plainly apparent on the face of
relevant pleadings. 16 In the case at bar, prescription as an affirmative
defense was seasonably raised by SLI in its answer, 17 except that the bills of
lading embodying the same were not formally offered in evidence, thus
reducing the bone of contention to whether or not prescription can be
maintained as such defense and, as in this case, consequently upheld on the
strength of mere references thereto.
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, 18 and the
genuineness and due execution of which are deemed admitted unless
specifically denied under oath by the adverse party. 19 The rules on
actionable documents cover and apply to both a cause of action or defense
based on said documents. 20
In the present case and under the aforestated assumption that the time limit
involved is a prescriptive period, respondent carrier duly raised prescription
as an affirmative defense in its answer setting forth paragraph 5 of the
pertinent bills of lading which comprised the stipulation thereon by parties, to
wit:
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,

63 | B R I N A S

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. 21
In their reply thereto, herein petitioners, by their own assertions that
2. In connection with Pars. 14 and 15 of defendant Sweet
Lines, Inc.'s Answer, plaintiffs state that such agreements
are what the Supreme Court considers as contracts of
adhesion (see Sweet Lines, Inc. vs. Hon. Bernardo Teves, et
al., G.R. No. L-37750, May 19, 1978) and, consequently, the
provisions therein which are contrary to law and public policy
cannot be availed of by answering defendant as valid
defenses. 22
thereby failed to controvert the existence of the bills of lading and the
aforequoted provisions therein, hence they impliedly admitted the same
when they merely assailed the validity of subject stipulations.
Petitioners' failure to specifically deny the existence, much less the
genuineness and due execution, of the instruments in question amounts to
an admission. Judicial admissions, verbal or written, made by the parties in
the pleadings or in the course of the trial or other proceedings in the same
case are conclusive, no evidence being required to prove the same, and
cannot be contradicted unless shown to have been made through palpable
mistake or that no such admission was made. 23 Moreover, when the due
execution and genuineness of an instrument are deemed admitted because
of the adverse party's failure to make a specific verified denial thereof, the
instrument need not be presented formally in evidence for it may be
considered an admitted fact. 24
Even granting that petitioners' averment in their reply amounts to a denial, it
has the procedural earmarks of what in the law on pleadings is called a
negative pregnant, that is, a denial pregnant with the admission of the

substantial facts in the pleading responded to which are not squarely denied.
It is in effect an admission of the averment it is directed to. 25 Thus, while
petitioners objected to the validity of such agreement for being contrary to
public policy, the existence of the bills of lading and said stipulations were
nevertheless impliedly admitted by them.
We find merit in respondent court's comments that petitioners failed to touch
on the matter of the non-presentation of the bills of lading in their brief and
earlier on in the appellate proceedings in this case, hence it is too late in the
day to now allow the litigation to be overturned on that score, for to do so
would mean an over-indulgence in technicalities. Hence, for the reasons
already advanced, the non-inclusion of the controverted bills of lading in the
formal offer of evidence cannot, under the facts of this particular case, be
considered a fatal procedural lapse as would bar respondent carrier from
raising the defense of prescription. Petitioners' feigned ignorance of the
provisions of the bills of lading, particularly on the time limitations for filing a
claim and for commencing a suit in court, as their excuse for non-compliance
therewith does not deserve serious attention.
It is to be noted that the carriage of the cargo involved was effected pursuant
to an "Application for Delivery of Cargoes without Original Bill of Lading"
issued on May 20, 1977 in Davao City 26 with the notation therein that said
application corresponds to and is subject to the terms of bills of lading MD-25
and MD-26. It would be a safe assessment to interpret this to mean that,
sight unseen, petitioners acknowledged the existence of said bills of lading.
By having the cargo shipped on respondent carrier's vessel and later making
a claim for loss on the basis of the bills of lading, petitioners for all intents
and purposes accepted said bills. Having done so they are bound by all
stipulations contained therein. 27 Verily, as petitioners are suing for recovery
on the contract, and in fact even went as far as assailing its validity by
categorizing it as a contract of adhesion, then they necessarily admit that
there is such a contract, their knowledge of the existence of which with its
attendant stipulations they cannot now be allowed to deny.
On the issue of the validity of the controverted paragraph 5 of the bills of
lading above quoted which unequivocally prescribes a time frame of thirty
(30) days for filing a claim with the carrier in case of loss of or damage to the
cargo and sixty (60) days from accrual of the right of action for instituting an

64 | B R I N A S

action in court, which periods must concur, petitioners posit that the alleged
shorter prescriptive period which is in the nature of a limitation on petitioners'
right of recovery is unreasonable and that SLI has the burden of proving
otherwise, citing the earlier case of Southern Lines, Inc. vs. Court of Appeals,
et al. 28 They postulate this on the theory that the bills of lading containing the
same constitute contracts of adhesion and are, therefore, void for being
contrary to public policy, supposedly pursuant to the dictum in Sweet Lines,
Inc. vs. Teves, et al. 29
Furthermore, they contend, since the liability of private respondents has been
clearly established, to bar petitioners' right of recovery on a mere technicality
will pave the way for unjust enrichment. 30 Contrarily, SLI asserts and defends
the reasonableness of the time limitation within which claims should be filed
with the carrier; the necessity for the same, as this condition for the carrier's
liability is uniformly adopted by nearly all shipping companies if they are to
survive the concomitant rigors and risks of the shipping industry; and the
countervailing balance afforded by such stipulation to the legal presumption
of negligence under which the carrier labors in the event of loss of or damage
to the cargo. 31
It has long been held that Article 366 of the Code of Commerce applies not
only to overland and river transportation but also to maritime
transportation. 32 Moreover, we agree that in this jurisdiction, as viewed from
another angle, it is more accurate to state that the filing of a claim with the
carrier within the time limitation therefor under Article 366 actually constitutes
a condition precedent to the accrual of a right of action against a carrier for
damages caused to the merchandise. The shipper or the consignee must
allege and prove the fulfillment of the condition and if he omits such
allegations and proof, no right of action against the carrier can accrue in his
favor. As the requirements in Article 366, restated with a slight modification in
the assailed paragraph 5 of the bills of lading, are reasonable conditions
precedent, they are not limitations of action. 33 Being conditions precedent,
their performance must precede a suit for enforcement 34 and the vesting of
the right to file spit does not take place until the happening of these
conditions. 35

be complete. All valid conditions precedent to the institution of the particular

action, whether prescribed by statute, fixed by agreement of the parties or
implied by law must be performed or complied with before commencing the
action, unless the conduct of the adverse party has been such as to prevent
or waive performance or excuse non-performance of the condition. 36
It bears restating that a right of action is the right to presently enforce a
cause of action, while a cause of action consists of the operative facts which
give rise to such right of action. The right of action does not arise until the
performance of all conditions precedent to the action and may be taken away
by the running of the statute of limitations, through estoppel, or by other
circumstances which do not affect the cause of action. 37 Performance or
fulfillment of all conditions precedent upon which a right of action depends
must be sufficiently alleged, 38 considering that the burden of proof to show
that a party has a right of action is upon the person initiating the suit. 39
More particularly, 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. 40
Stipulations in bills of lading or other contracts of shipment which require
notice of claim for loss of or damage to goods shipped in order to impose
liability on the carrier operate to prevent the enforcement of the contract
when not complied with, that is, notice is a condition precedent and the
carrier is not liable if notice is not given in accordance with the
stipulation, 41 as the failure to comply with such a stipulation in a contract of
carriage with respect to notice of loss or claim for damage bars recovery for
the loss or damage suffered. 42

Now, before an action can properly be commenced all the essential elements
of the cause of action must be in existence, that is, the cause of action must

65 | B R I N A S

On the other hand, 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 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. 43

What the court finds rather odd is the fact that petitioner TPI filed a
provisional claim with DVAPSI as early as June 14, 1977 46 and, as found by
the trial court, a survey fixing the extent of loss of and/or damage to the
cargo was conducted on July 8, 1977 at the instance of petitioners. 47 If
petitioners had the opportunity and awareness to file such provisional claim
and to cause a survey to be conducted soon after the discharge of the cargo,
then they could very easily have filed the necessary formal, or even a
provisional, claim with SLI itself 48 within the stipulated period therefor,
instead of doing so only on April 28, 1978 despite the vessel's arrival at the
port of destination on May 15, 1977. Their failure to timely act brings us to no
inference other than the fact that petitioners slept on their rights and they
must now face the consequences of such inaction.
The ratiocination of the Court of Appeals on this aspect is worth reproducing:

In the case at bar, there is neither any showing of compliance by petitioners

with the requirement for the filing of a notice of claim within the prescribed
period nor any allegation to that effect. It may then be said that while
petitioners may possibly have a cause of action, for failure to comply with the
above condition precedent they lost whatever right of action they may have in
their favor or, token in another sense, that remedial right or right to relief had
prescribed. 44
The shipment in question 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. The findings of respondent court as
supported by petitioners' formal offer of evidence in the court below show
that the claim was filed with SLI only on April 28, 1978, way beyond the
period provided in the bills of lading45 and violative of the contractual
provision, the inevitable consequence of which is the loss of petitioners'
remedy or right to sue. 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 timebarred.

xxx xxx xxx

It must be noted, at this juncture, that the aforestated time
limitation 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 which reads as follows:
Art. 366. Within the twenty-four hours
following the receipt of the merchandise, the
claim against the carrier for damage or
average which may be found therein upon
opening the packages, may be made,
provided that the indications of the damage
or average which gives rise to the claim
cannot be ascertained from the outside part
of the packages, in which case the claims
shall be admitted only at the time of the
receipt.
After the periods mentioned have elapsed,
or the transportation charges have been
paid, no claim shall be admitted against the

66 | B R I N A S

carrier with regard to the condition in which

the goods transported were delivered.
Gleanable therefrom is the fact that subject stipulation even
lengthened the period for presentation of claims thereunder.
Such modification has been sanctioned by the Supreme
Court. In the case of Ong Yet (M)ua Hardware Co., Inc. vs.
Mitsui Steamship Co., Ltd., et al., 59 O.G. No. 17, p. 2764, it
ruled that Art. 366 of the Code of Commerce can be modified
by a bill of lading prescribing the period of 90 days after
arrival of the ship, for filing of written claim with the carrier or
agent, instead of the 24-hour time limit after delivery
provided in the aforecited legal provision.
Tested, too, under paragraph 5 of said Bill of Lading, it is
crystal clear that the commencement of the instant suit on
May 12, 1978 was indeed fatally late. In view of the express
provision
that
"suits
arising
from
. . . damage or loss shall be instituted within 60 days from
date of accrual of right of action," the present action
necessarily fails on ground of prescription.
In the absence of constitutional or statutory
prohibition, it is usually held or recognized
that it is competent for the parties to a
contract of shipment to agree on a limitation
of time shorter than the statutory period,
within which action for breach of the contract
shall be brought, and such limitation will be
enforced if reasonable . . . (13 C.J.S. 496497)
A perusal of the pertinent provisions of law on the matter
would disclose that there is no constitutional or statutory
prohibition infirming paragraph 5 of subject Bill of Lading.
The stipulated period of 60 days is reasonable enough for
appellees to ascertain the facts and thereafter to sue, if need
be, and the 60-day period agreed upon by the parties which

shortened the statutory period within which to bring action for

breach of contract is valid and binding. . . . (Emphasis in the
original text.) 49
As explained above, the shortened period for filing suit is not unreasonable
and has in fact been generally recognized to be a valid business practice in
the shipping industry. Petitioners' advertence to the Court's holding in
the Southern Lines case, supra, is futile as what was involved was a claim for
refund of excess payment. We ruled therein that non-compliance with the
requirement of filing a notice of claim under Article 366 of the Code of
Commerce does not affect the consignee's right of action against the carrier
because said requirement applies only to cases for recovery of damages on
account of loss of or damage to cargo, not to an action for refund of
overpayment, and on the further consideration that neither the Code of
Commerce nor the bills of lading therein provided any time limitation for suing
for refund of money paid in excess, except only that it be filed within a
reasonable time.
The ruling in Sweet Lines categorizing the stipulated limitation on venue of
action provided in the subject bill of lading as a contract of adhesion and,
under the circumstances therein, void for being contrary to public policy is
evidently likewise unavailing in view of the discrete environmental facts
involved and the fact that the restriction therein was unreasonable. In any
case, Ong Yiu vs. Court of Appeals, et al., 50 instructs us that "contracts of
adhesion wherein one party imposes a ready-made form of contract on the
other . . . are contracts not entirely prohibited. The one who adheres to the
contract is in reality free to reject it entirely; if he adheres he gives his
consent." In the present case, not even an allegation of ignorance of a party
excuses non-compliance with the contractual stipulations since the
responsibility for ensuring full comprehension of the provisions of a contract
of carriage devolves not on the carrier but on the owner, shipper, or
consignee as the case may be.
While it is true that substantial compliance with provisions on filing of claim
for loss of or damage to cargo may sometimes suffice, the invocation of such
an assumption must be viewed vis-a-vis the object or purpose which such a
provision seeks to attain and that is to afford the carrier a reasonable
opportunity to determine the merits and validity of the claim and to protect

67 | B R I N A S

itself against unfounded impositions. 51 Petitioners' would nevertheless adopt

an adamant posture hinged on the issuance by SLI of a "Report on Losses
and Damages," dated May 15, 1977, 52 from which petitioners theorize that
this charges private respondents with actual knowledge of the loss and
damage involved in the present case as would obviate the need for or render
superfluous the filing of a claim within the stipulated period.
Withal, it has merely to be pointed out that the aforementioned report bears
this notation at the lower part thereof: "Damaged by Mla. labor upon
unloading; B/L noted at port of origin," as an explanation for the cause of loss
of and/or damage to the cargo, together with an iterative note stating that
"(t)his 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."
Moreover, knowledge on the part of the carrier of the loss of or damage to
the goods deducible from the issuance of said report is not equivalent to nor
does it approximate the legal purpose served by the filing of the requisite
claim, that is, to promptly apprise the carrier about a consignee's intention to
file a claim and thus cause the prompt investigation of the veracity and merit
thereof for its protection. It would be an unfair imposition to require the
carrier, upon discovery in the process of preparing the report on losses or
damages of any and all such loss or damage, to presume the existence of a
claim against it when at that time the carrier is expectedly concerned merely
with accounting for each and every shipment and assessing its condition.
Unless and until a notice of claim is therewith timely filed, the carrier cannot
be expected to presume that for every loss or damage tallied, a
corresponding claim therefor has been filed or is already in existence as
would alert it to the urgency for an immediate investigation of the soundness
of the claim. 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. 53
Thus, to put the legal effect of respondent carrier's report on losses or
damages, the preparation of which is standard procedure upon unloading of
cargo at the port of destination, on the same level as that of a notice of claim

by imploring substantial compliance is definitely farfetched. Besides, the cited

notation on the carrier's report itself makes it clear that the filing of a notice of
claim in any case is imperative if carrier is to be held liable at all for the loss
of or damage to cargo.
Turning now to respondent DVAPSI and considering that whatever right of
action petitioners may have against respondent carrier was lost due to their
failure to seasonably file the requisite claim, it would be awkward, to say the
least, that by some convenient process of elimination DVAPSI should
proverbially be left holding the bag, and it would be pure speculation to
assume that DVAPSI is probably responsible for the loss of or damage to
cargo. 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.
Petitioners failed to pinpoint liability on any of the original defendants and in
this seemingly wild goose-chase, they cannot quite put their finger down on
when, where, how and under whose responsibility the loss or damage
probably occurred, or as stated in paragraph 8 of their basic complaint filed in
the court below, whether "(u)pon discharge of the cargoes from the original
carrying vessel, the SS VISHVA YASH," and/or upon discharge of the
cargoes from the interisland vessel the MV "SWEET LOVE," in Davao City
and later while in the custody of defendant arrastre operator. 54
The testimony of petitioners' own witness, Roberto Cabato, Jr., Marine and
Aviation Claims Manager of petitioner Philamgen, was definitely inconclusive
and the responsibility for the loss or damage could still not be ascertained
therefrom:
Q In other words, Mr. Cabato, you only
computed the loss on the basis of the
figures submitted to you and based on the
documents like the survey certificate and the
certificate of the arrastre?

68 | B R I N A S

A Yes, sir.

and time in the liability as regards the

underwriter in accordance with the policy
that we issued.

Q Therefore, Mr. Cabato, you have no idea

how or where these losses were incurred?
xxx xxx xxx
A No, sir.

Q Mr. Witness, from the documents, namely,

the survey of Manila Adjusters and
Surveyors Company, the survey of Davao
Arrastre contractor and the bills of lading
issued by the defendant Sweet Lines, will
you be able to tell the respective liabilities of
the bailees and/or carriers concerned?

xxx xxx xxx

Q Mr. Witness, you said that you processed
and investigated the claim involving the
shipment in question. Is it not a fact that in
your processing and investigation you
considered how the shipment was
transported? Where the losses could have
occurred and what is the extent of the
respective responsibilities of the bailees
and/or carriers involved?
xxx xxx xxx
A With respect to the shipment being
transported, we have of course to get into it
in order to check whether the shipment
coming in to this port is in accordance with
the policy condition, like in this particular
case, the shipment was transported to
Manila and transhipped through an
interisland vessel in accordance with the
policy. With respect to the losses, we have a
general view where losses could have
occurred. Of course we will have to consider
the different bailees wherein the shipment
must have passed through, like the ocean
vessel, the interisland vessel and the
arrastre, but definitely at that point and time
we cannot determine the extent of each
liability. We are only interested at that point

A No, sir. (Emphasis ours.) 55

Neither did nor could the trial court, much less the Court of Appeals, precisely
establish the stage in the course of the shipment when the goods were lost,
destroyed or damaged. What can only be inferred from the factual findings of
the trial court is that by the time the cargo was discharged to DVAPSI, loss or
damage had already occurred and that the same could not have possibly
occurred while the same was in the custody of DVAPSI, as demonstrated by
the observations of the trial court quoted at the start of this opinion.
ACCORDINGLY, on the foregoing premises, the instant petition is DENIED
and the dismissal of the complaint in the court a quo as decreed by
respondent Court of Appeals in its challenged judgment is hereby
AFFIRMED.
SO ORDERED.

69 | B R I N A S

G.R. No. L-61352 February 27, 1987

DOLE
PHILIPPINES,
INC., plaintiff-appellant,
vs.
MARITIME COMPANY OF THE PHILIPPINES, defendant-appellee.

3. On June 11, 1973 the plaintiff filed a complaint in the

Court of First Instance of Manila, docketed therein as Civil
Case No. 91043, embodying three (3) causes of action
involving three (3) separate and different shipments. The
third cause of action therein involved the cargo now subject
of this present litigation;

Domingo E. de Lara & Associates for plaintiff-appellant.

Bito, Misa and Lozada Law Office for defendant-appellee.

NARVASA, J.:
This appeal, which was certified to the Court by the Court of Appeals as
involving only questions of law, 1 relates to a claim for loss and/or damage to
a shipment of machine parts sought to be enforced by the consignee,
appellant Dole Philippines, Inc. (hereinafter caged Dole) against the carrier,
Maritime Company of the Philippines (hereinafter called Maritime), under the
provisions of the Carriage of Goods by Sea Act. 2
The basic facts are succinctly stated in the order of the Trial Court 3 dated
March 16, 1977, the relevant portion of which reads:
xxx xxx xxx
Before the plaintiff started presenting evidence at today's
trial at the instance of the Court the lawyers entered into the
following stipulation of facts:
1. The cargo subject of the instant case was discharged in
Dadiangas unto the custody of the consignee on December
18, 1971;
2. The corresponding claim for the damages sustained by
the cargo was filed by the plaintiff with the defendant vessel
on May 4, 1972;

4. On December 11, 1974, Judge Serafin Cuevas issued an

Order in Civil Case No. 91043 dismissing the first two
causes of action in the aforesaid case with prejudice and
without pronouncement as to costs because the parties had
settled or compromised the claims involved therein. 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. The dismissal of that
complaint containing the three causes of action was upon a
joint motion to dismiss filed by the parties;
5. Because of the dismissal of the (complaint in Civil Case
No. 91043 with respect to the third cause of action without
prejudice, plaintiff instituted this present complaint on
January 6, 1975.
xxx xxx xxx 4
To the complaint in the subsequent action Maritime filed an answer
pleading inter alia the affirmative defense of prescription under the provisions
of the Carriage of Goods by Sea Act, 5 and following pre-trial, moved for a
preliminary hearing on said defense. 6 The Trial Court granted the motion,
scheduling the preliminary hearing on April 27, 1977. 7 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. 8 The motion was opposed by Dole9 and the Trial
Court, after due consideration, resolved the matter in favor of Maritime and
dismissed the complaint 10 Dole sought a reconsideration, which was
denied, 11 and thereafter took the present appeal from the order of dismissal.

70 | B R I N A S

The pivotal issue is whether or not Article 1155 of the Civil Code providing
that the prescription of actions is interrupted by the making of an extrajudicial
written demand by the creditor is applicable to actions brought under the
Carriage of Goods by Sea Act which, in its Section 3, paragraph 6, 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 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.
xxx xxx xxx
Dole concedes that its action is subject to the one-year period of limitation
prescribe in the above-cited provision.12 The substance of its argument is 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, 13 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, 14 prescription under said Act is subject to the
provisions of Article 1155 of the Civil Code on tolling and because Dole's
claim for loss or damage made 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. To much the same effect is the further argument based on
Article 1176 of the Civil Code which provides that the rights and obligations of
common carriers shag be governed by the Code of Commerce and by
special laws in all matters not regulated by the Civil Code.
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. 15 There, in a parallel factual situation,

where suit to recover for damage to cargo shipped by vessel from Tokyo to
Manila was filed more than two years after the consignee's receipt of the
cargo, this Court rejected the contention that an extrajudicial demand toiled
the prescriptive period provided for in the Carriage of Goods by Sea Act, viz:
In the second assignment of error plaintiff-appellant argues
that it was error for the court a quo 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. We notice 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.) Similarly, we now 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. * * *
Moreover, no different result would obtain even if the Court were to accept
the proposition that a written extrajudicial demand does toll prescription
under the Carriage of Goods by Sea Act. The demand in this instance would
be the claim for damage-filed by Dole with Maritime on May 4, 1972. The
effect of that demand would have been to renew the one- year prescriptive
period from the date of its making. Stated otherwise, under Dole's theory,
when its claim was received by Maritime, the one-year prescriptive period

71 | B R I N A S

was interrupted "tolled" would be the more precise term and began to
run anew from May 4, 1972, affording Dole another period of one (1) 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.
Dole's contention that the prescriptive period "*** remained tolled as of May
4, 1972 *** (and that) in legal contemplation *** (the) case (Civil Case No.
96353) was filed on January 6, 1975 *** well within the one-year prescriptive
period in Sec. 3(6) of the Carriage of Goods by Sea Act." 16 equates tolling
with indefinite suspension. It is clearly fallacious and merits no consideration.
WHEREFORE, the order of dismissal appealed from is affirmed, with costs
against the appellant, Dole Philippines, Inc.
SO ORDERED.

72 | B R I N A S

THIRD DIVISION
AIR FRANCE,
Petitioner,

G.R. No. 165266

Present:

- versus -

CARPIO MORALES, J.,

Chairperson,
BERSAMIN,
MENDOZA,*
VILLARAMA, JR., and
SERENO, JJ.

BONIFACIO H. GILLEGO, substituted by his Promulgated:

surviving heirs represented by Dolores P.
Gillego,
December 15, 2010
Respondent.
x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x
DECISION
VILLARAMA, JR., J.:
For review is the Decision[1] dated June 30, 2004 of the Court of Appeals
(CA) in CA-G.R. CV No. 56587 which affirmed the Decision [2] dated January
3, 1996 of the Regional Trial Court (RTC) of Makati City, Branch 137 in Civil
Case No. 93-2328.
The facts follow:
Sometime in April 1993, respondent Bonifacio H. Gillego, [3] then incumbent
Congressman of the Second District of Sorsogon and Chairman of the House
of Representatives Committee on Civil, Political and Human Rights, was
invited to participate as one of the keynote speakers at the 89th InterParliamentary Conference Symposium on Parliament Guardian of Human
Rights to be held in Budapest, Hungary and Tokyo, Japan from May 19 to 22,
1993. The Philippines is a member of the Inter-Parliamentary Union which
organized the event.[4]
On May 16, 1993, respondent left Manila on board petitioner Air Frances
aircraft bound for Paris, France. He arrived in Paris early morning of May 17,

1993 (5:00 a.m.). While waiting at the De Gaulle International Airport for his
connecting flight to Budapest scheduled at 3:15 p.m. that same day,
respondent learned that petitioner had another aircraft bound for Budapest
with an earlier departure time (10:00 a.m.) than his scheduled flight. He then
went to petitioners counter at the airport and made arrangements for the
change in his booking. He was given a corresponding ticket and boarding
pass for Flight No. 2024 and also a new baggage claim stub for his checkedin luggage.[5]
However, upon arriving in Budapest, respondent was unable to
locate his luggage at the claiming section. He sought assistance from
petitioners counter at the airport where petitioners representative verified
from their computer that he had indeed a checked-in luggage. He was
advised to just wait for his luggage at his hotel and that petitioners
representatives would take charge of delivering the same to him that same
day. But said luggage was never delivered by petitioners representatives
despite follow-up inquiries by respondent.
Upon his return to the Philippines, respondents lawyer immediately
wrote petitioners Station Manager complaining about the lost luggage and
the resulting damages he suffered while in Budapest. Respondent claimed
that his single luggage contained his personal effects such as clothes,
toiletries, medicines for his hypertension, and the speeches he had prepared,
including the notes and reference materials he needed for the
conference. He was thus left with only his travel documents, pocket money
and the clothes he was wearing. Because petitioners representatives
in Budapest failed to deliver his luggage despite their assurances and his
repeated follow-ups, respondent was forced to shop for personal items
including new clothes and his medicines. Aside from these unnecessary
expenditures of about $1,000, respondent had to prepare another speech, in
which he had difficulty due to lack of data and information. Respondent thus
demanded the sum of P1,000,000.00 from the petitioner as compensation for
his loss, inconvenience and moral damages. [6] Petitioner, however, continued
to ignore respondents repeated follow-ups regarding his lost luggage.
On July 13, 1993, respondent filed a complaint[7] for damages
against the petitioner alleging that by reason of its negligence and breach of
obligation to transport and deliver his luggage, respondent suffered
inconvenience, serious anxiety, physical suffering and sleepless nights. It
was further alleged that due to the physical, mental and emotional strain
resulting from the loss of his luggage, aggravated by the fact that he failed to
take his regular medication, respondent had to be taken to a medical clinic

73 | B R I N A S

in Tokyo,Japan for emergency treatment. Respondent asserted that as a

common carrier which advertises and offers its services to the public,
petitioner is under obligation to observe extraordinary diligence in the
vigilance over checked-in luggage and to see to it that respondents luggage
entrusted to petitioners custody would accompany him on his flight and/or
could be claimed by him upon arrival at his point of destination or delivered to
him without delay. Petitioner should therefore be held liable for actual
damages ($2,000.00 or P40,000.00), moral damages (P1,000,000.00),
exemplary damages (P500,000.00), attorneys fees (P50,000.00) and costs of
suit.

On January 3, 1996, the trial court rendered its decision in favor of

respondent and against the petitioner, as follows:
WHEREFORE, premises considered, judgment is
rendered ordering defendant to pay plaintiff:
1. The sum of P1,000,000.00 as moral damages;
2. The sum of P500,000.00 as exemplary damages;
3. The sum of P50,000.00 as attorneys fees; and

[8]

Petitioner filed its answer admitting that respondent was issued

tickets for the flights mentioned, his subsequent request to be transferred to
another flight while at the Paris airport and the loss of his checked-in luggage
upon arrival at Budapest, which luggage has not been retrieved to date and
the respondents repeated follow-ups ignored. However, as to the rest of
respondents allegations, petitioner said it has no knowledge and information
sufficient to form a belief as to their truth. As special and affirmative defense,
petitioner contended that its liability for lost checked-in baggage is governed
by the Warsaw Convention for the Unification of Certain Rules Relating to
International Carriage. Under the said treaty, petitioners liability for lost or
delayed registered baggage of respondent is limited to 250 francs per
kilogram or US$20.00, which constitutes liquidated damages and hence
respondent is not entitled to any further damage.
Petitioner averred that it has taken all necessary measures to avoid
loss of respondents baggage, the contents of which respondent did not
declare, and that it has no intent to cause such loss, much less knew that
such loss could occur. The loss of respondents luggage is due to or
occasioned by force majeure or fortuitous event or other causes beyond the
carriers control. Diligent, sincere and timely efforts were exerted by petitioner
to locate respondents missing luggage and attended to his problem with
utmost courtesy, concern and dispatch. Petitioner further asserted that it
exercised due diligence in the selection and supervision of its employees and
acted in good faith in denying respondents demand for damages. The claims
for actual, moral and exemplary damages and attorneys fees therefore have
no basis in fact and in law, and are, moreover speculative and
unconscionable.
In his Reply,[9] respondent maintained that the loss of his luggage
cannot be attributed to anything other than petitioners simple negligence and
its failure to perform the diligence required of a common carrier.

4. The costs.
SO ORDERED.[10]
The trial court found there was gross negligence on the part of
petitioner which failed to retrieve respondents checked-in luggage up to the
time of the filing of the complaint and as admitted in its answer, ignored
respondents repeated follow-ups. It likewise found petitioner guilty of willful
misconduct as it persistently disregarded the rights of respondent who was
no ordinary individual but a high government official. As to the applicability of
the limited liability for lost baggage under the Warsaw Convention, the trial
court rejected the argument of petitioner citing the case of Alitalia v.
Intermediate Appellate Court.[11]
Petitioner appealed to the CA, which affirmed the trial courts decision. The
CA noted that in the memorandum submitted by petitioner before the trial
court it was mentioned that respondents luggage was eventually found and
delivered to him, which was not denied by respondent and thus resulted in
the withdrawal of the claim for actual damages. As to the trial courts finding
of gross negligence, bad faith and willful misconduct which justified the
award of moral and exemplary damages, the CA sustained the same, stating
thus:
It bears stressing that defendant-appellant
committed a breach of contract by its failure to deliver the
luggage of plaintiff-appellee on time despite demand from
plaintiff-appellee. The unreasonable delay in the delivery
of the luggage has not been satisfactorily explained by
defendant-appellant, either in its memorandum or in its
appellants brief. Instead of justifying the delay, defendant-

74 | B R I N A S

appellant took refuge under the provisions of the Warsaw

Convention to escape liability. Neither was there any
showing of apology on the part of defendant-appellant as to
the delay. Furthermore, the unapologetic defendantappellant even faulted plaintiff-appellee for not leaving a
local address in Budapest in order for the defendantappellant to contact him (plaintiff-appellee) in the event
the luggage is found. This actuation of defendantappellant is a clear showing of willful misconduct and a
deliberate design to avoid liability. It amounts to bad
faith. As elucidated by Chief Justice Hilario Davide, Jr., [b]ad
faith does not simply connote bad judgment or negligence; it
imports a dishonest purpose or some moral obliquity and
conscious doing of a wrong, a breach of a known duty
through some motive or interest or ill will that partakes of the
nature of fraud.[12] (Emphasis supplied.)
Its motion for reconsideration having been denied, petitioner filed the
present Rule 45 petition raising the following grounds:
I.
THE AMOUNTS AWARDED TO RESPONDENT AS MORAL
AND EXEMPLARY DAMAGES ARE EXCESSIVE,
UNCONSCIONABLE AND UNREASONABLE.
II.
THERE IS NO LEGAL AND FACTUAL BASIS TO THE
FINDINGS OF THE TRIAL COURT AND THE COURT OF
APPEALS THAT PETITIONERS ACTIONS WERE
ATTENDED BY GROSS NEGLIGENCE, BAD FAITH AND
WILLFUL MISCONDUCT AND THAT IT ACTED IN A
WANTON, FRAUDULENT, RECKLESS, OPPRESSIVE OR
MALEVOLENT MANNER, TO JUSTIFY THE AWARD OF
MORAL AND EXEMPLARY DAMAGES.[13]
Petitioner assails the trial and appellate courts for awarding extravagant
sums to respondent that already tend to punish the petitioner and enrich the
respondent, which is not the function at all of moral damages. Upon the facts
established, the damages awarded are definitely not proportionate or
commensurate to the wrong or injury supposedly inflicted. Without belittling

the problems respondent experienced in Budapest after losing his luggage,

petitioner points out that despite the unfortunate incident, respondent was
able to reconstruct the speeches, notes and study guides he had earlier
prepared for the conference in Budapest and Tokyo, and to attend, speak
and participate therein as scheduled. Since he prepared the research and
wrote his speech, considering his acknowledged and long-standing expertise
in the field of human rights in the Philippines, respondent should have had no
difficulty delivering his speech even without his notes. In addition, there is no
evidence that members of the Inter-Parliamentary Union made derogatory
statements or even knew that he was unprepared for the conference.
Bearing in mind that the actual damages sought by respondent was only
$2,000.00, then clearly the trial court went way beyond that amount in
determining the appropriate damages, inspite of the fact that the respondent
eventually got back his baggage.[14]
Comparing the situation in this case to other cases awarding similar
damages to the aggrieved passenger as a result of breaches of contract by
international carriers, petitioner argues that even assuming that respondent
was entitled to moral and exemplary damages, the sums adjudged should be
modified or reduced. It is stressed that petitioner or its agents were never
rude or discourteous toward respondent; he was not subjected to humiliating
treatment or comments as in the case of Lopez, et al. v. Pan American World
Airways,[15] Ortigas, Jr. v. Lufthansa German Airlines [16] and Zulueta v. Pan
American World Airways, Inc.[17].The mere fact that respondent was a
Congressman should not result in an automatic increase in the moral and
exemplary damages recoverable. As held in Kierulf v. Court of Appeals [18] the
social and financial standing of a claimant may be considered only if he or
she was subjected to contemptuous conduct despite the offenders
knowledge of his or her social and financial standing. [19]
In any event, petitioner invokes the application of the exception to
the rule that only questions of law may be entertained by this Court in a
petition for review under Rule 45 as to allow a factual review of the
case. First, petitioner contends that it has always maintained that the
admission in its answer was only made out of inadvertence, considering that
it was inconsistent with the special and affirmative defenses set forth in the
same pleading. The trial court incorrectly concluded that petitioner had not
prepared a Property Irregularity Report (PIR) but fabricated one only as an
afterthought. A PIR can only be initiated upon the instance of a passenger
whose baggage had been lost, and in this case it was prepared by the station
where the loss was reported. The PIR in this case was automatically and
chronologically recorded in petitioners computerized system. Respondent
himself admitted in his testimony that he gave his Philippine address and

75 | B R I N A S

telephone number to the lady in charge of petitioners complaint desk

in Budapest. It was not necessary to furnish a passenger with a copy of the
PIR since its purpose is for the airline to trace a lost baggage. What
respondent ought to have done was to make a xerox copy thereof for
himself.[20]
Petitioner reiterates that there was no bad faith or negligence on its
part and the burden is on the respondent to prove by clear and convincing
evidence that it acted in bad faith. Respondent in his testimony miserably
failed to prove that bad faith, fraud or ill will motivated or caused the delay of
his baggage. This Court will surely agree that mere failure of a carrier to
deliver a passengers baggage at the agreed place and time did not ipso
facto amount to willful misconduct as to make it liable for moral and
exemplary damages. Petitioner adduced evidence showing that it exerted
diligent, sincere and timely efforts to locate the missing baggage, eventually
leading to its recovery. It attended to respondents problem with utmost
courtesy, concern and dispatch. Respondent, moreover, never alleged that
petitioners employees were at anytime rude, mistreated him or in anyway
showed improper behavior.[21]

compensatory damages and neither did he adduce evidence of the actual

amount of loss and damage incurred by such delayed delivery of his
luggage. Consequently, the trial court proceeded to determine only the
propriety of his claim for moral and exemplary damages, and attorneys fees.
In awarding moral damages for breach of contract of carriage, the
breach must be wanton and deliberately injurious or the one responsible
acted fraudulently or with malice or bad faith. [25] Not every case of mental
anguish, fright or serious anxiety calls for the award of moral damages.
[26]
Where in breaching the contract of carriage the airline is not shown to
have acted fraudulently or in bad faith, liability for damages is limited to the
natural and probable consequences of the breach of the obligation which the
parties had foreseen or could have reasonably foreseen. In such a case the
liability does not include moral and exemplary damages. [27]
Bad faith should be established by clear and convincing
evidence. The settled rule is that the law always presumes good faith such
that any person who seeks to be awarded damages due to the acts of
another has the burden of proving that the latter acted in bad faith or with ill
motive.[28]

The petition is partly meritorious.

A business intended to serve the travelling public primarily, a contract
of carriage is imbued with public interest. [22] The law governing common
carriers consequently imposes an exacting standard. Article 1735 of the Civil
Code provides that in case of lost or damaged goods, common carriers are
presumed to have been at fault or to have acted negligently, unless they
prove that they observed extraordinary diligence as required by Article
1733. Thus, in an action based on a breach of contract of carriage, the
aggrieved party does not have to prove that the common carrier was at fault
or was negligent. All that he has to prove is the existence of the contract and
the fact of its non-performance by the carrier.[23]
That respondents checked-in luggage was not found upon arrival at
his destination and was not returned to him until about two years later [24] is
not disputed. The action filed by the respondent is founded on such breach of
the contract of carriage with petitioner who offered no satisfactory
explanation for the unreasonable delay in the delivery of respondents
baggage. The presumption of negligence was not overcome by the petitioner
and hence its liability for the delay was sufficiently established.However,
upon receipt of the said luggage during the pendency of the case in the trial
court, respondent did not anymore press on his claim for actual or

In the case of Tan v. Northwest Airlines, Inc.,[29] we sustained the

CAs deletion of moral and exemplary damages awarded to a passenger
whose baggage were loaded to another plane with the same expected date
and time of arrival but nevertheless not delivered to her on time. We found
that respondent carrier was not motivated by malice or bad faith in doing so
due to weight and balance restrictions as a safety measure. In another case
involving the off-loading of private respondents baggage to another
destination, taken together with petitioner airlines neglect in providing the
necessary accommodations and assistance to its stranded passengers,
aggravated by the discourteous acts of its employees, we upheld the CA in
sustaining the trial courts decision awarding moral and exemplary damages
and attorneys fees. We pointed out that it is PALs duty to provide assistance
to private respondents and to any other passenger similarly inconvenienced
due to delay in the completion of the transport and the receipt of their
baggage.[30]
After a careful review, we find that petitioner is liable for moral
damages.

76 | B R I N A S

Petitioners station manager, Ma. Lourdes Reyes, testified that upon

receiving the letter-complaint of respondents counsel, she immediately
began working on the PIR from their computerized data. Based on her
testimony, a PIR is issued at the airline station upon complaint by a
passenger concerning missing baggage. From the information obtained in
the computer-printout, it appears that a PIR [31] was initiated at
petitioners Budapest counter. A search telex for the missing luggage was
sent out on the following dates: May 17, May 21 and May 23, 1993. As
shown in the PIR printout, the information respondent supposedly furnished
to petitioner was only his Philippine address and telephone number, and not
the address and contact number of the hotel where he was billeted
atBudapest. According to the witness, PIR usually is printed in two originals,
one is kept by the station manager and the other copy given to the
passenger. The witness further claimed that there was no record or entry in
the PIR of any follow-up call made by the respondent while in Budapest.
[32]
Respondent, on the other hand, claimed that he was not given a copy of
this PIR and that his repeated telephone calls to inquire about his lost
luggage were ignored.

passenger whose baggage was not transported and delivered to him at his
travel destination and scheduled time. Inattention to and lack of care for the
interest of its passengers who are entitled to its utmost consideration,
particularly as to their convenience, amount to bad faith which entitles the
passenger to an award of moral damages. [33] What the law considers as bad
faith which may furnish the ground for an award of moral damages would be
bad faith in securing the contract and in the execution thereof, as well as in
the enforcement of its terms, or any other kind of deceit. [34]

We hold that the trial and appellate courts did not err in finding that
petitioner acted in bad faith in repeatedly ignoring respondents follow-up
calls. The alleged entries in the PIR deserve scant consideration, as these
have not been properly identified or authenticated by the airline station
representative in Budapest who initiated and inputed the said
entries. Furthermore, this Court cannot accept the convenient excuse given
by petitioner that respondent should be faulted in allegedly not giving his
hotel address and telephone number. It is difficult to believe that respondent,
who had just lost his single luggage containing all his necessities for his stay
in a foreign land and his reference materials for a speaking engagement,
would not give an information so vital such as his hotel address and contact
number to the airline counter where he had promptly and frantically filed his
complaint. And even assuming arguendo that his Philippine address and
contact number were the only details respondent had provided for the PIR,
still there was no explanation as to why petitioner never communicated with
respondents concerning his lost baggage long after respondent had already
returned to the Philippines. While the missing luggage was eventually
recovered, it was returned to respondent only after the trial of this case.

However,
we
agree
with
petitioner
that
the
sum
of P1,000,000.00 awarded by the trial court is excessive and not
proportionate to the loss or suffering inflicted on the passenger under the
circumstances. As in Trans World Airlines v. Court of Appeals[35] where this
Court after considering the social standing of the aggrieved passenger who is
a lawyer and director of several companies, the amount of P500,000.00
awarded by the trial court as moral damages was still reduced
to P300,000.00, the moral damages granted to herein respondent should
likewise be adjusted.

Furthermore, the alleged copy of the PIR confirmed that the only
action taken by the petitioner to locate respondents luggage were telex
searches allegedly made on May 17, 21 and 23, 1993. There was not even
any attempt to explain the reason for the loss of respondents
luggage. Clearly, petitioner did not give the attention and care due to its

While respondent failed to cite any act of discourtesy, discrimination

or rudeness by petitioners employees, this did not make his loss and moral
suffering insignificant and less deserving of compensation. In repeatedly
ignoring respondents inquiries, petitioners employees exhibited an indifferent
attitude without due regard for the inconvenience and anxiety he experienced
after realizing that his luggage was missing. Petitioner was thus guilty of bad
faith in breaching its contract of carriage with the respondent, which entitles
the latter to the award of moral damages.

The purpose of awarding moral damages is to enable the injured

party to obtain means, diversion or amusement that will serve to alleviate the
moral suffering he has undergone by reason of defendant's culpable action.
On the other hand, the aim of awarding exemplary damages is to deter
serious wrongdoings.[36] Article 2216 of the Civil Code provides that
assessment of damages is left to the discretion of the court according to the
circumstances of each case. This discretion is limited by the principle that the
amount awarded should not be palpably excessive as to indicate that it was
the result of prejudice or corruption on the part of the trial court. Simply put,
the amount of damages must be fair, reasonable and proportionate to the
injury suffered.[37]
Where as in this case the air carrier failed to act timely on the
passengers predicament caused by its employees mistake and more than

77 | B R I N A S

ordinary inadvertence or inattention, and the passenger failed to show any

act of arrogance, discourtesy or rudeness committed by the air carriers
employees, the amounts of P200,000.00, P50,000.00 and P30,000.00 as
moral damages, exemplary damages and attorneys fees would be sufficient
and justified.[38]
WHEREFORE, the petition is DENIED. The Decision dated June 30,
2004 of the Court of Appeals in CA-G.R. CV No. 56587 is
hereby AFFIRMED with MODIFICATION in that the award of moral
damages, exemplary damages and attorneys fees are hereby reduced
to P200,000.00, P50,000.00 and P30,000.00, respectively.
With costs against the petitioner.
SO ORDERED.

78 | B R I N A S

[G.R. No. 104685. March 14, 1996]

SABENA BELGIAN WORLD AIRLINES, petitioner, vs. HON. COURT OF
APPEALS and MA. PAULA SAN AGUSTIN, respondents.
DECISION

On September 30, 1987, on the occasion of plaintiffs following up of her

luggage claim, she was furnished copies of defendants telexes with an
information that the Brussels Office of defendant found the luggage and that
they have broken the locks for identification (Exhibit B). Plaintiff was assured
by the defendant that it has notified its Manila Office that the luggage will be
shipped to Manila on October 27, 1987. But unfortunately plaintiff was
informed that the luggage was lost for the second time (Exhibits C and C-1).

VITUG, J.:
The appeal before the Court involves the issue of an airlines liability for
lost luggage. The petition for review assails the decision of the Court
Appeals,[1] dated 27 February 1992, affirming an award of damages made by
the trial court in a complaint filed by private respondent against petitioner.
The factual background of the case, narrated by the trial court and
reproduced at length by the appellate court, is hereunder quoted:
On August 21, 1987, plaintiff was a passenger on board Flight SN 284 of
defendant airline originating from Casablanca to Brussels, Belgium on her
way back to Manila. Plaintiff checked in her luggage which contained her
valuables, namely: jewelries valued at $2,350.00; clothes $1,500.00;
shoes/bag $150; accessories $75; luggage itself $10.00; or a total of
$4,265.00, for which she was issued Tag No. 71423. She stayed overnight in
Brussels and her luggage was left on board Flight SN 284.
Plaintiff arrived at Manila International Airport on September 2, 1987 and
immediately submitted her Tag No. 71423 to facilitate the release of her
luggage hut the luggage was missing. She was advised to accomplish and
submit a property Irregularity Report which she submitted and filed on the
same day.
She followed up her claim on September 14, 1987 but the luggage remained
to be missing.
On September 15, 1987, she filed her formal complaint with the office of
Ferge Massed, defendants Local Manager, demanding immediate attention
(Exh. A).

At the time of the filling of the complaint, the luggage with its content has not
been found.
Plaintiff demanded from the defendant the money value of the luggage and
its contents amounting to $4,265.00 or its exchange value, but defendant
refused to settle the claim.
Defendant asserts in its Answer and its evidence tend to show that while it
admits that the plaintiff was a passenger on board Flight No. SN 284 with a
piece of checked in luggage bearing Tag No. 71423, the loss of the luggage
was due to plaintiffs sole if not contributory negligence; that she did not
declare the valuable items in her checked-in luggage at the flight counter
when she checked in for her flight from Casablanca to Brussels so that either
the representative of the defendant at the counter would have advised her to
secure an insurance on the alleged valuable items and required her to pay
additional charges, or would have refused acceptance of her baggage as
required by the generally accepted practices of international carriers; that
Section 9(a), Article IX of General Conditions of carriage requiring
passengers to collect their checked baggage at the place of stopover, plaintiff
neglected to claim her baggage at the Brussels Airport; that plaintiff should
have retrieved her undeclared valuables from her baggage at the Brussels
Airport since her flight from Brussels to Manila will still have to visit for
confirmation inasmuch as only her flight from Casablanca to Brussels was
confirmed; that defendant incorporated in all Sabena Plane Tickets, including
Sabena Ticket No. 082422-72502241 issued to plaintiff in Manila on August
21, 1987, a warning that Items of value should be carried on your person and
that some carriers assume no liability for fragile, valuable or perishable
articles and that further information may he obtained from the carrier for
guidance; that granting without conceding that defendant is liable, its liability

79 | B R I N A S

is limited only to US $20.00 per kilo due to plaintiffs failure to declare a higher
value on the contents of her checked in luggage and pay additional charges
thereon.[2]

Passengers shall not include in his checked baggage, and the carrier may
refuse to carry as checked baggage, fragile or perishable articles, money,
jewelry, precious metals, negotiable papers, securities or other valuables. [4]

The trial court rendered judgment ordering petitioner Sabena Belgian

World Airlines to pay private respondent Ma. Paula San Agustin

Fault or negligence consists in the omission of that diligence which is

demanded by the nature of an obligation and corresponds with the
circumstances of the person, of the time, and of the place. When the source
of an obligation is derived from a contract, the mere breach or non-fulfillment
of the prestation gives rise to the presumption of fault on the part of the
obligor. This rule is not different in the case of common carriers in the
carriage of goods which, indeed, are bound to observe not just the due
diligence of a good father of a family but that of extraordinary care in the
vigilance over the goods. The appellate court has aptly observed:

(a) x x x US$4,265.00 or its legal exchange in Philippine pesos;

(b) x x x P30,000.00 as moral damages;
(c) x x x P10,000.00 as exemplary damages;
(d) x x x P10,000.00 attorneys fees; and
(e) (t)he costs of the suit.[3]
Sabena appealed the decision of the Regional Trial Court to the Court of
Appeals. The appellate court, in its decision of 27 February 1992, affirmed in
toto the trial courts judgment.
Petitioner airline company, in contending that the alleged negligence of
private respondent should be considered the primary cause for the loss of
her luggage, avers that, despite her awareness that the flight ticket had been
confirmed only for Casablanca and Brussels, and that her flight from
Brussels to Manila had yet to be confirmed, she did not retrieve the luggage
upon arrival in Brussels. Petitioner insists that private respondent, being a
seasoned international traveler, must have likewise been familiar with the
standard provisions contained in her flight ticket that items of value are
required to be hand-carried by the passenger and that the liability of the
airline or loss, delay or damage to baggage would be limited, in any event, to
only US$20.00 per kilo unless a higher value is declared in advance and
corresponding additional charges are paid thereon. At the Casablanca
International Airport, private respondent, in checking in her luggage, evidently
did not declare its contents or value. Petitioner cites Section 5(c), Article IX,
of the General Conditions of Carriage, signed at Warsaw, Poland, on 02
October 1929, as amended by the Hague Protocol of 1955, generally
observed by International carriers, stating, among other things, that:

x x x Art. 1733 of the [Civil] Code provides that from the very nature of their
business and by reasons of public policy, common carriers are bound to
observe extraordinary diligence in the vigilance over the goods transported
by them. This extraordinary responsibility, according to Art. 1736, lasts from
the time the goods are unconditionally placed in the possession of and
received by the carrier until they are delivered actually or constructively to the
consignee or person who has the right to receive them. Art. 1737 states that
the common carriers duty to observe extraordinary diligence in the vigilance
over the goods transported by them remains in full force and effect even
when they are temporarily unloaded or stored in transit. And Art. 1735
establishes the presumption 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 had observed extraordinary
diligence as required in Article 1733.
The only exceptions to the foregoing extraordinary responsibility of the
common carrier is when the loss, destruction, or deterioration of the goods is
due to any of the following causes:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;

80 | B R I N A S

(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.

before it, sustained the trial court in finding petitioner ultimately guilty of gross
negligence in the handling of private respondents luggage. The loss of said
baggage not only once by twice, said the appellate court, underscores the
wanton negligence and lack of care on the part of the carrier.

Not one of the above excepted causes obtains in this case. [5]
The above rules remain basically unchanged even when the contract is
breached by tort[6] although noncontradictory principles on quasi-delict may
then be assimilated as also forming part of the governing law. Petitioner is
not thus entirely off track when it has likewise raised in its defense the tort
doctrine of proximate cause. Unfortunately for petitioner, however, the
doctrine cannot, in this particular instance, support its case. Proximate cause
is that which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces injury and without which the result would not
have occurred. The exemplification by the Court in one case [7] is simple and
explicit; viz:
(T)he proximate legal cause is that acting first and producing the injury, either
immediately or by setting other events in motion, all constituting a natural and
Continuous chain of events, each having a close causal Connection with its
immediate predecessor, the final event in the chain immediately affecting the
injury as a natural and probable result of the cause which first acted, under
such circumstances that the person responsible for the first event should, as
an ordinarily prudent, and intelligent person, have reasonable ground to
expect at the moment of his act or default that an injury to some person
might probably result therefrom.
It remained undisputed that private respondents luggage was lost while
it was in the custody of petitioner. It was supposed to arrive on the same
flight that private respondent took in returning to Manila on 02 September
1987. When she discovered that the luggage was missing, she promptly
accomplished and filed a Property Irregularity Report. She followed up her
claim on 14 September 1987, and filed, on the following day, a formal lettercomplaint with petitioner. She felt relieved when, on 23 October 1987, she
was advised that her luggage had finally been found, with its contents intact
when examined, and that she could expect it to arrive on 27 October
1987. She then waited anxiously only to be told later that her luggage had
been lost for the second time. Thus, the appellate court, given all the facts

The above findings, which certainly cannot be said to be without basis,

foreclose whatever rights petitioner might have had to the possible limitation
of liabilities enjoyed by international air carriers under the Warsaw
Convention (Convention for the Unification of Certain Rules Relating to
International Carriage by Air, as amended by the Hague Protocol of 1955, the
Montreal Agreement of 1966, the Guatemala Protocol of 1971 and the
Montreal Protocols of 1975). In Alitalia vs. Intermediate Appellate Court,
[8]
now Chief Justice Andres R. Narvasa, speaking for the Court, has
explained it well; he said:
The Warsaw Convention however denies to the carrier availment of the
provisions which exclude or limit his liability, if the damage is caused by his
wilful misconduct or by such default on his part as, in accordance with the
law of the court seized of the case, is considered to be equivalent to wilful
misconduct, or if the damage is (similarly) caused x x x by any agent of the
carrier acting within the scope of his employment. The Hague Protocol
amended the Warsaw Convention by removing the provision that if the airline
took all necessary steps to avoid the damage, it could exculpate itself
completely, and declaring the stated limits of liability not applicable if it is
proved that the damage resulted from an act or omission of the carrier, its
servants or agents, done with intent to cause damage or recklessly and with
knowledge that damage would probably result. The same deletion was
effected by the Montreal Agreement of 1966, with the result that a passenger
could recover unlimited damages upon proof of wilful misconduct.
The Convention does not thus operate as an exclusive enumeration of the
instances of an airlines liability, or as an absolute limit of the extent of that
liability. Such a proposition is not borne out by the language of the
Convention, as this Court has now, and at an earlier time, pointed
out. Moreover, slight reflection readily leads to the conclusion that it should
be deemed a limit of liability only in those cases where the cause of the
death or injury to person, or destruction, loss or damage to property or delay
in its transport is not attributable to or attended by any wilful misconduct, bad

81 | B R I N A S

faith, recklessness or otherwise improper conduct on the part of any official

or employee for which the carrier is responsible, and there is otherwise no
special or extraordinary form of resulting injury. The Contentions provisions,
in short, do not regulate or exclude liability for other breaches of contract by
the carrier or misconduct of its officers and employees, or for some particular
or exceptional type of damage. Otherwise, an air carrier would be exempt
from any liability for damages in the event of its absolute refusal, in bad faith,
to comply with a contract of carriage, which is absurd. Nor may it for a
moment be supposed that if a member of the aircraft complement should
inflict some physical injury on a passenger, or maliciously destroy or damage
the latters property, the Convention might successfully be pleaded as the
sole gauge to determine the carriers liability to the passenger. Neither may
the Convention be invoked to justify the disregard of some extraordinary sort
of damage resulting to a passenger and preclude recovery therefor beyond
the limits set by said Convention. It is in this sense that the Convention has
been applied, or ignored, depending on the peculiar facts presented by each
case.
The Court thus sees no error in the preponderant application to the
instant case by the appellate court, as well as by the trial court, of the usual
rules on the extent of recoverable damages beyond the Warsaw
limitations. Under domestic law and jurisprudence (the Philippines being the
country of destination), the attendance of gross negligence (given the
equivalent of fraud or bad faith) holds the common carrier liable for all
damages which can be reasonably attributed, although unforeseen, to the
non-performance of the obligation,[9]including moral and exemplary damages.
[10]

WHEREFORE, the decision appealed from is AFFIRMED. Costs against

petitioner.
SO ORDERED.

82 | B R I N A S

[G.R. No. 116044-45. March 9, 2000]

AMERICAN AIRLINES, petitioner, vs. COURT OF APPEALS, HON.
BERNARDO
LL.
SALAS
and
DEMOCRITO
MENDOZA, respondents. Oldmis o
DECISION
GONZAGA_REYES, J.:
Before us is a petition for review of the decision dated December 24, 1993
rendered by the Court of Appeals in the consolidated cases docketed as CAG.R. SP nos. 30946 and 31452 entitled American Airlines vs. The Presiding
Judge Branch 8 of the Regional Trial Court of Cebu and Democrito Mendoza,
petitions for certiorari and prohibition. In SP no. 30946, the petitioner assails
the trial courts order denying the petitioners motion to dismiss the action for
damages filed by the private respondent for lack of jurisdiction under section
28 (1) of the Warsaw Convention; and in SP No. 31452 the petitioner
challenges the validity of the trial courts order striking off the record the
deposition of the petitioners security officer taken in Geneva, Switzerland for
failure of the said security officer to answer the cross interrogatories
propounded by the private respondent. Ncm

The sole issue raised in SP No. 30946 is the questioned jurisdiction of the
Regional Trial Court of Cebu to take cognizance of the action for damages
filed by the private respondent against herein petitioner in view of Art 28 (1)
of the Warsaw Convention.[1] It is undisputed that the private respondent
purchased from Singapore Airlines in Manila conjunction tickets for Manila Singapore - Athens - Larnaca - Rome - Turin - Zurich - Geneva Copenhagen - New York. The petitioner was not a participating airline in any
of the segments in the itinerary under the said conjunction tickets. In Geneva
the petitioner decided to forego his trip to Copenhagen and to go straight to
New York and in the absence of a direct flight under his conjunction tickets
from Geneva to New York, the private respondent on June 7, 1989
exchanged the unused portion of the conjunction ticket for a one-way ticket
from Geneva to New York from the petitioner airline. Petitioner issued its own
ticket to the private respondent in Geneva and claimed the value of the
unused portion of the conjunction ticket from the IATA[2] clearing house in
Geneva. Ncmmis
In September 1989, private respondent filed an action for damages before
the regional trial court of Cebu for the alleged embarassment and mental
anguish he suffered at the Geneva Airport when the petitioners security
officers prevented him from boarding the plane, detained him for about an
hour and allowed him to board the plane only after all the other passengers
have boarded. The petitioner filed a motion to dismiss for lack of jurisdiction
of Philippine courts to entertain the said proceedings under Art. 28 (1) of the
Warsaw Convention. The trial court denied the motion. The order of denial
was elevated to the Court of Appeals which affirmed the ruling of the trial
court. Both the trial and that appellate courts held that the suit may be
brought in the Philippines under the pool partnership agreement among the
IATA members, which include Singapore Airlines and American Airlines,
wherein the members act as agents of each other in the issuance of tickets
to those who may need their services. The contract of carriage perfected in
Manila between the private respondent and Singapore Airlines binds the
petitioner as an agent of Singapore Airlines and considering that the
petitioner has a place of business in Manila, the third option of the plaintiff
under the Warsaw Convention i.e. the action may be brought in the place
where the contract was perfected and where the airline has a place of
business, is applicable. Hence this petition assailing the order upholding the
jurisdiction of Philippine courts over the instant action. Scnc m

83 | B R I N A S

Both parties filed simultaneous memoranda pursuant to the resolution of this

Court giving due course to the petition.
The petitioners theory is as follows: Under Art 28 (1) of the Warsaw
convention an action for damages must be brought at the option of the
plaintiff either before the court of the 1) domicile of the carrier; 2) the carriers
principal place of business; 3) the place where the carrier has a place of
business through which the contract was made; 4) the place of destination.
The petitioner asserts that the Philippines is neither the domicile nor the
principal place of business of the defendant airline; nor is it the place of
destination. As regards the third option of the plaintiff, the petitioner contends
that since the Philippines is not the place where the contract of carriage was
made between the parties herein, Philippine courts do not have jurisdiction
over this action for damages. The issuance of petitioners own ticket in
Geneva in exchange for the conjunction ticket issued by Singapore Airlines
for the final leg of the private respondents trip gave rise to a separate and
distinct contract of carriage from that entered into by the private respondent
with Singapore Airlines in Manila. Petitioner lays stress on the fact that the
plane ticket for a direct flight from Geneva to New York was purchased by the
private respondent from the petitioner by "exchange and cash" which
signifies that the contract of carriage with Singapore Airlines was terminated
and a second contract was perfected. Moreover, the second contract of
carriage cannot be deemed to have been an extension of the first as the
petitioner airline is not a participating airline in any of the destinations under
the first contract. The petitioner claims that the private respondents argument
that the petitioner is bound under the IATA Rules as agent of the principal
airline is irrelevant and the alleged bad faith of the airline does not remove
the case from the applicability of the Warsaw Convention. Further, the IATA
Rule cited by the private respondent which is admittedly printed on the ticket
issued by the petitioner to him which states, "An air carrier issuing a ticket for
carriage over the lines of another carrier does so only as its agent" does not
apply herein, as neither Singapore Airlines nor the petitioner issued a ticket
to the private respondent covering the route of the other. Since the
conjunction tickets issued by Singapore Airlines do not include the route
covered by the ticket issued by the petitioner, the petitioner airline submits
that it did not act as an agent of Singapore Airlines. Sdaa miso

Private respondent controverts the applicability of the Warsaw Convention in

this case. He posits that under Article 17 of the Warsaw Convention [3] a
carrier may be held liable for damages if the "accident" occurred on board
the airline or in the course of "embarking or disembarking" from the carrier
and that under Article 25 (1)[4] thereof the provisions of the convention will not
apply if the damage is caused by the "willful misconduct" of the carrier. He
argues that his cause of action is based on the incident at the pre-departure
area of the Geneva airport and not during the process of embarking nor
disembarking from the carrier and that security officers of the petitioner
airline acted in bad faith. Accordingly, this case is released from the terms of
the Convention. Private respondent argues that assuming that the
convention applies, his trip to nine cities in different countries performed by
different carriers under the conjunction tickets issued in Manila by Singapore
Airlines is regarded as a single transaction; as such the final leg of his trip
from Geneva to New York with the petitioner airline is part and parcel of the
original contract of carriage perfected in Manila. Thus, the third option of the
plaintiff under Art. 28 (1) e.g., where the carrier has a place of business
through which the contract of carriage was made, applies herein and the
case was properly filed in the Philippines. The private respondent seeks
affirmance of the ruling of the lower courts that the petitioner acted as an
agent of Singapore Airlines under the IATA Rules and as an agent of the
principal carrier the petitioner may be held liable under the contract of
carriage perfected in Manila, citing the judicial admission made by the
petitioner that it claimed the value of the unused portion of the private
respondents conjunction tickets from the IATA Clearing House in Geneva
where the accounts of both airlines are respectively credited and debited.
Accordingly, the petitioner cannot now deny the contract of agency with
Singapore Airlines after it honored the conjunction tickets issued by the
latter. Sdaad
The petition is without merit.
The Warsaw Convention to which the Republic of the Philippines is a party
and which has the force and effect of law in this country applies to all
international transportation of persons, baggage or goods performed by an
aircraft gratuitously or for hire.[5] As enumerated in the Preamble of the
Convention, one of the objectives is "to regulate in a uniform manner the
conditions of international transportation by air". [6]The contract of carriage

84 | B R I N A S

entered into by the private respondent with Singapore Airlines, and

subsequently with the petitioner, to transport him to nine cities in different
countries with New York as the final destination is a contract of international
transportation and the provisions of the Convention automatically apply and
exclusively govern the rights and liabilities of the airline and its passengers.
[7]
This includes section 28 (1) which enumerates the four places where an
action for damages may be brought. Scs daad

Petitioner disputes the ruling of the lower court that it is. Petitioners main
argument is that the issuance of a new ticket in Geneva created a contract of
carriage separate and distinct from that entered by the private respondent in
Manila.
We find the petitioners argument without merit. Juris
Art 1(3) of the Warsaw Convention which states:

The threshold issue of jurisdiction of Philippine courts under Art 28 (1) must
first be resolved before any pronouncements may be made on the liability of
the carrier thereunder.[8] The objections raised by the private respondent that
this case is released from the terms of the Convention because the incident
on which this action is predicated did not occur in the process of embarking
and disembarking from the carrier under Art 17 [9] and that the employees of
the petitioner airline acted with malice and bad faith under Art 25 (1)
[10]
pertain to the merits of the case which may be examined only if the action
has first been properly commenced under the rules on jurisdiction set forth in
Art. 28 (1).

"Transportation to be performed by several successive

carriers shall be deemed, for the purposes of this
convention, to be one undivided transportation, if it has been
regarded by the parties as a single operation, whether it has
been agreed upon under the form of a single contract or a
series of contracts, and it shall not lose its international
character merely because one contract or series of contracts
is to be performed entirely within the territory subject of the
sovereignty, suzerainty, mandate or authority of the same
High contracting Party." Sc juris

Art (28) (1) of the Warsaw Convention states: Sup rema

Art 28 (1) An action for damages must be brought at the
option of the plaintiff, in the territory of one of the High
Contracting Parties, either before the court of the domicile of
the carrier or of his principal place of business or where he
has a place of business through which the contract has been
made, or before the court at the place of destination.
There is no dispute that petitioner issued the ticket in Geneva which was
neither the domicile nor the principal place of business of petitioner nor the
respondents place of destination.
The question is whether the contract of transportation between the petitioner
and the private respondent would be considered as a single operation and
part of the contract of transportation entered into by the latter with Singapore
Airlines in Manila.

The contract of carriage between the private respondent and Singapore

Airlines although performed by different carriers under a series of airline
tickets, including that issued by petitioner, constitutes a single operation.
Members of the IATA are under a general pool partnership agreement
wherein they act as agent of each other in the issuance of tickets [11] to
contracted passengers to boost ticket sales worldwide and at the same time
provide passengers easy access to airlines which are otherwise inaccessible
in some parts of the world. Booking and reservation among airline members
are allowed even by telephone and it has become an accepted practice
among them.[12] A member airline which enters into a contract of carriage
consisting of a series of trips to be performed by different carriers is
authorized to receive the fare for the whole trip and through the required
process of interline settlement of accounts by way of the IATA clearing house
an airline is duly compensated for the segment of the trip serviced. [13] Thus,
when the petitioner accepted the unused portion of the conjunction tickets,
entered it in the IATA clearing house and undertook to transport the private
respondent over the route covered by the unused portion of the conjunction
tickets, i.e., Geneva to New York, the petitioner tacitly recognized its

85 | B R I N A S

commitment under the IATA pool arrangement to act as agent of the principal
contracting airline, Singapore Airlines, as to the segment of the trip the
petitioner agreed to undertake. As such, the petitioner thereby assumed the
obligation to take the place of the carrier originally designated in the original
conjunction ticket. The petitioners argument that it is not a designated carrier
in the original conjunction tickets and that it issued its own ticket is not
decisive of its liability. The new ticket was simply a replacement for the
unused portion of the conjunction ticket, both tickets being for the same
amount of US$ 2,760 and having the same points of departure and
destination.[14] By constituting itself as an agent of the principal carrier the
petitioners undertaking should be taken as part of a single operation under
the contract of carriage executed by the private respondent and Singapore
Airlines in Manila.
The quoted provisions of the Warsaw Convention Art. 1(3) clearly states that
a contract of air transportation is taken as a single operation whether it is
founded on a single contract or a series of contracts. The number of tickets
issued does not detract from the oneness of the contract of carriage as long
as the parties regard the contract as a single operation. The evident purpose
underlying this Article is to promote international air travel by facilitating the
procurement of a series of contracts for air transportation through a single
principal and obligating different airlines to be bound by one contract of
transportation. Petitioners acquiescence to take the place of the original
designated carrier binds it under the contract of carriage entered into by the
private respondent and Singapore Airlines in Manila. Juris sc

with jurisdiction over this case. We note that while this case was filed in Cebu
and not in Manila the issue of venue is no longer an issue as the petitioner is
deemed to have waived it when it presented evidence before the trial court.
The issue raised in SP No. 31452 which is whether or not the trial court
committed grave abuse of discretion in ordering the deposition of the
petitioners security officer taken in Geneva to be stricken off the record for
failure of the said security officer to appear before the Philippine consul in
Geneva to answer the cross-interrogatories filed by the private respondent
does not have to be resolved. The subsequent appearance of the said
security officer before the Philippine consul in Geneva on September 19,
1994 and the answer to the cross-interrogatories propounded by the private
respondent was transmitted to the trial court by the Philippine consul in
Geneva on September 23, 1994 [15] should be deemed as full compliance with
the requisites of the right of the private respondent to cross-examine the
petitioners witness. The deposition filed by the petitioner should be reinstated
as part of the evidence and considered together with the answer to the crossinterrogatories.
WHEREFORE, the judgment of the appellate court in CA-G.R. SP No. 30946
is affirmed. The case is ordered remanded to the court of origin for further
proceedings. The decision of the appellate court in CA-G.R. SP. No. 31452 is
set aside. The deposition of the petitioners security officer is reinstated as
part of the evidence. Misj uris
SO ORDERED.

The third option of the plaintiff under Art 28 (1) of the Warsaw
Convention e.g., to sue in the place of business of the carrier wherein the
contract was made, is therefore, Manila, and Philippine courts are clothed

86 | B R I N A S