3. Defenses and Conditions deck.
deck. The logs stored in the lower hold were not secured by cable wire, because they fitted
CENTRAL SHIPPING COMPANY, INC., petitioner, vs. INSURANCE COMPANY OF NORTH
AMERICA, respondent.
DOCTRINE: A common carrier is presumed to be at fault or negligent. It shall be liable for the
loss, destruction or deterioration of its cargo, unless it can prove that the sole and proximate
cause of such event is one of the causes enumerated in Article 1734 of the Civil Code, or that
it exercised extraordinary diligence to prevent or minimize the loss. In the present case, the
weather condition encountered by petitioners vessel was not a storm or a natural disaster
comprehended in the law. Given the known weather condition prevailing during the voyage,
the manner of stowage employed by the carrier was insufficient to secure the cargo from the
rolling action of the sea. The carrier took a calculated risk in improperly securing the cargo.
Having lost that risk, it cannot now disclaim any liability for the loss.
FACTS:
Carrier: CENTRAL SHIPPING COMPANY, INC
Vessel: M/V Central Bohol
Subject: 376 pieces of Philippine Apitong Round Logs
Consignee: Alaska Lumber Co. Inc.
The vessel listed up to 15 degrees. (Tumagilid ata) The ship captain ordered his men to
abandon ship and the vessel completely sank.
Petitioner raised as its main defense that the proximate and only cause of the sinking of its
vessel and the loss of its cargo was a natural disaster, a tropical storm which neither
[petitioner] nor the captain of its vessel could have foreseen. RTC ruled in favor of
respondent. CA affirmed. It found that the southwestern monsoon encountered by the vessel
was not unforeseeable. Given the season of rains and monsoons, the ship captain and his
crew should have anticipated the perils of the sea. The appellate court further held that the
weather disturbance was not the sole and proximate cause of the sinking of the vessel, which
was also due to the concurrent shifting of the logs in the hold that could have resulted only
from improper stowage.
ISSUE:
W/N petitioner is liable
RULING:
Even if the weather encountered by the ship is to be deemed a natural disaster
under Article 1739 of the Civil Code, petitioner failed to show that such natural disaster or
calamity was the proximate and only cause of the loss. Human agency must be entirely
excluded from the cause of injury or loss. In other words, the damaging effects blamed on
the event or phenomenon must not have been caused, contributed to, or worsened by the
presence of human participation. The defense of fortuitous event or natural disaster cannot
be successfully made when the injury could have been avoided by human precaution.
According to the boatswains testimony, the logs were piled properly, and the entire
shipment was lashed to the vessel by cable wire. The ship captain testified that out of the 376
pieces of round logs, around 360 had been loaded in the lower hold of the vessel and 16 on
exactly from floor to ceiling. However, while they were placed side by side, there were
unavoidable clearances between them owing to their round shape. Those loaded on deck
were lashed together several times across by cable wire, which had a diameter of 60
millimeters, and were secured from starboard to port.
It is obvious, as a matter of common sense, that the manner of stowage in the
lower hold was not sufficient to secure the logs in the event the ship should roll in heavy
weather. Notably, they were of different lengths ranging from 3.7 to 12.7 meters. Being
clearly prone to shifting, the round logs should not have been stowed with nothing to hold
them securely in place. Each pile of logs should have been lashed together by cable wire, and
the wire fastened to the side of the hold. Considering the strong force of the wind and the
roll of the waves, the loose arrangement of the logs did not rule out the possibility of their
shifting. By force of gravity, those on top of the pile would naturally roll towards the bottom
of the ship.
The evidence indicated that strong southwest monsoons were common
occurrences during the month of July. Thus, the officers and crew of M/V Central
Bohol should have reasonably anticipated heavy rains, strong winds and rough seas. They
should then have taken extra precaution in stowing the logs in the hold, in consonance with
their duty of observing extraordinary diligence in safeguarding the goods. But the carrier took
a calculated risk in improperly securing the cargo. Having lost that risk, it cannot now escape
responsibility for the loss.
The doctrine of limited liability under Article 587 of the Code of Commerce is not
applicable to the present case. This rule does not apply to situations in which the loss or the
injury is due to the concurrent negligence of the shipowner and the ca
EVERETT STEAMSHIP v. COURT OF APPEALS
FACTS Hernandez trading company imported three crates of bus spare parts marked as
Marco 12, Marco 13, Marco 14 from its supplier Maruman trading company. Said crates were
shipped from Japan to Manila on noard the vessel owned by Everette Orient Lines. Upon
arrival in Manila, it was discovered that Marco 14 was missing. Hernandez makes a formal
claim to Everette in an amount of 1 mill ++ Yen, which is the amount of the cargo lost.
However, Everett offers an amount of 100k because it is the amount that was stipulated in its
Bill of Lading. Hernandez files a case at the RTC of Caloocan, RTC rules in favor of Hernandez
holding Everett liable for the amount of !mill ++ Yen.
THE CA affirmed the RTCs ruling and made an additional observation that since
Hernandez is not a privy to the contract in the bill of lading ( the contract was entered by
Everett and Maruman trading [shipper]), and so the 100k limit stipulated will not bind
Hernandez making Everett liable for the full amount of 1mill ++ Yen.
ISSUE
1. Is Everett liable for the full amount or the amount that was stipulated in the
contract?- what was stipulated in the contract
2. Is Hernandez a privy to the contract which says that Petitioner is liable only for
100k? Yes
RULING
1. Controlling provisions for this issue would be 1749 and 1750 of the Civil Code. 1
In Sea Land Service, Inc. vs Intermediate Appellate Court
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
The clause of the contract goes:
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 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.
In Ong Yiu VS. CA the court 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
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
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.
1. 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. private respondent (Hernandez)
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. 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.
FACTS
Hernandez trading company imported three crates of bus spare parts marked as Marco 12,
Marco 13, Marco 14 from its supplier Maruman trading company.
Said crates were shipped from Japan to Manila on noard the vessel owned by Everette Orient
Lines. Upon arrival in Manila, it was discovered that Marco 14 was missing.
Hernandez makes a formal claim to Everette in an amount of 1 mill ++ Yen, which is the
amount of the cargo lost.
However, Everett offers an amount of 100k because it is the amount that was stipulated in its
Bill of Lading.
Hernandez files a case at the RTC of Caloocan, RTC rules in favor of Hernandez holding
Everett liable for the amount of !mill ++ Yen.
THE CA affirmed the RTCs ruling and made an additional observation that since Hernandez is
not a privy to the contract in the bill of lading ( the contract was entered by Everett and
Maruman trading [shipper]), and so the 100k limit stipulated will not bind Hernandez making In Ong Yiu VS. CA the court said that
Everett liable for the full amount of 1mill ++ Yen.
contracts of adhesion wherein one party imposes a ready-made form of
ISSUE contract on the other, as the plane ticket in the case at bar, are contracts
not entirely prohibited
3. Is Everett liable for the full amount or the amount that was stipulated in the
contract?- what was stipulated in the contract A contract limiting liability upon an agreed valuation does not offend
4. Is Hernandez a privy to the contract which says that Petitioner is liable only for against the policy of the law forbidding one from contracting against his
100k? Yes own negligence

RULING
2. Controlling provisions for this issue would be 1749 and 1750 of the Civil Code. 2
In Sea Land Service, Inc. vs Intermediate Appellate Court
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
The clause of the contract goes:
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 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.
2. 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. private respondent (Hernandez)
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. 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.
CRUZ v. SUN HOLIDAYS

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.

2 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.
 Southern Lines, Inc. v. CA 4. Duration of Responsibility
FACTS:
- Sometime in 1948, the City of Iloilo requested for rice from the National Rice and
Corn Corporation (hereafter referred to as NARIC) in Manila. MITUSI LINES v. COURT OF APPEALS
- NARIC, pursuant to the order, shipped 1,726 sacks of rice consigned to the City of
Iloilo on board the SS "General Wright" belonging to the Southern Lines, Inc. Each
sack of rice weighed 75 kilos and the entire shipment as indicated in the bill of
lading had a total weight of 129,450 kilos. According to the bill of lading, the cost of
the shipment was P63,115.50.
- The City of Iloilo received the shipment and paid the amount of P63,115.50.
However, it was noted that the foot of the bill of lading that there was shortage
was equivalent to 41 sacks of rice with a net weight of 13,319 kilos, the
proportionate value of which was P6,486.35.
- The City of Iloilo filed a complaint in the Court of First Instance of Iloilo against
NARIC and the Southern Lines, Inc. for the recovery of the amount of P6,486.35
representing the value of the shortage of the shipment of rice.
- After trial, the lower court absolved NARIC from the complaint, but sentenced the
Southern Lines, Inc. to pay.
- The Southern Lines, Inc. appealed to the Court of Appeals which affirmed the
judgment of the trial court. Hence, this petition for review.
-
ISSUE: Whether or not the defendant-carrier, the herein petitioner, is liable for the loss or
shortage of the rice shipped? YES

RULING:
Under the provisions of Article 361 of the Code of Commerce, the defendant-carrier
in order to free itself from liability, was only obliged to prove that the damages suffered by Sulpicio Lines v. Domingo Curso
the goods were "by virtue of the nature or defect of the articles." Under the provisions of
Article 362, the plaintiff, in order to hold the defendant liable, was obliged to prove that the WHO WON: Sulpicio Lines
damages to the goods by virtue of their nature, occurred on account of its negligence or
because the defendant did not take the precaution adopted by careful persons. DOCTRINE: Moral damages may be recovered in an action upon breach of contract of carriage
only when: (a) where death of a passenger results, or (b) it is proved that the carrier was
Petitioner claims exemption from liability by contending that the shortage in the
guilty of fraud and bad faith, even if death does not result. Article 2206 of the Civil Code
shipment of rice was due to such factors as the shrinkage, leakage or spillage of the rice on
entitles the descendants, ascendants, illegitimate children, and surviving spouse of the
account of the bad condition of the sacks at the time it received the same and the negligence
of the agents of respondent City of Iloilo in receiving the shipment. The contention is deceased passenger to demand moral damages for mental anguish by reason of the death of
untenable, for, if the fact of improper packing is known to the carrier or his servants, or the deceased.
apparent upon ordinary observation, but it accepts the goods notwithstanding such
condition, it is not relieved of liability for loss or injury resulting thereform. FACTS:

Furthermore, according to the Court of Appeals, "appellant (petitioner) itself frankly
admitted that the strings that tied the bags of rice were broken; some bags were with holes
and plenty of rice were spilled inside the hull of the boat, and that the personnel of the boat
collected no less than 26 sacks of rice which they had distributed among themselves." This
finding, which is binding upon this Court, shows that the shortage resulted from the
negligence of petitioner.
- On October 23, 1988, Dr.Curso boarded at the port of Manila the MV Doa Marilyn,
an inter-island vessel owned and operated by petitioner Sulpicio Lines, Inc., bound for
Tacloban City.
- Unfortunately, the MV Doa Marilyn sank in the afternoon of October 24, 1988
while at sea due to the inclement sea and weather conditions brought about by Typhoon
Unsang. The body of Dr.Curso was not recovered, along with hundreds of other passengers of
the ill-fated vessel.
- At the time of his death, Dr.Curso was 48 years old, and employed as a resident
physician at the Naval District Hospital in Naval, Biliran. He had a basic monthly salary of
P3,940 and would have retired from government service by December 20, 2004 at the age of
65.
- Respondents (surviving bros and sis of Dr. Curso) sued petitioner in the RTC to claim
damages based on breach of CoC by sea, averring that petitioner had acted negligently in
transporting Dr. Curso and the other passengers. They stated, among others, that their
parents had predeceased Dr. Curso, who died single and without issue and that, as such, they
were Dr.Cursos surviving heirs and successors in interest entitled to recover moral and other
damages.
- RTC dismissed the complaint due to the following reasons: (1) the sinking of the
vessel was due to force majeure; (2) the officers of the MV Doa Marilyn had acted with the
diligence required of a common carrier; (3) the sinking of the vessel and the death of its
passengers, including Dr.Curso, could not have been avoided; (4) there was no basis to
consider the MV Doa Marilyn not seaworthy at the time of the voyage; (5) the findings of
the Special Board of Marine Inquiry (SBMI) constituted to investigate the disaster absolved
the petitioner, its officers, and crew of any negligence and administrative liability; and (6) the
respondents failed to prove their claim for damages.
- CA reversed RTCs ruling. It found inadequate proof to show that Sulpicio Lines, Inc.,
or its officers and crew, had exercised the required degree of diligence to acquit the Sulpicio
Lines of liability since (1) the court finds inadequate explanation why the officers of the M.V.
Doa Marilyn had not apprised themselves of the weather reports on the approach of
typhoon "Unsang" which had the power of a signal no. 3 cyclone, bearing upon the general
direction of the path of the M.V. Doa Marilyn; (2) there was no account of the acts and
decision of the crew of the ill-fated ship. It does not appear what occurred during that time,
or what weather reports were received and acted upon by the ship captain; (3) the fitness of
the ship for the voyage is of doubtful character since at the first sign of bad weather, the
ships hydraulic system failed and had to be repaired mid-voyage, making the vessel a virtual
derelict amidst a raging storm at sea. CA ordered Sulpicio Lines to pay plaintiff heirs of
Dr.Curso indemnity for the latters death, loss of earning capacity, moral damages and costs
of suit.
- Sulpicio appealed the said decision due to CAs decision to award the surviving
brothers and sisters of the late Dr. Cenon moral damages among others.
ISSUE: Are the surviving brothers and sisters of a passenger of a vessel that sinks during a
voyage entitled to recover moral damages from the vessel owner as common carrier? NO
RULING:
As a general rule, moral damages are not recoverable in actions for damages
predicated on a breach of contract, unless there is fraud or bad faith. As an exception, moral
damages may be awarded in case of breach of contract of carriage that results in the death of
a passenger, in accordance with Article 1764, in relation to Article 2206 (3), of the Civil Code,
which provide:
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.
Article 2206. The amount of damages for death caused by a crime or quasi-delict
shall be at least three thousand pesos, even though there may have been mitigating
circumstances. In addition:
xxx
(3) The spouse, legitimate and illegitimate descendants and ascendants of the deceased may
demand moral damages for mental anguish by reason of the death of the deceased.
Verily, the omission from Article 2206 (3) of the brothers and sisters of the
deceased passenger reveals the legislative intent to exclude them from the recovery of moral
damages for mental anguish by reason of the death of the deceased. Thus, the CA erred in
awarding moral damages to the respondents.
Essentially, the purpose of moral damages is indemnity or reparation, that is, to
enable the injured party to obtain the means, diversions, or amusements that will serve to
alleviate the moral suffering he has undergone by reason of the tragic event. According to
Villanueva v. Salvador, the conditions for awarding moral damages are: (a) there must be an
injury, whether physical, mental, or psychological, clearly substantiated by the claimant; (b)
there must be a culpable act or omission factually established; (c) the wrongful act or
omission of the defendant must be the proximate cause of the injury sustained by the
claimant; and (d) the award of damages is predicated on any of the cases stated in Article
2219 of the Civil Code.
To be entitled to moral damages, the respondents must have a right based upon
law. It is true that under Article 1003 of the Civil Code they succeeded to the entire estate of
the late Dr.Curso in the absence of the latters descendants, ascendants, illegitimate children,
and surviving spouse. However, they were not included among the persons entitled to
recover moral damages, as enumerated in Article 2219 of the Civil Code. Article 2219
circumscribes the instances in which moral damages may be awarded. The said provision
does not include succession in the collateral line as a source of the right to recover moral
damages.
 In fine, moral damages may be recovered in an action upon breach of contract of
carriage only when: (a) where death of a passenger results, or (b) it is proved that the carrier
was guilty of fraud and bad faith, even if death does not result. Article 2206 of the Civil Code
entitles the descendants, ascendants, illegitimate children, and surviving spouse of the
deceased passenger to demand moral damages for mental anguish by reason of the death of
the deceased.
Coastwise Lighterage Corporation v. CA
Facts: Pag-asa Sales Inc. entered into a contract to transport molasses from the province
of Negros to Manila with Coastwise Lighterage Corporation (Coastwise for brevity), using the
latter's dumb barges. The barges were towed in tandem by the tugboat MT Marica, which is
likewise owned by Coastwise. Upon reaching Manila Bay, one of the barges, "Coastwise 9",
struck an unknown sunken object. The forward buoyancy compartment was damaged, and
water gushed in through a hole "two inches wide and twenty-two inches long". As a
consequence, the molasses at the cargo tanks were contaminated. Pag-asa filed a claim
against Philippine General Insurance Company, the insurer of its cargo. Philgen paid P700,000
for the value of the molasses lost. Philgen then filed an action against Coastwise to recover
the money it paid, claiming to be subrogated to the claims which the consignee may have
against the carrier. Both the trial court and the Court of Appeals ruled against Coastwise.
Issues:
(1) Whether Coastwise was transformed into a private carrier by virtue of the
contract it entered into with Pag-asa, and whether it exercised the required degree of
diligence
(2) Whether Philgen was subrogated into the rights of the consignee against the
carrier
Held:
(1) Pag-asa Sales, Inc. only leased three of petitioner's vessels, in order to carry
cargo from one point to another, but the possession, command mid navigation of the vessels
remained with petitioner Coastwise Lighterage. Coastwise Lighterage, by the contract of
affreightment, was not converted into a private carrier, but remained a common carrier and
was still liable as such. The law and jurisprudence on common carriers both hold that the
mere proof of delivery of goods in good order to a carrier and the subsequent arrival of the
same goods at the place of destination in bad order makes for a prima facie case against the
carrier. It follows then that the presumption of negligence that attaches to common carriers,
once the goods it is sports are lost, destroyed or deteriorated, applies to the petitioner. This
presumption, which is overcome only by proof of the exercise of extraordinary diligence,
remained unrebutted in this case. Jesus R. Constantino, the patron of the vessel "Coastwise 9"
admitted that he was not licensed. Coastwise Lighterage cannot safely claim to have
exercised extraordinary diligence, by placing a person whose navigational skills are
questionable, at the helm of the vessel which eventually met the fateful accident. It may also
logically, follow that a person without license to navigate, lacks not just the skill to do so, but
also the utmost familiarity with the usual and safe routes taken by seasoned and legally
authorized ones. Had the patron been licensed he could be presumed to have both the skill
and the knowledge that would have prevented the vessel's hitting the sunken derelict ship
that lay on their way to Pier 18. As a common carrier, petitioner is liable for breach of the
contract of carriage, having failed to overcome the presumption of negligence with the loss
and destruction of goods it transported, by proof of its exercise of extraordinary diligence.
(2) Article 2207 of the Civil Code is founded on the well-settled principle of
subrogation. If the insured property is destroyed or damaged through the fault or negligence
of a party other than the assured, then the insurer, upon payment to the assured will be
subrogated to the rights of the assured to recover from the wrongdoer to the extent that the
insurer has been obligated to pay. Payment by the insurer to the assured operated as an
equitable assignment to the former of all remedies which the latter may have against the
third party whose negligence or wrongful act caused the loss. The right of subrogation is not
dependent upon, nor does it grow out of, any private of contract or upon written assignment
of, claim. It accrues simply upon payment of the insurance claim by the insurer.
PHILIPPINE FIRST INSURANCE CO., INC., respondents.
DOCTRINE: Proof of the delivery of goods in good order to a common carrier and of their
arrival in bad order at their destination constitutes prima facie fault or negligence on the part
of the carrier. If no adequate explanation is given as to how the loss, the destruction or the
deterioration of the goods happened, the carrier shall be held liable therefor.
FACTS:
Shipper: CMC Trading A.G.
Carrier: BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V.
Subject: coils of various Prime Cold Rolled Steel sheets
Consignee: Philippine Steel Trading Corporation
Insurer: PHILIPPINE FIRST INSURANCE CO., INC.
Goods found to be in bad order. Belgian refused to pay. Thus, Phil First did.
Impugning the propriety of the suit against them, defendants-appellees imputed that the
damage and/or loss was due to pre-shipment damage, to the inherent nature, vice or defect
of the goods, or to perils, danger and accidents of the sea, or to insufficiency of packing
thereof, or to the act or omission of the shipper of the goods or their representatives.
RTC dismissed. CA ruled that Belgian liable. Failed to overcome presumption of
negligence. Belgian inadequately proven petitioners' claim that the loss or the deterioration
of the goods was due to pre-shipment damage.
ISSUES: Whether petitioners have overcome the presumption of negligence of a common
carrier
RULING: No. A review of the records and more so by the evidence shows
First, as stated in the Bill of Lading, petitioners received the subject shipment in good order
and condition in Hamburg, Germany.
Second, prior to the unloading of the cargo, an Inspection Report prepared and signed by
representatives of both parties showed the steel bands broken, the metal envelopes rust-
stained and heavily buckled, and the contents thereof exposed and rusty.
Third, Bad Order Tally Sheet No. 154979 issued by Jardine Davies Transport Services, Inc.,
stated that the four coils were in bad order and condition. Normally, a request for a bad order
survey is made in case there is an apparent or a presumed loss or damage.
Fourth, the Certificate of Analysis stated that, based on the sample submitted and tested, the
steel sheets found in bad order were wet with fresh water.
Fifth, petitioners -- in a letter addressed to the Philippine Steel Coating Corporation and dated
October 12, 1990 -- admitted that they were aware of the condition of the four coils found in
bad order and condition.
Further, petitioners failed to prove that they observed the extraordinary diligence and
precaution which the law requires a common carrier to know and to follow to avoid damage
to or destruction of the goods entrusted to it for safe carriage and delivery.
True, the words "metal envelopes rust stained and slightly dented" were noted on the Bill of
Lading; however, there is no showing that petitioners exercised due diligence to forestall or
lessen the loss. The master of the vessel should have known at the outset that metal
envelopes in the said state would eventually deteriorate when not properly stored while in
transit.The master of the vessel and his crew should have undertaken precautionary
measures to avoid possible deterioration of the cargo. But none of these measures was taken.
In their attempt to escape liability, petitioners further contend that they are exempted from
liability under Article 1734(4) of the Civil Code. They cite the notation "metal envelopes rust
stained and slightly dented" printed on the Bill of Lading as evidence that the character of the
goods or defect in the packing or the containers was the proximate cause of the damage
From the evidence on record, it cannot be reasonably concluded that the damage to the four
coils was due to the condition noted on the Bill of Lading.Theaforecitedexception refers to
cases when goods are lost or damaged while in transit as a result of the natural decay of
perishable goods or the fermentation or evaporation of substances liable therefor, the
necessary and natural wear of goods in transport, defects in packages in which they are
shipped, or the natural propensities of animals. None of these is present in the instant case.
Further, even if the fact of improper packing was known to the carrier or its crew or was
apparent upon ordinary observation, it is not relieved of liability for loss or injury resulting
therefrom, once it accepts the goods notwithstanding such condition.
May 2nd at 3rd issue pa pero di konasinama. Notice of loss. Dapat within 3 days
dawsiyanagfile, 1 yr prescription if there was an inspection. Limited liability. No stipulation in
the bill of lading, Letter of credit attached to the bill of lading does not count.
Samar Mining Co. v. Nordeutscher Lloyd
FACTS: The case arose from an importation made by Samar Mining Co. Inc. of 1 crate
Optima welded wedge wire sieves through the M/S Schwabenstein, a vessel owned by
Nordeutscher Lloyd, (represented in the Philippines by its agent, C.F. Sharp & Co., Inc.), which
shipment is covered by Bill of Lading No. 18 duly issued to consignee Samar Mining. Upon
arrival of the vessel at the port of Manila, the importation was unloaded and delivered in
good order and condition to the bonded warehouse of AMCYL. The goods were however
never delivered to, nor received by, the consignee at the port of destination Davao. When
the letters of complaint sent to Nordeutscher Lloyd failed to elicit the desired response,
Samar Mining filed a formal claim for P1,691.93, the equivalent of $424.00 at the prevailing
rate of exchange at that time, against the former, but neither paid. Samar Mining filed a suit
to enforce payment. Nordeutscher Lloyd and CF Sharp & Co. brought in AMCYL as third party
defendant. The trial court rendered judgment in favor of Samar Mining, ordering
Nordeutscher Lloyd, et. al. to pay the amount of P1,691.93 plus attorneys fees and costs.
However, the Court stated that Nordeutscher Lloyd, et. al. may recoup whatever they may
pay Samar Mining by enforcing the judgment against third party defendant AMCYL, which had
earlier been declared in default. Nordeutscher Lloyd and C.F. Sharp & Co. appealed from said
decision. Notes The following are the pertinent ports, as provided in the bill of lading: Port of
Loading: Bremen, Germany Port of discharge from ship: Manila Port of destination/Port of
discharge of the goods: Davao As plainly indicated on the face of the bill, the vessel M/S
Schwabenstein is to transport the goods only up to Manila. Thereafter, the goods are to be
transshipped by the carrier to the port of destination.
ISSUE: Whether or not a stipulation in the bill of lading exempting the carrier from liability
for loss of goods not in its actual custody (i.e., after their discharge from the ship) is valid.
HELD: It is clear that in discharging the goods from the ship at the port of Manila, and third party when last seen and/or heard of. However, Article 1736 is applicable to the instant
delivering the same into the custody of AMCYL, the bonded warehouse, appellants were suit. Under said article, the carrier may be relieved of the responsibility for loss or damage to
acting in full accord with the contractual stipulations contained in Bill of Lading No. 18. The the goods upon actual or constructive delivery of the same by the carrier to the consignee, or
delivery of the goods to AMCYL was part of appellants' duty to transship (meaning to transfer to the person who has a right to receive them. There is actual delivery in contracts for the
for further transportation from one ship or conveyance to another) the goods from Manila to transport of goods when possession has been turned over to the consignee or to his duly
their port of destination-Davao. The extent of appellant carrier's responsibility and/or liability authorized agent and a reasonable time is given him to remove the goods. In the present
in the transshipment of the goods in question are spelled out and delineated under Section 1, case, there was actual delivery to the consignee through its duly authorized agent, the carrier.
paragraph 3 of Bill of Lading No. 18, to wit: the carrier shall not be liable in any capacity Lastly, two undertakings are embodied in the bill of lading: the transport of goods from
whatsoever for any delay, loss or damage occurring before the goods enter ship's tackle to be Germany to Manila, and the transshipment of the same goods from Manila to Davao, with
loaded or after the goods leave ship's tackle to be discharged, transshipped or forwarded. Samar Mining acting as the agent of the consignee. The moment the subject goods are
Further, in Section 11 of the same bill, it was provided that this carrier, in making discharged in Manila, Samar Minings personality changes from that of carrier to that of agent
arrangements for any transshipping or forwarding vessels or means of transportation not of the consignee. Such being the case, there was, in effect, actual delivery of the goods from
operated by this carrier shall be considered solely the forwarding agent of the shipper and appellant as carrier to the same appellant as agent of the consignee. Upon such delivery, the
without any other responsibility whatsoever even though the freight for the whole transport appellant, as erstwhile carrier, ceases to be responsible for any loss or damage that may
has been collected by him Pending or during forwarding or transshipping the carrier may befall the goods from that point onwards. This is the full import of Article 1736. But even as
store the goods ashore or afloat solely as agent of the shipper We find merits in agent of the consignee, the appellant cannot be made answerable for the value of the missing
Nordeutschers contention that they are not liable for the loss of the subject goods by goods. It is true that the transshipment of the goods, which was the object of the agency, was
claiming that they have discharged the same in full and good condition unto the custody of not fully performed. However, appellant had commenced said performance, the completion
AMCYL at the port of discharge from ship Manila, and therefore, pursuant to the of which was aborted by circumstances beyond its control. An agent who carries out the
aforequoted stipulation (Sec. 11) in the bill of lading, their responsibility for the cargo had orders and instructions of the principal without being guilty of negligence, deceit or fraud,
ceased.The validity of stipulations in bills of lading exempting the carrier from liability for loss cannot be held responsible for the failure of the principal to accomplish the object of the
or damage to the goods when the same are not in its actual custody has been upheld by Us in agency.
PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674 (1968), ruling that
pursuant to the terms of the Bill of Lading, appellee's responsibility as a common carrier
ceased the moment the goods were unloaded in Manila and in the matter of transshipment,
appellee acted merely as an agent of the shipper and consignee In the present case, by the
authority of the above pronouncements, and in conformity with the pertinent provisions of
the Civil Code, Section 11 of Bill of Lading No. 18 and the third paragraph of Section 1 thereof
are valid stipulations between the parties insofar as they exempt the carrier from liability for
loss or damage to the goods while the same are not in the latter's actual custody. Acareful
perusal of the provisions of the New Civil Code on common carriers directs our attention to
Article 1736, which reads: The extraordinary responsibility of the common carrier lasts from
the time the goods are unconditionally placed in the possession of, and received by the
carrier for transportation until the same are delivered, actually or constructively, by the
carrier to the consignee, or to the person who has a right to receive them, without prejudice
to the provisions of article 1738. In relation to this, Article 1738 provides: the extraordinary
liability of the common carrier continues to be operative even during the time the goods are
stored in a warehouse of the carrier at the place of destination, until the consignee has been
advised of the arrival of the goods and has had reasonable opportunity thereafter to remove
them or otherwise dispose of them. Art. 1738 finds no applicability to the instant case. The
said article contemplates a situation where the goods had already reached their place of
destination and are stored in the warehouse of the carrier. The subject goods were still
awaiting transshipment to their port of destination, and were stored in the warehouse of a
 Ganzon v. CA
Facts: Tumambing contracted the services of Ganzon for the latter to haul 305 tons of
scrap iron from Mariveles, Bataan to the port of Manila on board the lighter LCT Batman.
Accordingly, Ganzon sent his lighter Batman to Mariveles. Tumambing then delivered the
scrap iron for loading to Filomeno Niza, the lighters captain. However, when about half of the
scrap iron was being loaded, Mayor Advincula of Mariveles, Bataan, demanded P5,000 from
Tumambing. The latter refused, an altercation started, until Mayor Advincula fired his gun at
Tumambing, who was later brought to a hospital in Balanga, Bataan. After sometime, the
loading of the scrap iron resumed. However, Acting Mayor Basilio Rub, accompanied by 3
policemen, ordered Captain Niza and its crew to dump the scrap iron where the lighter was
docked. The remaining scrap iron was confiscated and brought to the compound of NASSCO.
A receipt was issued by the Acting Mayor stating that he had taken custody of the scrap iron.
Hence, Tumambing filed an action against Ganzon for damages based on culpa contractual.
Ganzon claims that he should not be liable because the scrap iron has not been
unconditionally placed under his custody and control.
Issue: Whether or not Ganzon is liable for Tumambings loss.
Ruling: Yes, Ganzon is liable. Ratio Decidendi There is no dispute that the scrap iron was
already delivered to Ganzons carrier and received by Captain Niza and the crew. By the said
act of delivery, the scrap iron was already deemed to be unconditionally placed in the
possession and control of the common carrier and upon their receipt, the contract of carriage
was deemed perfected. Consequently, petitioner-carriers extraordinary responsibility for the
loss or deterioration of the goods commenced. According to Art 1736 of the NCC, such
responsibility will only cease upon the actual or constructive delivery to the consignee or any
person who has a right to receive the goods. However, in this case, the same is not true since
the scrap iron remained in the custody and control of the carrier, albeit still unloaded. Ganzon
may be exempt from liability if the loss of the scrap iron was due to any of the causes
enumerated under Art. 1734 of the NCC. However, Ganzon was not able to prove the same.
Art 1743 provides as follows: Art. 1734. Common carriers are responsible for the loss,
destruction, or deterioration of the goods, unless the same is due to any of the following
causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2)
Act of the public enemy in war, whether international or civil; (3) Act of omission of the
shipper or owner of the goods; (4) The character of the goods or defects in the packing or in
the containers; (5) Order or act of competent public authority. Lastly, the SC cannot sustain
Ganzons claim that the cause of the loss was a caso fortuito considering that in the courts
below, his defense was that the loss of the scrap iron was due to an order or act of a
competent public authority. Such change in theory on appeal cannot be allowed. In any case,
the intervention of the municipal officials is not of such character as would render the
fulfilment of Ganzons obligation impossible. According to the SC, the scrap iron could have
still been delivered in accordance with the contract of carriage after the dispute has been
settled.
Saludo Jr. v. CA
Facts: Crispina Galdo Saludo, mother of the petitioners, died in Chicago, Illinois. Pomierski
and Son Funeral Home of Chicago, made the necessary preparations and arrangements for
the shipment of the remains from Chicago to the Philippines. Pomierski brought the remains
to Continental Mortuary Air Services (CMAS) at the Chicago Airport which made the necessary
arrangements such as flights, transfers, etc. CMAS booked the shipment with PAL thru the
carriers agent Air Care International. PAL Airway Bill Ordinary was issued wherein the
requested routing was from Chicago to San Francisco on board Trans World Airline (TWA) and
from San Francisco to Manila on board PAL. Salvacion (one of the petitioners), upon arrival at
San Francisco, went to the TWA to inquire about her mothers remains. But she was told they
did not know anything about it. She then called Pomierski that her mothers remains were not
at the West Coast terminal. Pomierski immediately called CMAS which informed that the
remains were on a plane to Mexico City, that there were two bodies at the terminal, and
somehow they were switched. CMAS called and told Pomierski that they were sending the
remains back to California via Texas. Petitioners filed a complaint against TWA and PAL fir the
misshipment and delay in the delay of the cargo containing the remains of the late Crispina
Saludo. Petitioners alleged that private respondents received the casketed remains of
Crispina on October 26, 1976, as evidenced by the issuance of PAL Airway Bill by Air Care and
from said date, private respondents were charged with the responsibility to exercise
extraordinary diligence so much so that the alleged switching of the caskets on October 27,
1976, or one day after the private respondents received the cargo, the latter must necessarily
be liable.
Issues:
Whether or not there was delivery of the cargo upon mere issuance of the airway
bill
Whether or not the delay in the delivery of the casketed remains of petitioners
mother was due to the fault of respondent airline companies
Held: NO to both, but TWA was held to pay petitioners nominal damages of P40,000 for its
violation of the degree of diligence required by law to be exercised by every common carrier
Ordinarily, a receipt is not essential to a complete delivery of goods to the carrier for
transportation but, when issued, is competent and prima facie, but not conclusive, evidence
of delivery to the carrier. A bill of lading, when properly executed and delivered to a shipper,
is evidence that the carrier has received the goods described therein for shipment. Except as
modified by statute, it is a general rule as to the parties to a contract of carriage of goods in
connection with which a bill of lading is issued reciting that goods have been received for
transportation, that the recital being in essence a receipt alone, is not conclusive, but may be
explained, varied or contradicted by parol or other evidence. In other words, on October 26,
1976 the cargo containing the casketed remains of Crispina Saludo was booked for PAL Flight
Number PR-107 leaving San Francisco for Manila on October 27, 1976, PAL Airway Bill No.
079-01180454 was issued, not as evidence of receipt of delivery of the cargo on October 26,
1976, but merely as a confirmation of the booking thus made for the San Francisco-Manila
flight scheduled on October 27, 1976. Actually, it was not until October 28, 1976 that PAL
received physical delivery of the body at San Francisco, as duly evidenced by the Interline
Freight Transfer Manifest of the American Airline Freight System and signed for by Virgilio
Rosales at 1945H, or 7:45 P.M. on said date. Explicit is the rule under Article 1736 of the Civil
Code that the extraordinary responsibility of the common carrier begins from the time the
goods are delivered to the carrier. This responsibility remains in full force and effect even
when they are temporarily unloaded or stored in transit, unless the shipper or owner
exercises the right of stoppage in transitu, and terminates only after the lapse of a reasonable
time for the acceptance, of the goods by the consignee or such other person entitled to
receive them. And, there is delivery to the carrier when the goods are ready for and have
been placed in the exclusive possession, custody and control of the carrier for the purpose of
their immediate transportation and the carrier has accepted them. Where such a delivery has
thus been accepted by the carrier, the liability of the common carrier commences eo instanti.
Hence, while we agree with petitioners that the extraordinary diligence statutorily required to
be observed by the carrier instantaneously commences upon delivery of the goods thereto,
for such duty to commence there must in fact have been delivery of the cargo subject of the
contract of carriage. Only when such fact of delivery has been unequivocally established can
the liability for loss, destruction or deterioration of goods in the custody of the carrier, absent
the excepting causes under Article 1734, attach and the presumption of fault of the carrier
under Article 1735 be invoked. As already demonstrated, the facts in the case at bar belie the
averment that there was delivery of the cargo to the carrier on October 26, 1976. Rather, as
earlier explained, the body intended to be shipped as agreed upon was really placed in the
possession and control of PAL on October 28, 1976 and it was from that date that private
respondents became responsible for the agreed cargo under their undertakings in PAL Airway
Bill No. 079-01180454. Consequently, for the switching of caskets prior thereto which was not
caused by them, and subsequent events caused thereby, private respondents cannot be held
liable. The oft-repeated rule regarding a carrier's liability for delay is that in the absence of a
special contract, a carrier is not an insurer against delay in transportation of goods. When a
common carrier undertakes to convey goods, the law implies a contract that they shall be
delivered at destination within a reasonable time, in the absence, of any agreement as to the
time of delivery. But where a carrier has made an express contract to transport and deliver
property within a specified time, it is bound to fulfill its contract and is liable for any delay, no
matter from what cause it may have arisen. This result logically follows from the well-settled
rule that where the law creates a duty or charge, and the party is disabled from performing it
without any default in himself, and has no remedy over, then the law will excuse him, but
where the party by his own contract creates a duty or charge upon himself, he is bound to
make it good notwithstanding any accident or delay by inevitable necessity because he might
have provided against it by contract. Whether or not there has been such an undertaking on
the part of the carrier to be determined from the circumstances surrounding the case and by
application of the ordinary rules for the interpretation of contracts. Echoing the findings of
the trial court, the respondent court correctly declared that In a similar case of delayed
delivery of air cargo under a very similar stipulation contained in the airway bill which reads:
"The carrier does not obligate itself to carry the goods by any specified aircraft or on a
specified time. Said carrier being hereby authorized to deviate from the route of the shipment
without any liability therefor", our Supreme Court ruled that common carriers are not
obligated by law to carry and to deliver merchandise, and persons are not vested with the
right to prompt delivery, unless such common carriers previously assume the obligation. Said
rights and obligations are created by a specific contract entered into by the parties (Mendoza
vs. PAL, 90 Phil. 836). There is no showing by plaintiffs that such a special or specific contract
had been entered into between them and the defendant airline companies. And this special
contract for prompt delivery should call the attention of the carrier to the circumstances
surrounding the case and the approximate amount of damages to be suffered in case of delay
(See Mendoza vs. PAL, supra). There was no such contract entered into in the instant case. A
common carrier undertaking to transport property has the implicit duty to carry and deliver it
within reasonable time, absent any particular stipulation regarding time of delivery, and to
guard against delay. In case of any unreasonable delay, the carrier shall be liable for damages
immediately and proximately resulting from such neglect of duty. As found by the trial court,
the delay in the delivery of the remains of Crispina Saludo, undeniable and regrettable as it
was, cannot be attributed to the fault, negligence or malice of private respondents, a
conclusion concurred in by respondent court and which we are not inclined to disturb.
Macam v. CA
Facts: Benito Macam, doing business under name Ben-Mac Enterprises, shipped on board
vessel Nen-Jiang, owned and operated by respondent China Ocean Shipping Co. through local
agent Wallem Philippines Shipping Inc., 3,500 boxes of watermelon covered by Bill of Lading
No. HKG 99012, and 1,611 boxes of fresh mangoes covered by Bill of Lading No. HKG 99013.
The shipment was bound for Hongkong with PAKISTAN BANK as consignee and Great
Prospect Company of Rowloon (GPC) as notify party. Upon arrival in Hongkong, shipment was
delivered by respondent WALLEM directly to GPC, not to PAKISTAN BANK and without the
required bill of lading having been surrendered. Subsequently, GPC failed to pay PAKISTAN
BANK, such that the latter, still in possession of original bill of lading, refused to pay petitioner
thru SOLIDBANK. Since SOLIDBANK already pre-paid the value of shipment, it demanded
payment from respondent WALLEM but was refused. MACAM constrained to return the
amount paid by SOLIDBANK and demanded payment from WALLEM but to no avail. WALLEM
submitted in evidence a telex dated 5 April 1989 as basis for delivering the cargoes to GPC
without the bills of lading and bank guarantee. The telex instructed delivery of various
shipments to the respective consignees without need of presenting the bill of lading and bank
guarantee per the respective shippers request since for prepaid shipt ofrt charges already
fully paid. MACAM, however, argued that, assuming there was such an instruction, the
consignee referred to was PAKISTAN BANK and not GPC. The RTC ruled for MACAM and
ordered value of shipment. CA reversed RTCs decision.
Issue: Are the respondents liable to the petitioner for releasing the goods to GPC without
the bills of lading or bank guarantee?
Held: It is a standard maritime practice when immediate delivery is of the essence, for
shipper to request or instruct the carrier to deliver the goods to the buyer upon arrival at the
port of destination without requiring presentation of bill of lading as that usually takes time.
Thus, taking into account that subject shipment consisted of perishable goods and
SOLIDBANK pre-paid the full amount of value thereof, it is not hard to believe the claim of
respondent WALLEM that petitioner indeed requested the release of the goods to GPC
without presentation of the bills of lading and bank guarantee. To implement the said telex
instruction, the delivery of the shipment must be to GPC, the notify party or real
importer/buyer of the goods and not the PAKISTANI BANK since the latter can very well
present the original Bills of Lading in its possession. Likewise, if it were the PAKISTANI BANK to
whom the cargoes were to be strictly delivered, it will no longer be proper to require a bank
guarantee as a substitute for the Bill of Lading. To construe otherwise will render meaningless
the telex instruction. After all, the cargoes consist of perishable fresh fruits and immediate
delivery thereof the buyer/importer is essentially a factor to reckon with. We emphasize that
the extraordinary responsibility of the common carriers lasts until actual or constructive
delivery of the cargoes to the consignee or to the person who has a right to receive them.
PAKISTAN BANK was indicated in the bills of lading as consignee whereas GPC was the notify
party. However, in the export invoices GPC was clearly named as buyer/importer. Petitioner
also referred to GPC as such in his demand letter to respondent WALLEM and in his complaint
before the trial court. This premise draws us to conclude that the delivery of the cargoes to
GPC as buyer/importer which, conformably with Art. 1736 had, other than the consignee, the
right to receive them was proper.
5. Stipulation Limiting Carriers Liability
CATHAY PACIFIC v. COURT OF APPEALS
WHO WON: Tomas Alcantara
DOCTRINE:
Although the Warsaw Convention has the force and effect of law in this country, being a
treaty commitment assumed by the Philippine government, said convention does not operate
as an exclusive enumeration of the instances for declaring a carrier liable for breach of
contract of carriage or as an absolute limit of the extent of that liability. The Warsaw
Convention declares the carrier liable for damages in the enumerated cases and under certain
limitations. However, it must not be construed to preclude the operation of the Civil Code
and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for
damages for violating the rights of its passengers under the contract of carriage, especially if
willful misconduct on the part of the carrier's employees is found or established.
FACTS:
- On 19 October 1975, respondent Tomas L. Alcantara was a first class passenger of
petitioner Cathay Pacific Airways, Ltd. (CATHAY) on its flight from Manila to
Hongkong and onward from Hongkong to Jakarta on another flight. The purpose of
his trip was to attend the following day, a conference with the Director General of
Trade of Indonesia, Alcantara being the Executive Vice-President and General
Manager of Iligan Cement Corporation, Chairman of the Export Committee of the
Philippine Cement Corporation, and representative of the Cement Industry
Authority and the Philippine Cement Corporation.
- Alcantara checked in his luggage which contained not only his clothing and articles
for personal use but also papers and documents he needed for the conference.
- Upon his arrival in Jakarta, respondent discovered that his luggage was missing.
When he inquired about his luggage from CATHAY's representative in Jakarta,
Alcantara was told that his luggage was left behind in Hongkong. For this,
respondent Alcantara was offered $20.00 as "inconvenience money" to buy his
immediate personal needs until the luggage could be delivered to him.
- His luggage finally reached Jakarta more than twenty four (24) hours after his
arrival. However, it was not delivered to him at his hotel but was required by
petitioner to be picked up by an official of the Philippine Embassy.
- Alcantara filed a complaint against CATHAY with the CFI praying for damages.
- CFI ordered CATHAY to pay Alcantara moral, temperate, exemplary and attorneys
fees. Both parties appealed to the CA. CATHAY assailed the conclusion of the trial
court that it was accountable for breach of contract and questioned the non-
application by the court of the Warsaw Convention as well as the excessive
damages awarded on the basis of its finding that respondent Alcantara was rudely
treated by petitioner's employees during the time that his luggage could not be
found. For his part, respondent Alcantara assigned as error the failure of the trial
court to grant the full amount of damages sought in his complaint. CA rendered its
decision affirming the findings of fact of the trial court but modifying its award by
increasing the moral damages to P80K exemplary damages to P20K and temperate
or moderate damages to P10K.
-
ISSUE/S:
1. W/N the award of damages was proper? YES save for the award of temperate
damages.
2. W/N the Warsaw Convention is applicable to the present case? NO
RULING:
1. Both the trial court and the appellate court found that CATHAY was grossly
negligent and reckless when it failed to deliver the luggage of petitioner at the appointed
place and time. CATHAY alleges that as a result of mechanical trouble, all pieces of luggage on
board the first aircraft bound for Jakarta were unloaded and transferred to the second
aircraft which departed an hour and a half later. Yet, as the CA noted, petitioner was not even
aware that it left behind private respondent's luggage until its attention was called by the
Hongkong Customs authorities. More, bad faith or otherwise improper conduct may be
attributed to the employees of petitioner. While the mere failure of CATHAY to deliver
respondent's luggage at the agreed place and time did not ipso facto amount to willful
misconduct since the luggage was eventually delivered to private respondent, albeit
belatedly, the Court is persuaded that the employees of CATHAY acted in bad faith.
Where in breaching the contract of carriage the defendant 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 obligation which the parties had foreseen or could
have reasonably foreseen. In that case, such liability does not include moral and exemplary
damages. Conversely, if the defendant airline is shown to have acted fraudulently or in bad
faith, the award of moral and exemplary damages is proper.
However, respondent Alcantara is not entitled to temperate damages, contrary to
the ruling of the court a quo, in the absence of any showing that he sustained some pecuniary
loss. t cannot be gainsaid that respondent's luggage was ultimately delivered to him without
serious or appreciable damage.
2. Although the Warsaw Convention has the force and effect of law in this country,
being a treaty commitment assumed by the Philippine government, said convention does not
operate as an exclusive enumeration of the instances for declaring a carrier liable for breach
of contract of carriage or as an absolute limit of the extent of that liability. The Warsaw
Convention declares the carrier liable for damages in the enumerated cases and under certain
limitations. However, it must not be construed to preclude the operation of the Civil Code
and other pertinent laws. It does not regulate, much less exempt, the carrier from liability for
damages for violating the rights of its passengers under the contract of carriage, especially if
willful misconduct on the part of the carrier's employees is found or established, which is
what was manifested in the instant case.
For, the Warsaw Convention itself provides in Art. 25 that (1) The carrier shall not
be entitled to avail himself of the provisions of this convention which exclude or limit his
liability, if the damage is caused by his willful misconduct or by such default on his part as, in
accordance with the law of the court to which the case is submitted, is considered to be
equivalent to willful misconduct; (2) Similarly the carrier shall not be entitled to avail himself
of the said provisions, if the damage is caused under the same circumstances by any agent of
the carrier acting within the scope of his employment;
When petitioner airline misplaced respondent's luggage and failed to deliver it to its
passenger at the appointed place and time, some special species of injury must have been
caused to him. For sure, the latter underwent profound distress and anxiety, and the fear of
losing the opportunity to fulfill the purpose of his trip. In fact, for want of appropriate
clothings for the occasion brought about by the delay of the arrival of his luggage, to his
embarrassment and consternation respondent Alcantara had to seek postponement of his
pre-arranged conference with the Director General of Trade of the host country.
In one case, this Court observed that a traveller would naturally suffer mental
anguish, anxiety and shock when he finds that his luggage did not travel with him and he finds
himself in a foreign land without any article of clothing other than what he has on. Thus,
respondent is entitled to moral and exemplary damages
TRANS-ASIA SHIPPING v. COURT OF APPEALS
FACTS: Respondent Atty. Renato Arroyo, a public attorney, bought a ticket from herein
petitioner for the voyage of M/V Asia Thailand vessel to Cagayan de Oro City from Cebu City
on November 12, 1991. At around 5:30 in the evening of November 12, 1991, respondent
boarded the M/V Asia Thailand vessel during which he noticed that some repairs were being
undertaken on the engine of the vessel. The vessel departed at around 11:00 in the evening
with only one (1) engine running. After an hour of slow voyage, the vessel stopped near Kawit
Island and dropped its anchor thereat. After half an hour of stillness, some passengers
demanded that they should be allowed to return to Cebu City for they were no longer willing
to continue their voyage to Cagayan de Oro City. The captain acceded to their request and
thus the vessel headed back to Cebu City. In Cebu City, plaintiff together with the other
passengers who requested to be brought back to Cebu City, were allowed to disembark.
Thereafter, the vessel proceeded to Cagayan de Oro City. Petitioner, the next day, boarded
the M/V Asia Japan for its voyage to Cagayan de Oro City, likewise a vessel of defendant. On
account of this failure of defendant to transport him to the place of destination on November
12, 1991, respondent Arroyo filed before the trial court an action for damage arising from
bad faith, breach of contract and from tort, against petitioner. The trial court ruled only for
breach of contract. The CA reversed and set aside said decision on appeal.
ISSUE: Whether or not the petitioner Trans-Asia was negligent?
HELD: Yes. Before commencing the contracted voyage, the petitioner undertook some
repairs on the cylinder head of one of the vessels engines. But even before it could finish
these repairs, it allowed the vessel to leave the port of origin on only one functioning engine,
instead of two. Moreover, even the lone functioning engine was not in perfect condition as
sometime after it had run its course, it conked out. This caused the vessel to stop and remain
adrift at sea, thus in order to prevent the ship from capsizing, it had to drop anchor. Plainly,
the vessel was unseaworthy even before the voyage began. For a vessel to be seaworthy, it
must be adequately equipped for the voyage and manned with a sufficient number of
competent officers and crew.[21] The failure of a common carrier to maintain in seaworthy
condition its vessel involved in a contract of carriage is a clear breach of is duty prescribed in terms of conditions printed at the back of the tickets; 2. It subverts the public policy on
Article 1755 of the Civil Code. transfer of venue of proceedings, since it will prejudice rights and interests of innumerable
passengers located in different places of the country who will have to file suits against
petitioner only in Cebu City. The philosophy underlying the provisions on transfer of venue of
SWEET LINES, INC. V. HON. BERNARDO TEVES actions is the convenience of the plaintiffs as well as his witnesses and to promote the ends of
justice.
FACTS:
Private respondents Atty. Leovigildo Tandog and Rogelio Tiro bought tickets for
Voyage 90 on Dec. 31, 1971 at the CDO branch office of petitioner, a shipping
company transporting inter-island passengers and cargoes.
Respondents were to board petitioners vessel M/S Sweet Hope bound for
Tagbilaran City via the port of Cebu.
Upon learning that the vessel was not proceeding to Bohol, private respondents,
per advice, went to the branch office for proper relocation to M/S Sweet Town.
Since the said vessel was already filled to capacity, they were forced to agree to
hide at the cargo section to avoid inspection of the officers of the Phil. Coastguard.
Private respondents alleged that they were exposed to scorching heat and dust
coming from the cargo, and the tickets they bought at CDO for Tagbilaran were not
honored and they were constrained to pay for other tickets.
Private respondents sued petitioner for damages and for breach of contract of
carriage before CFI Misamis Oriental.
Petitioner moved to dismiss the complaint on the ground of improper venue.
Condition No. 14 (printed at the back of the tickets): It is hereby agreed and
understood that any and all actions arising out of the conditions and provisions of
this ticket, irrespective of where it is issued, shall be filed in the competent courts in
Cebu City.
Trial court denied the motion.

Petitioner contends that Condition No. 14 is valid and enforceable since private
respondents acceded to it when they purchased passage tickets; venue may be validly waived
since it is printed in bold and capital letters and not in fine print; Condition No. 14 is
unequivocal and mandatory; and the respondent judge acted with or in excess of his
jurisdiction.
Private respondents claim that Condition No. 14 is not valid, that the same is not an
essential element of the contract of carriage, being in itself a different agreement which
requires the mutual consent of the parties.

ISSUE:
Is Condition No. 14 printed at the back of the petitioners passage tickets
purchased by private respondents, which limits the venue of actions arising from the contract
of carriage to the CFI Cebu, valid and enforceable?

HELD:
No. Condition No. 14 is a contract of adhesion (drafted only by one party
(corporation), and is sought to be accepted or adhered by the other party who cannot change
the same and who are thus made to adhere thereto on the take it or leave it basis). The
validity and enforceability of a contract of adhesion will have to be determined by the
peculiar circumstances and the nature of the conditions or terms sought to be enforced.
Condition No. 14 is void and unenforceable: 1. It is not just and fair to bind passengers to the
6. Amount of Liability
JUAN YSMAEL & CO, INC. V. GABINO BARRETTO & CO., LTD., ET. AL
G.R. No. L-28028, Nov. 25, 1927
FACTS:
Plaintiff seeks to recover from the defendants P 9,940.95, the alleged value of 4
cases of merchandise which it delivered to the steamship Andres on October 25,
1922, at Manila to be shipped to Surigao, but which were never delivered to
Salomon Sharuff, the consignee, or returned to the plaintiff.
The defendants denied all the material allegations of the complaint and as special
defense, alleged that the 4 cases of merchandise were never delivered to them, and
that under paragraph 7 of the printed conditions appearing at the back of the bill of
lading, plaintiffs right of action is barred because it was not brought within 60 days
from the time the cause of action accrued.
Defendants further alleged that under the provision 12 of the bill of lading, the
defendants are not liable in excess of P300 for any package of silk unless the value
and contents of such packages are correctly declared in the bill of lading at the time
of shipment.
The lower court rendered judgment for the plaintiff for the full amount of its claim.
Defendants appealed.
ISSUES:
1. Whether or not the plaintiffs right of action is barred because it was not brought
within 60 days from the time the cause of action accrued. (paragraph 7)
2. Whether or not the carrier shall not be liable for the loss or damage from any
cause or for any reason to an amount of P300 for any single package of silk or other valuable
cargo.
HELD:
1. No. The goods in question were shipped from Manila on October 25, 1922, to be
delivered to Salomon Sharuff in Surigao, plaintiffs original complaint was filed on
April 17, 1923, or a little less than 6 months after the shipment was made.The
action was brought with a reasonable time. It is true that both the plaintiff and
the defendants are residents of Manila, but it is also true that Surigao where the
goods in question were to be delivered is one of the most distant places from
Manila. In the very nature of the things, plaintiff would not want to commence its
action until such time as it had made a full and careful investigation of all of the
material facts and even the law of the case, so as to determine whether or not
defendants were liable for its loss.
2. No. The validity of the stipulations limiting carriers liability is to be determined by
their reasonableness and their conformity to the sound public policy. It cannot
lawfully stipulate for exemption from liability, unless such exemption is just and
reasonable, and unless the contract is freely and fairly made.
The evidence shows that 164 cases were shipped, and that the value of each case
was very near P2,500. In this situation, the limit of defendants liability for each case
of silk for loss or damage from any cause or for any reason would put it in the
power of the defendants to have taken the whole cargo of 164 cases of silk at a
valuation of P300 for each case, or less that 1/8 of its actual value. If that rule
should be sustained, no silk would ever be shipped from one island to another in
the Philippines. Such limitation of value is unconscionable and void as against public
policy.
PARMANAND SHEWARAM V. PAL
G.R. No. L-20099, July 7, 1966
FACTS:
Shewaram was a paying passenger on defendants aircraft from Zamboanga City
bound for Manila.
He checked in 3 pieces of baggages- a suitcase and 2 other pieces. The suitcase was
mistagged by defendants personnel in Zamboanga as IGN (Iligan) instead of MNL
(Manila).
Plaintiff made a claim with defendants personnel in Manila airport and another
suitcase similar to his own which was the only baggage left for that flight was given
to the plaintiff for him to take delivery but he refused to take the delivery of the
same because it was not his, alleging that all his clothes were white and the
National transistor 7 and a Rollflex camera were not found inside the suitcase, and
moreover, it contained a pistol which he did not have nor placed it inside the
suitcase.
It was found out that the suitcase shown to and given to the plaintiff belonged to a
certain Del Rosario who was bound for Iligan in the same flight with Shewaram.
Shewaram made demand for these 2 items or for the value thereof but the same
was not complied with by defendant.
The municipal trial court rendered decision in favor of plaintiff. The said court had
found that the suitcase of the appellee was tampered and the transistor radio and
the camera contained therein were lost, and that the loss of those articles was due
to the negligence of the employees of the appellant.
ISSUE: Whether or not the limited liability rule applies.
HELD: No. Article 1750 of the NCC provides that the pecuniary liability of a common carrier
may, by contract, be limited to a fixed amount. It is required, however, that the contract must
be reasonable and just under the circumstances and has been fairly agreed upon. In the
case at bar, the requirements have not been met. It cannot be said that the appellee had
actually entered into a contract with the appellant, embodying the conditions as printed at
the back of the ticket stub that was issued by the appellant to the appellee. The fact that
those conditions are printed at the back of the tickets stub in letters so small that they are
hard to read would not warrant the presumption that the appellee was aware of those
conditions such that he had fairly and freely agreed to those conditions.
The liability of the appellant should be governed by the provisions of Article 1734 and 1735 of
the NCC. It having been clearly found by the trial court that the transistor radio and the
camera of the appellee were lost as a result of the negligence of the appellant as a common
carrier, the liability of the appellant is clear- it must pay the appellee the value of those
articles.
 ONG YIU V. CA AND PAL
G.R. No. L-40597, June 29, 1979
FACTS:
On August 26, 1967, petitioner, a practicing lawyer and businessman, was a fare
paying passenger of respondent PAL on board a flight from Cebu bound for Butuan
City. He was scheduled to attend a trial in CFI Butuan on August 28-31, 1967.He
checked in a blue maleta.Upon arrival in Butuan, petitioner claimed his luggage but
it could not be found.
PAL Butuan sent a message to PAL Cebu inquiring about the missing luggage. It was
later on relayed to PAL Manila.PAL Manila wired PAL Cebu advising that the luggage
had been over carried to Manila and it would be forwarded to Cebu. Instructions
were also given that the luggage be immediately forwarded to Butuan on the first
available flight. At 5 PM, PAL Cebu sent a message to PAL Butuan that the luggage
would be forwarded the following day, August 27, 1967. However, this message was
not received by PAL Butuan as all personnel had already left since there were no
more incoming flights that afternoon.
Petitioner was worried about the missing luggage because it contained vital
documents needed for trial. Petitioner wired PAL Cebu demanding the delivery of
his baggage before noon the next day otherwise he would hold PAL liable for
damages. This telegram was received by the PAL Cebu supervisor but the latter felt
no need to wire the 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.
On August 27, 1967, petitioner went to Bancasi Airport. He did not wait for the
morning flight which arrived at 10 AM. The porter paged petitioner but the latter
had already left. A certain Emilio Dagorro, a driver who used to drive the 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 that luggage and placed it on the counter. Dagorro examined the lock,
pressed it, and it opened. After calling the attention of Gomez, Gomez took a look
at its contents, but did not touch them.
Dagorro delivered the maleta to petitioner, informing him that the lock was open.
Upon inspection, petitioner found that the folder containing documents in civil case
were missing, aside from 2 gift items for his parents-in-law. Petitioner refused to
accept the luggage. Dagorro returned it to the porter clerk who sealed it and
forwarded the same to PAL Cebu.
Petitioner asked for postponement of the hearing due to the loss of his documents,
which was granted by the court. He returned to Cebu. In a letter to PAL Cebu, he
demanded that his luggage be produced intact, and that he be compensated for
damages. Petitioner sent a letter to PAL Cebu inquiring the results of the
investigation to pinpoint responsibility for the unauthorized opening of the maleta.
PAL Cebu failed to found the lost folder and failed to pinpoint the personnel who
allegedly pilfered the baggage.
Petitioner filed a complaint against PAL for damages for breach of contract of
transportation. The trial court found PAL to have acted in bad faith and with malice
and declared petitioner entitled to damages. CA found that PAL was guilty only of
simple negligence.
ISSUE: Whether or not PAL acted in bad faith.
HELD: No. Bad faith means a breach of a known duty though some motive of interest or ill
will. It was the duty of PAL to look for petitioners luggage which had been miscarried. PAL
exerted due diligence in complying with such duty. In the absence of a wrongful act or
omission or fraud or bad faith, petitioner is not entitled to moral damages. Petitioner is
neither entitled to exemplary damages. It 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 PALs carriage liability to the amount of P100 as stipulated at the back of the ticket;
and that there is nothing in the evidence to show that he actually entered into a contract with
PAL limiting the latters liability for the loss or delay of the baggage of its passengers.
While it may be true that petitioner had not signed the plane ticket, he is
nevertheless bound by the provisions thereof. Such provisions have been held to be 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 contract of adhesion
wherein one party imposes a readymade form of contract on the other. The one who adheres
to the contract is in reality free to reject it entirely; if he adheres, he gives his consent.
SEA-LAND SERVICE, INC. V. IAC
G.R. No. 75118, August 31, 1987
FACTS:
Sea-Land received from Seaborne Trading Company in California a shipment
consigned to Sen Hiap Hing the business name used by Paulino Cue in the wholesale
and retail trade which operated out of an establishment located in Cebu City.
The shipper not having declared the value of the shipment, no value was indicated
in the bill of lading. The shipment was loaded on board the MS Patriot, owned and
operated by Sea-Land, for discharge at the port of Cebu.
The shipment arrived in Manila. Sometime between February 13 and 16, 1981,
while awaiting trans-shipment to Cebu, the shipment was stolen and has never
been recovered.
Paulino Cue made a formal claim upon Sea-Land for the value of the lost shipment
amounting to P179,643.48. Sea-Land offered $4,000 or P30,600 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. Cue rejected the offer and
filed for damages.
Trial court rendered judgment in favor of Cue. IAC affirmed the decision of the trial
court.
ISSUE: 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.
HELD: Yes. There is no question of the right of a consignee in a bill of lading to recover
from the carrier or shipper for loss or damage of goods being transported under said bill,
although that document may have been drawn up only by the consignor and the carrier
without the intervention of the consignee. The right of a party to recover for loss of a
shipment consigned to him under the bill of lading drawn up only 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 when he demands fulfilment of that stipulation.
There can be no doubt about the validity and enforceability of freely-agreed-upon stipulations
in an 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.
Since the liability of a common carrier for loss of damage to goods transported by it under a
contract of carriage is governed by the laws of the country in destination, the liability of Sea-
Land to the consignee is governed primarily by the Civil Code and suppletorily by the Code of
Commerce and special laws such as the Carriage of Goods by Sea Act.
The stipulation in the questioned bill of lading limiting Sea-Lands liability for loss or damage
to the shipment covered by said bill to $500 per package is held valid and binding on private
respondent.
CITADEL LINES, INC. V. CA AND MANILA WINE MERCHANTS
G.R. No. 88092, April 25, 1990
FACTS:
Petitioner Citadel (Carrier) is the general agent of the vessel Cardigan Bay/Strait
Enterprise, while respondent Manila Wine Merchants (Consignee) is the importer of
the subject shipment of Dunhill cigarettes from England.
180 Filbrite cartons of mixed British manufactured cigarettes were loaded on the
said vessel at England for carriage to Manila. The shipment arrived at Manila in
container van, which was received by E. Razon, Inc. (Arrastre)
On April 30, 1979, the container van, which contained 2 shipments, was stripped.
One shipment was delivered and the other shipment consisting of the imported
British manufactured cigarettes was palletized.
Due to lack of space at the Special Cargo Coral, the cigarettes were placed in 2
containers with 2 pallets in container No. BENU 204850-9 (original container) and 4
pallets in container No. BENU 201009-9, with both containers duly padlocked and
sealed by the representative of the Carrier.
On May 1, 1979, the Carriers head checker discovered that container No. BENU
201009-9 had a different padlock and the seal was tampered with. It was found out
that 90 cases of imported British cigarettes were missing.
According to the investigation of the Arrastre, the cargo was not formally turned
over to it by the Carrier but was kept inside the container van No. BENU 201009-9
which was padlocked and sealed by the representatives of the Carrier without any
participation of the Arrastre.
When the Consignee learned that 90 cases were missing, it filed a formal claim with
the Carrier. The Carrier admitted the loss but alleged that the same occurred at Pier
13, an area absolutely under the control of Arrastre. In view thereof, the Consignee
filed a formal claim with the Arrastre, demanding payment of the value of the goods
but said claim was denied.
The trial court rendered a decision exonerating the Arrastre of any liability on the
ground that the container van was not formally turned over to its custody, and
adjudging the Carrier liable for the missing cargoes. CA affirmed the decision.
ISSUE: Whether the stipulation limiting the liability of the carrier contained in the bill of
lading is binding on the consignee.
HELD: Yes. A stipulation limiting the liability of the carrier to the value of goods appearing
in the bill of lading, unless the shipper or owner declares a greater value, is binding. Further, a
contract fixing the sum that may be recovered by the owner or shipper for the loss,
destruction or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been fairly and freely agreed upon. The Consignee itself admits in its
memorandum that the value of goods shipped does not appear in the bills of lading. Hence,
the stipulation on the carriers limited liability applies.
BRITISH AIRWAYS v. CA
LOADSTAR SHIPPING CO, INC. V. CA
G.R. No. 131621, September 28, 1999
FACTS:
Loadstar received on board M/V Cherokee goods amounting to P6,067,178. The
goods were insured for the same amount with Manila Insurance Co. (MIC) against
various risks including TOTAL LOSS BY TOTAL LOSS OF THE VESSEL.
The vessel was insured by Prudential Guarantee & Assurance, Inc. (PGAI) for P4M.
On November 20, 1984, the vessel, along with its cargo, sank off Limasawa Island.
The consignee made a claim with Loadstar which ignored the same. MIC paid to the
insured the full settlement of its claim.
MIC filed a complaint against Loadstar and PGAI, alleging that the sinking of the
vessel was due to the fault and negligence of Loadstar and its employees; that PGAI
be ordered to pay the insurance of the vessel directly to MIC, to be deducted from
MICs claim from Loadstar.
Loadstar denied liability for the loss of goods and claimed that the sinking was due
to force majeure. PGAI averred that MIC had no cause of action against it, Loadstar
being the party insured. PGAI was later on dropped as defendant.
Trial court rendered judgment in favor of MIC. CA affirmed the decision in toto.
ISSUES:
1. Is the M/V Cherokee a private or common carrier?
2. Did Loadstar observe due and/or ordinary diligence in these premises?
HELD:
1. Loadstar is a common carrier. It is not necessary that the carrier be issued a
certificate of public convenience, and this public character is not altered by the fact
that the carriage of the goods in question was periodic, occasional, episodic or
unscheduled. The records do not disclose that the M/V Cherokee undertook to
carry a special cargo or was chartered to a special person only. The bill of lading
failed to show any special arrangement, but only general provision that the said
vessel was a general cargo carrier. At that time, the vessel was also carrying
passengers.
2. No. The M/V Cherokee was not seaworthy. The vessel was not even sufficiently
manned. For a vessel to be seaworthy, it must be adequately equipped for the
voyage and manned with a sufficient number of competent officers and crew.
Loadstar argued that any agreement limiting its liability is valid. Since the
cargo was being shipped at owners risk, Loadstar was not liable for any loss or
damage to the same. MIC, on the other hand, argued that the limited liability theory
is not applicable because Loadstar was at fault or negligent, and because it failed to
maintain a seaworthy vessel. Authorizing the voyage notwithstanding the
knowledge of a typhoon is tantamount to negligence. SC affirmed MICs argument.
7. Passengers Baggages
QUISUMBING, SR. V. CA
G.R. No. L-50076, September 14, 1990
FACTS:
Norberto Quisumbing, Sr. and Gunther Leoffler were among the passengers of PALs
plane from Mactan City to Manila.
Florencio Villarin, a Senior NBI agent who was also a passenger of the plane, noticed
a certain Zaldy, a suspect in the killing of Judge Valdez. Soon thereafter, Zaldy
announced to the passengers and the pilots that it was a hold-up and ordered the
pilot not to send any SOS. The hold-uppers divested passengers of their belongings
including Quisumbing who was divested of jewelries and cash; and Leoffler who was
divested of a wrist watch, cash and wallet. Upon landing at Manila, Zaldy and his 3
companions succeeded in escaping.
Quisumbing and Leoffler made demands to PAL to indemnify them but PAL refused
averring that it is not liable to them.
Plaintiffs filed a suit against PAL contending that the loss is a result of breach of
PALs contractual obligation to carry them and their belongings and effects to
Manila without loss or damage, and constitutes a serious dereliction of PALs legal
duty to exercise extraordinary diligence.
PAL denied liability alleging that the robbery constitute force majeure, and neither
of the plaintiffs had notified PAL that they were in possession of cash and valuable
jewelries and watches or surrendered said items to the crew on board the aircraft.
Trial court dismissed plaintiffs complaint because they did not notify defendant
that they were in possession of the cash, jewelries and wallet they are claiming; and
that the robbery is a force majeure for which the defendant is not liable because
robbers were able to gain entrance to the plane with the guns they used already in
their possession, which fact could not have been prevented nor avoided by the
defendant since it was not authorized to search its passengers for firearms and
deadly weapons.
CA affirmed the trial courts decision. PAL could not be faulted for want of diligence
for failing to take positive measures to implement regulations prohibiting civilians
from carrying firearms on board aircrafts.
ISSUE: Whether or not there is negligence of the part of the PAL crew occurring before and
exposing them to hijacking.
HELD: No.Hijackers do not board an airplane through blatant display of firepower.
Firearms and grenades are brought to the plane surreptitiously. The use of the most
sophisticated electronic detection devices may have minimized hijacking but still ineffective
against truly determined hijackers. The evidence fail to prove any want of diligence on the
part of PAL or it had failed to comply with the applicable regulations or universally accepted
and observed procedures to preclude highjacking; and the particular act singled out by the
petitioners is not negligent acts sufficient to overcome the force majeure nature of armed
robbery.
 PAN AMERICAN WORLD AIRWAYS, INC. V. JOSE RAPADAS
G.R. No. 60673, May 19, 1992
FACTS:
Private respondent Rapadas held Passenger ticket and Baggage claim check for
petitioners flight from Guam to Manila. Rapadas was ordered by petitioners
handcarry control agent to check in his Samsonite attache case. Rapadas protested
pointing to the fact that other passengers were permitted to handcarry bulkier
baggages. He stepped out of the line. However, the same man in charge did not fail
to notice him and ordered him again to register his attache case. For fear that he
would miss his flight, he acceded to checking in. He gave his attache case to his
brother who happened to be around and who checked in for him, but without
declaring its contents or the value of its contents.
Upon arriving in Manila, Rapadas claimed and was given all his checked-in baggages
except the attache case. Petitioner exerted efforts to locate the luggage through
the Pan American World Airways Baggage Service.
Rapadas received a letter from petitioners counsel offering to settle the claim for
the sum of $160 representing the petitioners alleged limit of liability for loss or
damage to a passengers property under the contract of carriage.
Rapadas refused to accept the settlement and filed an instant action for damages
alleging that PAN AM discriminated or singled him out in ordering that his luggage
to be checked in; that PAN AM neglected its duty in the handling and safekeeping of
his attache case.
Petitioner acknowledged responsibility for the loss of the attache case but asserted
that the claim was subject to the Notice of Baggage Liability Limitations allegedly
attached to and forming part of the passenger ticket.
The trial court ruled in favor of Rapadas after finding no stipulation giving notice to
the baggage liability limitation. The court rejected the claim of PAN AM that its
liability under the terms of the passenger ticket is only up to $160. However, it
discredited insufficient evidence to show discriminatory acts or bad faith on the
part of PAN AM.
CA affirmed the trial court decision.
ISSUE: Whether or not a passenger is bound by the terms of a passenger ticket declaring
that the limitations of liability set forth in the Warsaw Convention shall apply in case of loss,
damage, or destruction to a registered luggage of a passenger.
HELD: Yes. There is no dispute that there was such a Notice appearing on page 2 of the
airline ticket stating that the Warsaw Convention governs in case of death or injury to a
passenger or of loss, damage or destruction to a passengers luggage. The Convention
governs the availment of the liability limitations where the baggage check is combined with or
incorporated in the passenger ticket. In the case at bar, the baggage check is combined with
the passenger ticket in one document.
The passenger, upon contracting with the airline and receiving the plane ticket, was expected
to be vigilant insofar as his luggage is concerned. If the passenger fails to adduce evidence to
overcome the stipulations, he cannot avoid the application of liability limitations. The facts
show that Rapadas actually refused to register the attache case despite having ordered by the
PAN AM agent. The private respondent manifested a disregard of the airline rules. The
alleged lack of enough time for him to make a declaration of a higher value and to pay the
supplementary charges cannot justify failure to comply with the requirement that will exclude
the application of limited liability. Passengers are also allowed one handcarried bag each
provided it conforms to certain prescribed dimensions. If Rapadas was not allowed to
handcarry his lost attache case, this means that he was carrying more than the allowable
weight for all his luggages or more than the allowable number of handcarried items or more
than the prescribed dimension for the bag.
We are not by any means suggesting that passengers are always bound to the stipulated
amounts printed on a ticket, found in a contract of adhesion. The reason behind stipulations
on liability limitations arise from the difficulty of establishing with clear preponderance of
evidence the contents of a lost suitcase. Unless the contents are declared, it will always be
the word of the passenger against that of the airline. If the loss of life or property is caused by
the gross negligence or arbitrary acts of the airline, the Court will not hesitate to disregard the
contract of adhesion.
BRITISH AIRWAYS V. CA
G.R. No. 121824, January 29, 1998
FACTS:
Mahtani decided to visit his relatives in Bombay, India. He obtained services of Mr.
Gumar to prepare his travel plans. The latter purchased a ticket from British Airways
(BA).
Since BA had no direct flights from Manila to Bombay, Mahtani had to take a flight
to HongKong via PAL , and upon arrival in HK he had to take a connecting flight to
Bombay on board BA.
Mahtani checked in at the PAL counter in Manila his 2 pieces of luggage containing
his clothing and personal effects, confident that upon reaching HK, the same would
be transferred to the BA flight bound for Bombay.
When Mahtani arrived in Bombay, he discovered that his luggage was missing and
that upon inquiry from the BA representatives, he was told that the same might be
diverted to London. After one week, BA finally advised him to file a claim by
accomplishing the Property Irregularity Report.
Back in the Philippines, Mahtani filed his claim for damages against BA and Mr.
Gumar. BA contended that Mahtani did not have cause of action against it. BA also
filed a third party complaint against PAL alleging that the reason for the non-
transfer of the luggage was due to the latters late arrival in HK, thus leaving hardly
any time for the proper transfer of Mahtanis luggage to the BA aircraft bound for
Bombay.
PAL disclaimed liability arguing that there was adequate time to transfer the
luggage to BA facilities in HK.
Trial court rendered its decision in favor of Mahtani. The third party complaint
against PAL was dismissed for lack of cause of action. CA affirmed in toto.
ISSUES:
1. Whether or not BA is liable for compensatory damages and attorneys fees.
2. Whether or not the dismissal of the third party complaint is correct.
HELD:
1. Yes. In determining compensatory damages, it is vital that the claimant satisfactorily
prove during the trial the existence of the factual basis of the damages and its
causal connection to the defendants acts. The benefits of limited liability are
subject to waiver such as when the air carrier failed to raise timely objections during
the trial when questions and answers regarding the actual claims and damages
sustained by the passenger were asked.In the case at bar, BA had waived the
 defense of limited liability when it allowed Mahtani to testify as to the actual
damages he incurred due to the misplacement of his luggage, without any
objection.
2. No. The contract of air transportation was exclusive between Mahtani and BA. It is
undisputed that PAL, in transporting Mahtani from Manila to HK, acted as the agent
of BA. It is a well-settled rule that an agent is also responsible for any negligence in
the performance of its function and is liable for damages which the principal may
suffer by reason of its negligent act. Since the instant petition was based on breach
of contract of carriage, Mahtani can only sue BA and not PAL, since the latter was
not a party to the contract. However, this is not to say that PAL is relieved from any
liability due to any of its negligent act.