Alitalia v.
IAC (1) Whether the Warsaw Convention should be applied
Facts:
Dr. Felipa Pablo, an associate professor in the
University of the Philippines and a research grantee of
the Philippine Atomic Energy Agency, was invited to
take part at a meeting of the Department of Research
and Isotopes in Italy in view of her specialized
knowledge in “foreign substances in food and the
agriculture environment”. She would be the second
speaker on the first day of the meeting. Dr. Pablo
booked passage on petitioner Alitalia. She arrived in
Milan on the day before the meeting, but was told that
her luggage was delayed and was in a succeeding flight
from Rome to Milan. The luggage included her
materials for the presentation. The succeeding flights
did not carry her luggage. Desperate, she went to
Rome to try to locate the luggage herself, but to no
avail. She returned to Manila without attending the
meeting. She demanded reparation for the damages.
She rejected Alitalia’s offer of free airline tickets and
commenced an action for damages. As it turned out,
the luggage was actually forwarded to Ispra, but only
a day after the scheduled appearance. It was returned
to her after 11 months. The trial court ruled in favor of
Dr. Pablo, and this was affirmed by the Court of
Appeals.
Issues:
to limit Alitalia’s liability
(2) Whether Dr. Pablo is entitled to nominal damages
Held:
(1) Under the Warsaw Convention, an air carrier is
made liable for damages for:
a. The death, wounding or other bodily injury of a
passenger if the accident causing it took place on
board the aircraft or I the course of its operations
of embarking or disembarking;
b. The destruction or loss of, or damage to, any
registered luggage or goods, if the occurrence
causing it took place during the carriage by air;
and
c. Delay in the transportation by air of passengers,
luggage or goods.
The convention however denies to the carrier availment
of the provisions which exclude or limit his liability, if
the damage is caused by his wilful misconduct, or by
such default on his part as is considered to be
equivalent to wilful misconduct. The Convention does
not thus operate as an exclusive enumeration of the
instances of an airline's liability, or as an absolute limit
of the extent of that liability. It should be deemed a
limit of liability only in those cases where the cause of this Court agrees that the respondent Court of Appeals
the death or injury to person, or destruction, loss or correctly set the amount thereof at PhP 40,000.00.
damage to property or delay in its transport is not
attributable to or attended by any wilful misconduct, The Court also agrees that respondent Court of Appeals
bad faith, recklessness, or otherwise improper conduct correctly awarded attorney’s fees to Dr. Pablo and the
on the part of any official or employee for which the amount of PhP 5,000.00 set by it is reasonable in the
carrier is responsible, and there is otherwise no special premises. The law authorizes recovery of attorney’s
or extraordinary form of resulting injury. fees inter alia where, as here, the defendant’s act or
omission has compelled the plaintiff to litigate with
In the case at bar, no bad faith or otherwise improper third persons or to incur expenses to protect his
conduct may be ascribed to the employees of petitioner interest or where the court deems it just and equitable.
airline; and Dr. Pablo's luggage was eventually
returned to her, belatedly, it is true, but without
appreciable damage. The fact is, nevertheless, that
some species of injury was caused to Dr. Pablo because
petitioner ALITALIA misplaced her baggage and failed
to deliver it to her at the time appointed - a breach of
its contract of carriage. Certainly, the compensation for
the injury suffered by Dr. Pablo cannot under the
circumstances be restricted to that prescribed by the
Warsaw Convention for delay in the transport of
baggage.

(2) She is not, of course, entitled to be compensated

for loss or damage to her luggage. She is however
entitled to nominal damages which, as the law says, is
adjudicated in order that a right of the plaintiff, which
has been violated or invaded by the defendant, may be
vindicated and recognized, and not for the purpose of
indemnifying the plaintiff that for any loss suffered and
American Home Assurance vs. CA
FACTS:
American Home Assurance Co. and the National Marine
Corporation (NMC) are foreign corporations licensed to
do business in the Philippines. On or about 19 June
1988, Cheng Hwa Pulp Corporation shipped 5,000 bales
(1,000 ADMT) of bleached kraft pulp from Haulien,
Taiwan on board “SS Kaunlaran”, which is owned and
operated by NMC. The said shipment was consigned to
Mayleen Paper, Inc. of Manila, which insured the
shipment with American Home Assurance Co..
On 22 June 1988, the shipment arrived in Manila and
was discharged into the custody of the Marina Port
Services, Inc., for eventual delivery to the consignee-
assured.
However, upon delivery of the shipment to Mayleen
Paper, Inc., it was found that 122 bales had either been
damaged or lost. The loss was calculated to be 4,360
kilograms with an estimated value of P61,263.41.
Mayleen Paper, Inc. then duly demanded
indemnification from NMC for the damages and losses
in the shipment but to no avail. Mayleen Paper, Inc.
sought recovery from American Home Assurance Co..
Upon demand and submission of proper
documentation, American Home Assurance paid
Mayleen Paper, Inc. the adjusted amount of P31,
506.75 for the damages/losses suffered by the
shipment, hence, AHA was subrogated to the rights and
interests of Mayleen Paper, Inc.
AHA brought a suit against respondent NMC for the
amount it paid Mayleen Paper, Inc.
The RTC rendered a decision dismissing the complaint,
such decision was affirmed by the CA.
ISSUE:
Is American Home Assurance Company is entitled to
reimbursement from NMC of what it paid to Mayleen
Paper?
RULING:
YES.
The Supreme Court reversed the decisions of both the
Court of Appeals and the Regional Trial Court of Manila,
Branch 41, appealed from; and ordered NMC to
reimburse the subrogee, American Home Assurance,
the amount of P31,506.75.
Under Article 1733 of the Civil Code, common carriers
from the nature of their business and for reasons of
public policy are bound to observe extraordinary
diligence in the vigilance over the goods and for the
safety of passengers transported by them according to
all circumstances of each case. Thus, under Article
1735 of the same Code, in all cases other than those
mentioned in Article 1734 thereof, the common carrier
shall be presumed to have been at fault or to have
acted negligently, unless it proves that it has observed
the extraordinary diligence required by law.
Common carriers cannot limit their liability for injury or
loss of goods where such injury or loss was caused by
its own negligence. Otherwise stated, the law on
averages under the Code of Commerce cannot be
applied in determining liability where there is 4,360 kilograms and amounting to P61,263.41. Instead
negligence. of presenting proof of the exercise of extraordinary
Under the foregoing principle and in line with the Civil diligence as required by law, NMC filed its Motion to
Code’s mandatory requirement of extraordinary Dismiss dated 7 August 1989, hypothetically admitting
diligence on common carriers in the care of goods the truth of the facts alleged in the complaint to the
placed in their stead, it is but reasonable to conclude effect that the loss or damage to the 122 bales was due
that the issue of negligence must first be addressed to the negligence or fault of NMC. Such being the case,
before the proper provisions of the Code of Commerce it is evident that the Code of Commerce provisions on
on the extent of liability may be applied. averages cannot apply.
As resolved in National Development Co. v. C.A. (164 Article 1734 of the Civil Code provides that common
SCRA 593 [1988]; citing Eastern Shipping Lines, Inc. carriers are responsible for loss, destruction or
v. I.A.C., 150 SCRA 469, 470 [1987], “the law of the deterioration of the goods, unless due to any of the
country to which the goods are to be transported causes enumerated therein. Herein, it is obvious that
governs the liability of the common carrier in case of the present case does not fall under any of the
their loss, destruction or deterioration.” (Article 1753, exceptions. Thus, American Home Assurance Company
Civil Code). Herein, thus, for cargoes transported to the is entitled to reimbursement of what it paid to Mayleen
Philippines, the liability of the carrier is governed Paper, Inc. as insurer.
primarily by the Civil Code and in all matters not
regulated by said Code, the rights and obligations of
common carrier shall be governed by the Code of
Commerce and by special laws (Article 1766, Civil
Code).
The filing of a motion to dismiss on the ground of lack
of cause of action carries with it the admission of the
material facts pleaded in the complaint (Sunbeam
Convenience Foods, Inc. v. C.A., 181 SCRA 443
[1990]). Herein, upon delivery of the shipment in
question at Mayleen’s warehouse in Manila, 122 bales
were found to be damaged/lost with straps cut or loose,
calculated by the so-called “percentage method” at
UNSWORTH TRANSPORT INTERNATIONAL
(PHILS.), INC., Petitioner,
vs.
COURT OF APPEALS and PIONEER INSURANCE
AND SURETY CORPORATION, Respondents.
Facts: On August 31, 1992, the shipper Sylvex
Purchasing Corporation delivered to UTI a shipment of
27 drums of various raw materials for pharmaceutical
manufacturing, consisting of: "1) 3 drums (of) extracts,
flavoring liquid, flammable liquid x x x banana
flavoring; 2) 2 drums (of) flammable liquids x x x
turpentine oil; 2 pallets. STC: 40 bags dried yeast; and
3) 20 drums (of) Vitabs: Vitamin B Complex
Extract." UTI issued Bill of Lading No. C320/C15991-
2, covering the aforesaid shipment. The subject
shipment was insured with private respondent Pioneer
Insurance and Surety Corporation in favor of Unilab
against all risks in the amount of P1,779,664.77 under
and by virtue of Marine Risk Note Number MC RM UL
0627 92 and Open Cargo Policy No. HO-022-RIU.
On the same day that the bill of lading was issued, the
shipment was loaded in a sealed 1x40 container van,
with no. APLU-982012, boarded on APL’s vessel M/V
"Pres. Jackson," Voyage 42, and transshipped to APL’s
M/V "Pres. Taft" for delivery to petitioner in favor of the
consignee United Laboratories, Inc. (Unilab).
On September 30, 1992, the shipment arrived at the
port of Manila. On October 6, 1992, petitioner received
the said shipment in its warehouse after it stamped the
Permit to Deliver Imported Goods procured by the
Champs Customs Brokerage. Three days thereafter, or
on October 9, 1992, Oceanica Cargo Marine Surveyors
Corporation (OCMSC) conducted a stripping survey of
the shipment located in petitioner’s warehouse.
Consequently, Unilab’s quality control representative
rejected one paper bag containing dried yeast and one
steel drum containing Vitamin B Complex as unfit for
the intended purpose. On November 7, 1992, Unilab
filed a formal claim for the damage against private
respondent and UTI. On November 20, 1992, UTI
denied liability on the basis of the gate pass issued by
Jardine that the goods were in complete and good
condition; while private respondent paid the claimed
amount on March 23, 1993. By virtue of the Loss and
Subrogation Receipt issued by Unilab in favor of private
respondent, the latter filed a complaint for Damages
against APL, UTI and petitioner with the RTC of Makati.
Issue: Whether or not petitioner is a common carrier.
Held: Admittedly, petitioner is a freight forwarder. The
term "freight forwarder" refers to a firm holding itself
out to the general public (other than as a pipeline, rail,
motor, or water carrier) to provide transportation of
property for compensation and, in the ordinary course
of its business, (1) to assemble and consolidate, or to
provide for assembling and consolidating, shipments,
and to perform or provide for break-bulk and
distribution operations of the shipments; (2) to assume
responsibility for the transportation of goods from the
place of receipt to the place of destination; and (3) to
use for any part of the transportation a carrier subject
to the federal law pertaining to common carriers.
A freight forwarder’s liability is limited to damages
arising from its own negligence, including negligence in
choosing the carrier; however, where the forwarder
contracts to deliver goods to their destination instead
of merely arranging for their transportation, it becomes
liable as a common carrier for loss or damage to goods.
A freight forwarder assumes the responsibility of a
carrier, which actually executes the transport, even
though the forwarder does not carry the merchandise
itself.
Undoubtedly, UTI is liable as a common carrier.
Common carriers, as a general rule, are presumed to
have been at fault or negligent if the goods they
transported deteriorated or got lost or destroyed. That
is, unless they prove that they exercised extraordinary
diligence in transporting the goods. In order to avoid
responsibility for any loss or damage, therefore, they
have the burden of proving that they observed such
diligence. Mere proof of delivery of the goods in good
order to a common carrier and of their arrival in bad
order at their destination constitutes a prima facie case
of fault or negligence against the carrier. If no adequate
explanation is given as to how the deterioration, loss,
or destruction of the goods happened, the transporter
shall be held responsible.
NATIONAL STEEL CORPORATION v. COURT OF
APPEALS
G.R. No. 112287 December 12, 1997
Panganiban, J.
Doctrine:
The stringent provisions of the Civil Code on common
carriers protecting the general public cannot justifiably
be applied to a private carrier.
Facts:
Plaintiff National Steel Corporation (NSC) as Charterer
and defendant Vlasons Shipping, Inc. (VSI) as Owner,
entered into a Contract of Voyage Charter Hire whereby
NSC hired VSI’s vessel, the MV Vlasons I to make one
voyage to load steel products at Iligan City and
discharge them at North Harbor, Manila. The handling,
loading and unloading of the cargoes were the
responsibility of the Charterer.
The skids of tinplates and hot rolled sheets shipped
were allegedly found to be wet and rusty. Plaintiff,
alleging negligence, filed a claim for damages against
the defendant who denied liability claiming that the MV
Vlasons I was seaworthy in all respects for the carriage
of plaintiff’s cargo; that said vessel was not a “common
carrier” inasmuch as she was under voyage charter
contract with the plaintiff as charterer under the
charter party; that in the course its voyage, the vessel
encountered very rough seas.
Issue:
Whether or not the provisions of the Civil Code on
common carriers pursuant to which there exists a
presumption of negligence against the common carrier
in case of loss or damage to the cargo are applicable to
a private carrier.
Held:
No. In a contract of private carriage, the parties may
freely stipulate their duties and obligations which
perforce would be binding on them. Unlike in a contract
involving a common carrier, private carriage does not
involve the general public. Hence, the stringent
provisions of the Civil Code on common carriers
protecting the general public cannot justifiably be
applied to a ship transporting commercial goods as a
private carrier.
It has been held that the true test of a common carrier
is the carriage of passengers or goods, provided it has
space, for all who opt to avail themselves of its
transportation service for a fee [Mendoza vs. Philippine
Airlines, Inc., 90 Phil. 836, 842-843 (1952)]. A carrier
which does not qualify under the above test is deemed
a private carrier. “Generally, private carriage is
undertaken by special agreement and the carrier does
not hold himself out to carry goods for the general
public.
Because the MV Vlasons I was a private carrier, the
ship owner’s obligations are governed by the foregoing
provisions of the Code of Commerce and not by the
Civil Code which, as a general rule, places the prima
facie presumption of negligence on a common carrier.
Malayan Insurance Co., Inc. v. Philippine First
Insurance Co., Inc., G.R. No. 184300 (July 11,
2012)
Facts:
1. Since 1989, Wyeth Philippines, Inc. (Wyeth) and
respondent Reputable Forwarder Services, Inc.
(Reputable) had been annually executing a
contract of carriage, whereby the latter
undertook to transport and deliver the former’s
products to its customers, dealers or salesmen.
2. Wyeth procured Marine Policy from respondent
Philippines First Insurance Co., Inc. (Philippines
First) to secure its interest over its own products.
3. Wyeth executed its annual contract of carriage
with Reputable. It turned out, however, that the
contract was not signed by Wyeth’s
representative/s.
4. Under the contract, Reputable undertook to
answer for "all risks with respect to the goods and
shall be liable to the COMPANY (Wyeth), for the
loss, destruction, or damage of the
goods/products due to any and all causes
whatsoever, including theft, robbery, flood,
storm, earthquakes, lightning, and other force
majeure while the goods/products are in transit
and until actual delivery to the customers,
salesmen, and dealers of the COMPANY".
5. The contract also required Reputable to secure
an insurance policy on Wyeth’s goods. Thus,
Reputable signed a Special Risk Insurance Policy
(SR Policy) with petitioner Malayan for the
amount of P1 million.
6. On October 6, 1994, during the effectivity of the
Marine Policy and SR Policy, Reputable
received from Wyeth 1,000 boxes of Promil
infant formula to be delivered by Reputable
to Mercury Drug Corporation in Quezon City.
Unfortunately, on the same date, the truck
carrying Wyeth’s products was hijacked by
about 10 armed men.
7. Philippines First then demanded reimbursement
from Reputable, having been subrogated to the
rights of Wyeth by virtue of the payment. The
latter, however, ignored the demand.
8. Philippines First instituted an action for sum of
money against Reputable. In its complaint,
Philippines First stated that Reputable is a
"private corporation engaged in the business of a
common carrier." In its answer. Reputable
claimed that it is a private carrier.
9. Disclaiming any liability, Malayan argued, among
others, that under Section 5 of the SR Policy, the
insurance does not cover any loss or damage to
property which at the time of the happening of
such loss or damage is insured by any marine
policy and that the SR Policy expressly excluded
third-party liability
10. RTC - Reputable liable to Philippines First
for the amount of indemnity it paid to Wyeth,
 among others. In turn, Malayan was found by the
RTC to be liable to Reputable to the extent of the
policy coverage.
They now filed the present petition.
11. Malayan also contends that the CA erred
when it held that Reputable is a private carrier
and should be bound by the contractual
stipulations in the contract of carriage.
12. Reputable, meanwhile, contends that it is
exempt from liability for acts committed by
thieves/robbers who act with grave or irresistible
threat whether it is a common carrier or a
private/special carrier.
Issue:
1) Whether Reputable is a private carrier; YES
2) Whether Reputable is strictly bound by the
stipulations in its contract of carriage with Wyeth, such
that it should be liable for any risk of loss or damage,
for any cause whatsoever, including that due to theft
or robbery and other force majeure; YES
Held: As to issue no. 1
The rule on judicial admission, however, also states
that such allegation, statement, or admission is
conclusive as against the pleader and that the facts
alleged in the complaint are deemed admissions of the
plaintiff and binding upon him. In this case, the pleader
or the plaintiff who alleged that Reputable is a common
carrier was Philippines First. It cannot, by any stretch
of imagination, be made conclusive as against
Reputable whose nature of business is in question.
Philippines First is not in any position to make any
admission, much more a definitive pronouncement, as
to the nature of Reputable’s business and there
appears no other connection between Philippines First
and Reputable which suggests mutual familiarity
between them.
Moreover, records show that the alleged judicial
admission of Philippines First was essentially disputed
by Reputable when it stated in paragraphs 2, 4, and 11
of its answer that it is actually a private or special
carrier.23 In addition, Reputable stated in paragraph 2
of its third-party complaint that it is "a private carrier
engaged in the carriage of goods."
Under Article 1732 of the Civil Code, common
carriers are persons, corporations, firms, or
associations engaged in the business of carrying
or transporting passenger or goods, or both by
land, water or air for compensation, offering their
services to the public. On the other hand, a
private carrier is one wherein the carriage is
generally undertaken by special agreement and it
does not hold itself out to carry goods for the
general public. A common carrier becomes a
private carrier when it undertakes to carry a
special cargo or chartered to a special person
only.

2. On the second issue – Reputable is bound by the

terms of the contract of carriage.

The extent of a private carrier’s obligation is

dictated by the stipulations of a contract it
entered into, provided its stipulations, clauses,
terms and conditions are not contrary to law,
morals, good customs, public order, or public
policy. "The Civil Code provisions on common carriers
should not be applied where the carrier is not acting as
such but as a private carrier. Public policy governing
common carriers has no force where the public at large
is not involved."

Thus, being a private carrier, the extent of Reputable’s

liability is fully governed by the stipulations of the
contract of carriage, one of which is that it shall be
liable to Wyeth for the loss of the goods/products due
to any and all causes whatsoever, including theft,
robbery and other force majeure while the
goods/products are in transit and until actual delivery
to Wyeth’s customers, salesmen and dealers.
British Airways vs. CA Case Digest
British Airways vs. Court of Appeals
(285 SCRA 450)
Facts: On April 16, 1989, Mahtani is on his way to
Bombay, India from Manila. His trip was Manila-Hong
Kong via PAL and then Hong Kong-India via British
Airways. Prior to his departure, he checked in two
pieces of luggage containing his clothing and other
personal effects, confident that the same would be
transferred to his BA flight.
Unfortunately, when he arrived in India, he discovered
that his luggage was missing.
The inescapable conclusion that BA had waived the
defense of limited liability when it allowed Mahtani to
testify as to the actual damages he incurred due to
misplacement of his luggage, without any objection.
It is a well-settled doctrine that where the proponent
offers evidence deemed by counsel of the adverse party
to be inadmissible for any reason, the latter has the
right to object. However, such right is a mere privilege
which can be waived. Necessarily, the objection must
be made at the earliest opportunity, in case of silence
when there is opportunity to speak may operate as a
waiver of objections.

The RTC awarded Mahtani damages which was affirmed

by CA.

Issue: Whether or not in a contract of air carriage a

declaration by the passenger is needed to recover a
greater amount?

Held: American jurisprudence provides that an air

carrier is not liable for the loss of baggage in an amount
in excess of the limits specified in the tariff which was
filed with the proper authorities, such tariff being
binding on the passenger regardless of the passenger’s
lack of knowledge thereof or assent thereto. This
doctrine is recognized in this jurisdiction.