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chapter 2
G.R. No. 171468 August 24, 2011
NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC., Petitioner,
vs.
NYK-FILJAPAN SHIPPING CORP., LEP PROFIT INTERNATIONAL, INC. (ORD), LEP
INTERNATIONAL PHILIPPINES, INC., DMT CORP., ADVATECH INDUSTRIES, INC., MARINA PORT
SERVICES, INC., SERBROS CARRIER CORPORATION, and SEABOARD-EASTERN INSURANCE CO.,
INC., Respondents.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 174241
NEW WORLD INTERNATIONAL DEVELOPMENT (PHILS.), INC., Petitioner,
vs.
SEABOARD-EASTERN INSURANCE CO., INC., Respondent.
D E C I S I O N
ABAD, J.:
These consolidated petitions involve a cargo owners right to recover damages from the loss of
insured goods under the Carriage of Goods by Sea Act and the Insurance Code.
The Facts and the Case
Petitioner New World International Development (Phils.), Inc. (New World) bought from DMT
Corporation (DMT) through its agent, Advatech Industries, Inc. (Advatech) three emergency
generator sets worth US$721,500.00.
DMT shipped the generator sets by truck from Wisconsin, United States, to LEP ProVit International,
Inc. (LEP ProVit) in Chicago, Illinois. From there, the shipment went by train to Oakland, California,
where it was loaded on S/S California Luna V59, owned and operated by NYK Fil-Japan Shipping
Corporation (NYK) for delivery to petitioner New World in Manila. NYK issued a bill of lading,
declaring that it received the goods in good condition.
NYK unloaded the shipment in Hong Kong and transshipped it to S/S ACX Ruby V/72 that it also
owned and operated. On its journey to Manila, however, ACX Ruby encountered typhoon Kadiang
whose captain Viled a sea protest on arrival at the Manila South Harbor on October 5, 1993
respecting the loss and damage that the goods on board his vessel suffered.
Marina Port Services, Inc. (Marina), the Manila South Harbor arrastre or cargo-handling operator,
received the shipment on October 7, 1993. Upon inspection of the three container vans separately
carrying the generator sets, two vans bore signs of external damage while the third van appeared
unscathed. The shipment remained at Pier 3s Container Yard under Marinas care pending
clearance from the Bureau of Customs. Eventually, on October 20, 1993 customs authorities allowed
petitioners customs broker, Serbros Carrier Corporation (Serbros), to withdraw the shipment and
deliver the same to petitioner New Worlds job site in Makati City.
An examination of the three generator sets in the presence of petitioner New Worlds
representatives, Federal Builders (the project contractor) and surveyors of petitioner New Worlds
insurer, SeaboardEastern Insurance Company (Seaboard), revealed that all three sets suffered
extensive damage and could no longer be repaired. For these reasons, New World demanded
recompense for its loss from respondents NYK, DMT, Advatech, LEP ProVit, LEP International
Philippines, Inc. (LEP), Marina, and Serbros. While LEP and NYK acknowledged receipt of the
demand, both denied liability for the loss.
Since Seaboard covered the goods with a marine insurance policy, petitioner New World sent it a
formal claim dated November 16, 1993. Replying on February 14, 1994, Seaboard required
petitioner New World to submit to it an itemized list of the damaged units, parts, and accessories,
with corresponding values, for the processing of the claim. But petitioner New World did not submit
what was required of it, insisting that the insurance policy did not include the submission of such a
list in connection with an insurance claim. Reacting to this, Seaboard refused to process the claim.
On October 11, 1994 petitioner New World Viled an action for speciVic performance and damages
against all the respondents before the Regional Trial Court (RTC) of Makati City, Branch 62, in Civil
Case 94-2770.
On August 16, 2001 the RTC rendered a decision absolving the various respondents from liability
with the exception of NYK. The RTC found that the generator sets were damaged during transit
while in the care of NYKs vessel, ACX Ruby. The latter failed, according to the RTC, to exercise the
degree of diligence required of it in the face of a foretold raging typhoon in its path.
The RTC ruled, however, that petitioner New World Viled its claim against the vessel owner NYK
beyond the one year provided under the Carriage of Goods by Sea Act (COGSA). New World Viled its
complaint on October 11, 1994 when the deadline for Viling the action (on or before October 7,
1994) had already lapsed. The RTC held that the one-year period should be counted from the date
the goods were delivered to the arrastre operator and not from the date they were delivered to
petitioners job site.1
As regards petitioner New Worlds claim against Seaboard, its insurer, the RTC held that the latter
cannot be faulted for denying the claim against it since New World refused to submit the itemized
list that Seaboard needed for assessing the damage to the shipment. Likewise, the belated Viling of
the complaint prejudiced Seaboards right to pursue a claim against NYK in the event of
subrogation.
On appeal, the Court of Appeals (CA) rendered judgment on January 31, 2006,2 afVirming the RTCs
rulings except with respect to Seaboards liability. The CA held that petitioner New World can still
recoup its loss from Seaboards marine insurance policy, considering a) that the submission of the
itemized listing is an unreasonable imposition and b) that the one-year prescriptive period under
the COGSA did not affect New Worlds right under the insurance policy since it was the Insurance
Code that governed the relation between the insurer and the insured.
Although petitioner New World promptly Viled a petition for review of the CA decision before the
Court in G.R. 171468, Seaboard chose to Vile a motion for reconsideration of that decision. On
August 17, 2006 the CA rendered an amended decision, reversing itself as regards the claim against
Seaboard. The CA held that the submission of the itemized listing was a reasonable requirement
that Seaboard asked of New World. Further, the CA held that the one-year prescriptive period for
maritime claims applied to Seaboard, as insurer and subrogee of New Worlds right against the
vessel owner. New Worlds failure to comply promptly with what was required of it prejudiced such
right.
Instead of Viling a motion for reconsideration, petitioner instituted a second petition for review
before the Court in G.R. 174241, assailing the CAs amended decision.
The Issues Presented
The issues presented in this case are as follows:
a) In G.R. 171468, whether or not the CA erred in afVirming the RTCs release from liability
of respondents DMT, Advatech, LEP, LEP ProVit, Marina, and Serbros who were at one time or
another involved in handling the shipment; and
b) In G.R. 174241, 1) whether or not the CA erred in ruling that Seaboards request from
petitioner New World for an itemized list is a reasonable imposition and did not violate the
insurance contract between them; and 2) whether or not the CA erred in failing to rule that
the one-year COGSA prescriptive period for marine claims does not apply to petitioner New
Worlds prosecution of its claim against Seaboard, its insurer.
The Courts Rulings
In G.R. 171468 --
Petitioner New World asserts that the roles of respondents DMT, Advatech, LEP, LEP ProVit, Marina
and Serbros in handling and transporting its shipment from Wisconsin to Manila collectively
resulted in the damage to the same, rendering such respondents solidarily liable with NYK, the
vessel owner.
But the issue regarding which of the parties to a dispute incurred negligence is factual and is not a
proper subject of a petition for review on certiorari. And petitioner New World has been unable to
make out an exception to this rule.3 Consequently, the Court will not disturb the Vinding of the RTC,
afVirmed by the CA, that the generator sets were totally damaged during the typhoon which beset
the vessels voyage from Hong Kong to Manila and that it was her negligence in continuing with that
journey despite the adverse condition which caused petitioner New Worlds loss.
That the loss was occasioned by a typhoon, an exempting cause under Article 1734 of the Civil Code,
does not automatically relieve the common carrier of liability. The latter had the burden of proving
that the typhoon was the proximate and only cause of loss and that it exercised due diligence to
prevent or minimize such loss before, during, and after the disastrous typhoon.4 As found by the
RTC and the CA, NYK failed to discharge this burden.
In G.R. 174241 --
One. The Court does not regard as substantial the question of reasonableness of Seaboards
additional requirement of an itemized listing of the damage that the generator sets suffered. The
record shows that petitioner New World complied with the documentary requirements evidencing
damage to its generator sets.
The marine open policy that Seaboard issued to New World was an all-risk policy. Such a policy
insured against all causes of conceivable loss or damage except when otherwise excluded or when
the loss or damage was due to fraud or intentional misconduct committed by the insured. The
policy covered all losses during the voyage whether or not arising from a marine peril.5
Here, the policy enumerated certain exceptions like unsuitable packaging, inherent vice, delay in
voyage, or vessels unseaworthiness, among others.6 But Seaboard had been unable to show that
petitioner New Worlds loss or damage fell within some or one of the enumerated exceptions.
What is more, Seaboard had been unable to explain how it could not verify the damage that New
Worlds goods suffered going by the documents that it already submitted, namely, (1) copy of the
Suppliers Invoice KL2504; (2) copy of the Packing List; (3) copy of the Bill of Lading
01130E93004458; (4) the Delivery of Waybill Receipts 1135, 1222, and 1224; (5) original copy of
Marine Insurance Policy MA-HO-000266; (6) copies of Damage Report from Supplier and Insurance
Adjusters; (7) Consumption Report from the Customs Examiner; and (8) Copies of Received Formal
Claim from the following: a) LEP International Philippines, Inc.; b) Marina Port Services, Inc.; and c)
Serbros Carrier Corporation.7 Notably, Seaboards own marine surveyor attended the inspection of
the generator sets.
Seaboard cannot pretend that the above documents are inadequate since they were precisely the
documents listed in its insurance policy.8 Being a contract of adhesion, an insurance policy is
construed strongly against the insurer who prepared it. The Court cannot read a requirement in the
policy that was not there.
Further, it appears from the exchanges of communications between Seaboard and Advatech that
submission of the requested itemized listing was incumbent on the latter as the seller DMTs local
agent. Petitioner New World should not be made to suffer for Advatechs shortcomings.
Two. Regarding prescription of claims, Section 3(6) of the COGSA provides that the carrier and the
ship shall be discharged from all liability in case of loss or damage unless the suit is brought within
one year after delivery of the goods or the date when the goods should have been delivered.
But whose fault was it that the suit against NYK, the common carrier, was not brought to court on
time? The last day for Viling such a suit fell on October 7, 1994. The record shows that petitioner
New World Viled its formal claim for its loss with Seaboard, its insurer, a remedy it had the right to
take, as early as November 16, 1993 or about 11 months before the suit against NYK would have
fallen due.
In the ordinary course, if Seaboard had processed that claim and paid the same, Seaboard would
have been subrogated to petitioner New Worlds right to recover from NYK. And it could have then
Viled the suit as a subrogee. But, as discussed above, Seaboard made an unreasonable demand on
February 14, 1994 for an itemized list of the damaged units, parts, and accessories, with
corresponding values when it appeared settled that New Worlds loss was total and when the
insurance policy did not require the production of such a list in the event of a claim.
Besides, when petitioner New World declined to comply with the demand for the list, Seaboard
against whom a formal claim was pending should not have remained obstinate in refusing to
process that claim. It should have examined the same, found it unsubstantiated by documents if that
were the case, and formally rejected it. That would have at least given petitioner New World a clear
signal that it needed to promptly Vile its suit directly against NYK and the others. Ultimately, the
fault for the delayed court suit could be brought to Seaboards doorstep.
Section 241 of the Insurance Code provides that no insurance company doing business in the
Philippines shall refuse without just cause to pay or settle claims arising under coverages provided
by its policies. And, under Section 243, the insurer has 30 days after proof of loss is received and
ascertainment of the loss or damage within which to pay the claim. If such ascertainment is not had
within 60 days from receipt of evidence of loss, the insurer has 90 days to pay or settle the claim.
And, in case the insurer refuses or fails to pay within the prescribed time, the insured shall be
entitled to interest on the proceeds of the policy for the duration of delay at the rate of twice the
ceiling prescribed by the Monetary Board.
Notably, Seaboard already incurred delay when it failed to settle petitioner New Worlds claim as
Section 243 required. Under Section 244, a prima facie evidence of unreasonable delay in payment
of the claim is created by the failure of the insurer to pay the claim within the time Vixed in Section
243.
Consequently, Seaboard should pay interest on the proceeds of the policy for the duration of the
delay until the claim is fully satisVied at the rate of twice the ceiling prescribed by the Monetary
Board. The term "ceiling prescribed by the Monetary Board" means the legal rate of interest of 12%
per annum provided in Central Bank Circular 416, pursuant to Presidential Decree 116.9 Section
244 of the Insurance Code also provides for an award of attorneys fees and other expenses incurred
by the assured due to the unreasonable withholding of payment of his claim.
In Prudential Guarantee and Assurance, Inc. v. Trans-Asia Shipping Lines, Inc.,10 the Court regarded
as proper an award of 10% of the insurance proceeds as attorneys fees. Such amount is fair
considering the length of time that has passed in prosecuting the claim.11 Pursuant to the Courts
ruling in Eastern Shipping Lines, Inc. v. Court of Appeals,12 a 12% interest per annum from the
Vinality of judgment until full satisfaction of the claim should likewise be imposed, the interim
period equivalent to a forbearance of credit.1avvphi1
Petitioner New World is entitled to the value stated in the policy which is commensurate to the
value of the three emergency generator sets or US$721,500.00 with double interest plus attorneys
fees as discussed above.
WHEREFORE, the Court DENIES the petition in G.R. 171468 and AFFIRMS the Court of Appeals
decision of January 31, 2006 insofar as petitioner New World International Development (Phils.),
Inc. is not allowed to recover against respondents DMT Corporation, Advatech Industries, Inc., LEP
International Philippines, Inc., LEP ProVit International, Inc., Marina Port Services, Inc. and Serbros
Carrier Corporation.
With respect to G.R. 174241, the Court GRANTS the petition and REVERSES and SETS ASIDE the
Court of Appeals Amended Decision of August 17, 2006. The Court DIRECTS Seaboard-Eastern
Insurance Company, Inc. to pay petitioner New World International Development (Phils.), Inc. US
$721,500.00 under Policy MA-HO-000266, with 24% interest per annum for the duration of delay in
accordance with Sections 243 and 244 of the Insurance Code and attorneys fees equivalent to 10%
of the insurance proceeds. Seaboard shall also pay, from Vinality of judgment, a 12% interest per
annum on the total amount due to petitioner until its full satisfaction.
SO ORDERED.
G.R. No. 94149 May 5, 1992
AMERICAN HOME ASSURANCE, COMPANY, petitioner,
vs.
THE COURT OF APPEALS and NATIONAL MARINE CORPORATION and/or NATIONAL MARINE
CORPORATION (Manila), respondents.

PARAS, J.:
This is a petition for review on certiorari which seeks to annul and set aside the (a) decision 1 dated
May 30, 1990 of the Court of Appeals in C.A. G.R. SP. No. 20043 entitled "American Home Assurance
Company v. Hon. Domingo D. Panis, Judge of the Regional Trial Court of Manila, Branch 41 and
National Marine Corporation and/or National Marine Corporation (Manila)", dismissing petitioner's
petition for certiorari, and (b) resolution 2 dated June 29, 1990 of the Court of Appeals denying
petitioner's motion for reconsideration.
The undisputed facts of the case are follows:
Both petitioner American Home Assurance Co. and the respondent National Marine Corporation are
foreign corporations licensed to do business in the Philippines, the former through its branch. The
American Home Assurance Company (Philippines), Inc. and the latter through its branch. The
National Marine Corporation (Manila) (Rollo, p. 20, Annex L, p.1).
That on or about June 19, 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
herein respondent National Marine Corporation with Registration No. PID-224. The said shipment
was consigned to Mayleen Paper, Inc. of Manila, which insured the shipment with herein petitioner
American Home Assurance Co. as evidenced by Bill of Lading No. HLMN-01.
On June 22, 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 indemniVication from respondent National Marine
Corporation for the aforesaid damages/losses in the shipment but, for apparently no justiViable
reason, said demand was not heeded (Petition, p. 4).
As the shipment was insured with petitioner in the amount of US$837,500.00, Mayleen Paper, Inc.
sought recovery from the former. 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, the former was subrogated to the rights and
interests on Mayleen Paper, Inc.
On June 6, 1989, the petitioner, as subrogee, then brought suit against respondent for the recovery
of the amount of P31.506.75 and 25% of the total amount due as attorney's fees, by Viling a
complaint for recovery of sum of money (Petition, p. 4).
Respondent, National Marine Corporation, Viled a motion to dismiss dated August 7, 1989 stating
that American Home Assurance Company had no cause of action based on Article 848 of the Code of
Commerce which provides "that claims for averages shall not be admitted if they do not exceed 5%
of the interest which the claimant may have in the vessel or in the cargo if it be gross average and
1% of the goods damaged if particular average, deducting in both cases the expenses of appraisal,
unless there is an agreement to the contrary." It contended that based on the allegations of the
complaint, the loss sustained in the case was P35,506.75 which is only .18% of P17,420,000.00, the
total value of the cargo.
On the other hand, petitioner countered that Article 848 does not apply as it refers to averages and
that a particular average presupposes that the loss or damages is due to an inherent defect of the
goods, an accident of the sea, or a force majeure or the negligence of the crew of the carrier, while
claims for damages due to the negligence of the common carrier are governed by the Civil Code
provisions on Common Carriers.
In its order dated November 23, 1989, the Regional Trial Court sustained private respondent's
contention. In part it stated:
Before the Court for resolution is a motion for reconsideration Viled by defendant
through counsel dated October 6, 1989.
The record shows that last August 8, 1989, defendant through counsel Viled a motion
to dismiss plaintiff's complaint.
Resolving the said motion last September 18, 1989, the court ruled to defer
resolution thereof until after trial on the merits. In the motion now under
consideration, defendant prays for the reconsideration of the order of September 18,
1989 and in lieu thereof, another order be entered dismissing plaintiff's complaint.
There appears to be good reasons for the court to take a second look at the issues
raised by the defendant.
xxx xxx xxx
It is not disputed defendants that the loss suffered by the shipment is only .18% or
less that 1% of the interest of the consignee on the cargo Invoking the provision of
the Article 848 of the Code of Commerce which reads:
Claims for average shall not be admitted if they do not exceed Vive
percent of the interest which the claimant may have in the vessels or
cargo if it is gross average, and one percent of the goods damaged if
particular average, deducting in both cases the expenses of appraisal,
unless there is an agreement to the contrary. (Emphasis supplied)
defendant claims that plaintiff is barred from suing for recovery.
Decisive in this case in whether the loss suffered by the cargo in question is a
"particular average."
Particular average, is a loss happening to the ship, freight, or cargo
which is not be (sic) shared by contributing among all those
interested, but must be borne by the owner of the subject to which it
occurs. (Black's Law Dictionary, Revised Fourth Edition, p. 172, citing
Bargett v. Insurance Co. 3 Bosw. [N.Y.] 395).
as distinguished from general average which
is a contribution by the several interests engaged in the maritime
venture to make good the loss of one of them for the voluntary
sacriVice of a part of the ship or cargo to save the residue of the
property and the lives of those on board, or for extraordinary
expenses necessarily incurred for the common beneVit and safety of
all (Ibid., citing California Canneries Co. v. Canton Ins. OfVice 25 Cal.
App. 303, 143 p. 549-553).
From the foregoing deVinition, it is clear that the damage on the cargo in question, is
in the nature of the "particular average." Since the loss is less than 1% to the value of
the cargo and there appears to be no allegations as to any agreement defendants and
the consignee of the goods to the contrary, by express provision of the law, plaintiff
is barred from suing for recovery.
WHEREOF, plaintiff's complaint is hereby dismissed for lack of cause of action.
(Rollo, p. 27; Annex A, pp. 3-4).
The petitioner then Viled a motion for reconsideration of the order of dismissal but same was denied
by the court in its order dated January 26, 1990 (supra).
Instead of Viling an appeal from the order of the court a quo dismissing the complaint for recovery of
a sum of money, American Home Assurance Company Viled a petition for certiorari with the Court of
Appeals to set aside the two orders or respondent judge in said court (Rollo, p. 25).
But the Court of Appeals in its decision dated May 30, 1990, dismissed the petition as constituting
plain errors of law and not grave abuse of discretion correctible by certiorari (a Special Civil Action).
If at all, respondent court ruled that there are errors of judgment subject to correction
by certiorari as a mode of appeal but the appeal is to the Supreme Court under Section 17 of the
Judiciary Act of 1948 as amended by Republic Act No. 5440. Otherwise stated, respondent Court
opined that the proper remedy is a petition for review on certiorari with the Supreme Court on pure
questions of law (Rollo, p. 30).
Hence, this petition.
In a resolution dated December 10, 1990, this Court gave due course to the petition and required
both parties to Vile their respective memoranda (Rollo, p. 58).
The procedural issue in this case is whether or not certiorari was the proper remedy in the case
before the Court of Appeals.
The Court of Appeals ruled that appeal is the proper remedy, for aside from the fact that the two
orders dismissing the complaint for lack of cause of action are Vinal orders within the meaning of
Rule 41, Section 2 of the Rules of Court, subject petition raised questions which if at all, constituting
grave abuse of discretion correctible by certiorari.
Evidently, the Court of Appeals did not err in dismissing the petition for certiorari for as ruled by
this Court, an order of dismissal whether right or wrong is a Vinal order, hence, a proper subject of
appeal, not certiorari (Marahay v. Melicor, 181 SCRA 811 (1990]). However, where the fact remains
that respondent Court of Appeals obviously in the broader interests of justice, nevertheless
proceeded to decide the petition for certiorari and ruled on speciVic points raised therein in a
manner akin to what would have been done on assignments of error in a regular appeal, the petition
therein was therefore disposed of on the merits and not on a dismissal due to erroneous choice of
remedies or technicalities (Cruz v. I.A.C., 169 SCRA 14 (1989]). Hence, a review of the decision of the
Court of Appeals on the merits against the petitioner in this case is in order.
On the main controversy, the pivotal issue to be resolved is the application of the law on averages
(Articles 806, 809 and 848 of the Code of Commerce).
Petitioner avers that respondent court failed to consider that respondent National Marine
Corporation being a common carrier, in conducting its business is regulated by the Civil Code
primarily and suppletorily by the Code of Commerce; and that respondent court refused to consider
the Bill of Lading as the law governing the parties.
Private respondent countered that in all matters not covered by the Civil Code, the rights and
obligations of the parties shall be governed by the Code of Commerce and by special laws
as provided for in Article 1766 of the Civil Code; that Article 806, 809 and 848 of the Code of
Commerce should be applied suppletorily as they provide for the extent of the common carriers'
liability.
This issue has been resolved by this Court in National Development Co. v. C.A. (164 SCRA 593 [1988];
citing Eastern Shipping Lines, Inc. v. I.A.C., 150 SCRA 469, 470 [1987] where it was held that "the law
of the country to which the goods are to be transported persons the liability of the common carrier
in case of their loss, destruction or deterioration." (Article 1753, Civil Code). Thus, for cargoes
transported to the Philippines as in the case at bar, the liability of the carrier is governed 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).
Corollary thereto, the Court held further that 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 (Ibid., p. 595).
But more importantly, the Court ruled that 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
negligence (Ibid., p. 606).
Under the foregoing principle and in line with the Civil Code's mandatory requirement of
extraordinary diligence on common carriers in the car care of goods placed in their stead, it is but
reasonable to conclude that the issue of negligence must Virst be addressed before the proper
provisions of the Code of Commerce on the extent of liability may be applied.
The records show that upon delivery of the shipment in question of 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 4,360 kilograms and amounting to P61,263.41 (Rollo, p. 68). Instead of
presenting proof of the exercise of extraordinary diligence as required by law, National Marine
Corporation (NMC) Viled its Motion to Dismiss dated August 7, 1989, hypothetically admitting the
truth of the facts alleged in the complaint to the effect that the loss or damage to the 122 bales was
due to the negligence or fault of NMC (Rollo, p. 179). As ruled by this Court, the Viling 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]). Such
being the case, it is evident that the Code of Commerce provisions on averages cannot apply.
On the other hand, Article 1734 of the Civil Code provides that common carriers are responsible for
loss, destruction or deterioration of the goods, unless due to any of the causes enumerated therein.
It is obvious that the case at bar does not fall under any of the exceptions. Thus, American Home
Assurance Company is entitled to reimbursement of what it paid to Mayleen Paper, Inc. as insurer.
Accordingly, it is evident that the Vindings of respondent Court of Appeals, afVirming the Vindings and
conclusions of the court a quo are not supported by law and jurisprudence.
PREMISES CONSIDERED, (1) the decisions of both the Court of Appeals and the Regional Trial Court
of Manila, Branch 41, appealed from are REVERSED; and (2) private respondent National Marine
Corporation is hereby ordered to reimburse the subrogee, petitioner American Home Assurance
Company, the amount of P31,506.75.
SO ORDERED.

G.R. No. L-26700 May 15, 1969


MALAYAN INSURANCE CO., INC., plaintiff-appellee,
vs.
MANILA PORT SERVICE and MANILA RAILROAD CO., defendants-appellants.
San Juan, Africa and Benedicto for plaintiff-appellee.
Corporate Legal Counsel D. F. Macaranas and Jose P. Guzman for defendants-appellants.
SANCHEZ, J.:
In a suit for recovery of money arising out of short delivery and pilferage of goods which came
into the Philippines under four importations while in the possession of the Manila Port Service,
judgment was rendered by the City Court of Manila against defendants. The latter appealed. In the
Court of First Instance of Manila, the case came up for decision upon a stipulation of
facts. 1 Judgment was thereafter rendered sentencing defendants to pay plaintiff "the sum of
P1,447.51 with legal interest thereon from the date the complaint was Viled on December 28, 1962,
until full payment is made, plus the sum of P200 by way of attorney's fees" and the costs.
Defendants appealed on points of law.
On December 31, 1961, the "Pioneer Ming" arrived at the imported from the United States a
shipment of 343 cartons and two crates of electrical surface raceways and Vittings. This was placed
on board the SS "Pioneer Ming". On December 31, 1961, the "Pioneer Ming" arrived at the port of
Manila and discharged the shipment into the custody of the Manila Port Service. One carton was
pilfered of its contents while six cartons were not delivered. Plaintiff's loss arising therefrom is the
subject of the Virst cause of action.
On November 29, 1961, Brunette Shoe Factory imported from the United States three cases upper
leather carried on board the same SS "Pioneer Ming" in that same voyage. SS "Pioneer Ming"
discharged the cargo into the custody of the Manila Port Service. The leather delivered was short of
111- square feet. This is covered by plaintiff's second cause of action.
For the third cause of action, plaintiff's case is predicated upon the facts following: On November
27, 1961, Dupro (Philippines), Inc. imported from the United States 18 cases of auto parts shipped
on board the SS "Pioneer Ming". This vessel arrived in Manila on December 28, 1961. The shipment
was discharged into the custody of the Manila Port Service. One case of that shipment was pilfered
of its contents. Loss was occasioned to plaintiff.
The fourth cause of action refers to a shipment of 15 cases black umbrella cloth imported by Chua
Luan and Co., Inc. from Japan on September 7, 1962, per SS "Narra" which arrived in Manila on
September 15, 1962. The shipment was discharged into the custody of the Manila Port Service. It
turned out, however, that two cases of the shipment were pilfered of contents resulting in loss to the
consignee.
Having paid for the losses to the different importers upon covering insurance policies, plaintiff
became the subrogee of the consignees.
1. It is now futile for defendants to pass on liability to the carriers which are not parties to this
action. Paragraph 7 of the Stipulation of Facts will stop them. It reads: "VII. That the goods were
discharged complete into the custody of the defendant." Not that the stipulation stands alone.
Defendants in their brief 2 categorically state that the opinion of the lower court "that the shipments
in question were discharged into the custody of the defendant Manila Port Service complete with
respect to quantity, is not disputed."
But defendants argue that the fact that the shipments were received by defendant Manila Port
Service complete, does not mean that the goods were received in "good order". Defendants miss the
point. This is immaterial. Because plaintiff's claim is for short delivery and pilferage. 3
Consequently, liability cannot be shifted to the carriers.
2. Seizing upon the trial court's Vinding that there is "no proof that said shortages or damages with
respect to the said goods were due to the negligence of the defendant, Manila Port
Service", 4 defendants now put forth disclaimer of liability.
We start with the presumption in Article 1265 of the Civil Code that whenever "the thing is lost in
the possession of the debtor, it shall be presumed that the loss was due to his fault, unless there is
proof to the contrary." As early as 1907, this Court held that under Article 1183 of the Spanish Civil
Code (Article 1265 of the new Code), "the burden of explanation of the loss rested upon the
depositary and under article 1769 [of the Spanish Civil Code now Article 1981 of the new Civil
Code], the fault is presumed to be his." 5 It has been said that the legal relationship created between
the consignee and the arrastre operator "is sufViciently akin to that existing between the consignee
or owner of shipped goods and the common carrier or that between a depositor and the
warehouseman." 6 And, as custodian of the goods discharged from the vessel, it is the duty of the
arrastre operator to take good care of the goods and turn them over to the party entitled to their
possession. 7 It would seem quite elementary that since the care to be used in the safekeeping of the
goods rests peculiarly within the knowledge of the Manila Port Service, it is incumbent upon said
defendant to prove that the losses were not due to its negligence or that of its employees.
Because there is no proof that the losses occurred either without defendants' fault or by reason
of caso fortuito, defendants are liable. 8
3. Nor will defendants escape liability by pleading that no claim was Viled within 15 days from "the
date of discharge of the last package from the carrying vessel", 9 a condition precedent to recovery,
as set forth in the said Section 15 of the Management Contract. It is correct to say that there is no
proof of the date of discharge of each of the four shipments. But then, there is no necessity for such
proof. There is the fact that provisional claims on each of the shipments were Viled well within the
15-day period following the arrival of each of the vessels. Naturally, those claims were presented
within 15 days from the date of delivery. The sufViciency of these provisional claims is not
challenged. And although the provisional claims do not specify the value of the goods lost and were
not accompanied by supporting papers, the jurisprudence is that such claims substantially fulVill the
requirement. 10
4. Defendants' next point is that they are not liable for the sum P1,447.51 adjudged in the decision
below. They say that their admission in paragraph VI of the Stipulation of Facts was delimited by the
words "if any" recoverable.11lawphi1.et Paragraph VI of the Stipulation of Facts reads:
VI. That the value of the alleged claims recoverable, if any, by the plaintiff from the defendants is as
follows:
1. P355.00 First cause of action
2. P66.92 Second cause of action
3. P25.59 Third cause of action
4. P1,000.00 Fourth cause of action.
Since the value of each claim is admitted and considering that plaintiff is entitled thereto as earlier
expressed in this opinion and upon the terms of the stipulation just quoted, the lower court was
correct in sentencing defendants to pay the total amount therein stated. 12
5. Defendants next question the award of legal interest from the date the complaint was Viled until
full payment is made. 13 They also object to the award of attorneys' fees. 14
Interest upon an obligation which calls for the payment of money, absent a stipulation, is the legal
rate. Such interest normally is allowable from the date of demand, judicial or extrajudicial. 15 The
trial court opted for judicial demand as the starting point.
But then upon the provisions of Article 2213 of the Civil Code, interest "cannot be recovered
upon unliquidated claims or damages, except when the demand can be established with reasonable
certainty." And as was held by this Court in Rivera vs. Perez, L-6998, February 29, 1956, if the suit
were for damages, "unliquidated and not known until deVinitely ascertained, assessed and
determined by the courts after proof (Montilla v. Corporacion de P. P. Agustinos, 25 Phil. 447;
Lichauco v. Guzman, 38 Phil. 302)", then, interest "should be from the date of the decision."
Defendants are correct in that Article 2213 of the Civil Code and the ruling in Rivera vs. Perez should
govern the present case. The total of plaintiff's unliquidated claim for the value of the undelivered
goods, as set forth in its complaint, amounted to P3,947.20. This demand was not established in its
totality. It was not deVinitely ascertained. Indeed, plaintiff settled for an amount (P1,447.51) very
much less than that demanded in fact less than Vifty percent (50%) of the claim. This amount of
P1,447.51 was not known until deVinitely agreed upon in the stipulation of facts. Said stipulation
was entered into in lieu of proof. These are the facts which place the present case within the
coverage of the rule set forth in Article 2213 of the Civil Code and elaborated in Rivera vs. Perez. For
which reason, interest should start from the date of the decision.
No reason exists why we should disturb the award of attorneys' fees. The court's authority to grant
such attorneys' fees is well within the compass of Article 2208(11) of the Civil Code providing that
attorneys' fees may be recovered in "any other case where the court deems it just and equitable."
FOR THE REASONS GIVEN, the judgment under review is hereby modiVied in the sense that the
amount of P1,447.51 shall bear legal interest from the date of the decision below. Thus modiVied,
the judgment under review is afVirmed in all other respects.
Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Fernando, Capistrano, Teehankee and Barredo, JJ., concur.
Concepcion, C.J., and Castro, J., are on leave.
Footnotes
G.R. No. 135645 March 8, 2002
THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., petitioner,
vs.
MGG MARINE SERVICES, INC. and DOROTEO GAERLAN, respondents.
KAPUNAN, J.:
This petition for review seeks the reversal of the Decision, dated September 23, 1998, of the Court
of Appeals in CA-G.R. CV No. 43915,1 which absolved private respondents MCG Marine Services, Inc.
and Doroteo Gaerlan of any liability regarding the loss of the cargo belonging to San Miguel
Corporation due to the sinking of the M/V Peatheray Patrick-G owned by Gaerlan with MCG Marine
Services, Inc. as agent.
On March 1, 1987, San Miguel Corporation insured several beer bottle cases with an aggregate value
of P5,836,222.80 with petitioner Philippine American General Insurance Company.2 The cargo were
loaded on board the M/V Peatheray Patrick-G to be transported from Mandaue City to Bislig,
Surigao del Sur.
After having been cleared by the Coast Guard Station in Cebu the previous day, the vessel left the
port of Mandaue City for Bislig, Surigao del Sur on March 2, 1987. The weather was calm when the
vessel started its voyage.
The following day, March 3, 1987, M/V Peatheray Patrick-G listed and subsequently sunk off Cawit
Point, Cortes, Surigao del Sur. As a consequence thereof, the cargo belonging to San Miguel
Corporation was lost.
Subsequently, San Miguel Corporation claimed the amount of its loss from petitioner.
Upon petitioner's request, on March 18, 1987, Mr. Eduardo Sayo, a surveyor from the Manila
Adjusters and Surveyors Co., went to Taganauan Island, Cortes, Surigao del Sur where the vessel was
cast ashore, to investigate the circumstances surrounding the loss of the cargo. In his report, Mr.
Sayo stated that the vessel was structurally sound and that he did not see any damage or crack
thereon. He concluded that the proximate cause of the listing and subsequent sinking of the vessel
was the shifting of ballast water from starboard to portside. The said shifting of ballast water
allegedly affected the stability of the M/V Peatheray Patrick-G.
Thereafter, petitioner paid San Miguel Corporation the full amount of P5,836,222.80 pursuant to the
terms of their insurance contract.1wphi1.nt
On November 3, 1987, petitioner as subrogee of San Miguel Corporation Viled with the Regional
Trial Court (RTC) of Makati City a case for collection against private respondents to recover the
amount it paid to San Miguel Corporation for the loss of the latter's cargo.
Meanwhile, the Board of Marine Inquiry conducted its own investigation of the sinking of the M/V
Peatheray Patrick-G to determine whether or not the captain and crew of the vessel should be held
responsible for the incident.3 On May 11, 1989, the Board rendered its decision exonerating the
captain and crew of the ill-fated vessel for any administrative liability. It found that the cause of the
sinking of the vessel was the existence of strong winds and enormous waves in Surigao del Sur, a
fortuitous event that could not have been for seen at the time the M/V Peatheray Patrick-G left the
port of Mandaue City. It was further held by the Board that said fortuitous event was the proximate
and only cause of the vessel's sinking.
On April 15, 1993, the RTC of Makati City, Branch 134, promulgated its Decision Vinding private
respondents solidarily liable for the loss of San Miguel Corporation's cargo and ordering them to
pay petitioner the full amount of the lost cargo plus legal interest, attorney's fees and costs of suit.4
Private respondents appealed the trial court's decision to the Court of Appeals. On September 23,
1998, the appellate court issued the assailed Decision, which reversed the ruling of the RTC. It held
that private respondents could not be held liable for the loss of San Miguel Corporation's cargo
because said loss occurred as a consequence of a fortuitous event, and that such fortuitous event
was the proximate and only cause of the loss.5
Petitioner thus Viled the present petition, contending that:
(A)
IN REVERSING AND SETTING ASIDE THE DECISION OF RTC BR. 134 OF MAKATI CITY ON
THE BASIS OF THE FINDINGS OF THE BOARD OF MARINE INQUIRY, APPELLATE COURT
DECIDED THE CASE AT BAR NOT IN ACCORD WITH LAW OR WITH THE APPLICABLE
DECISIONS OF THE HONORABLE COURT;
(B)
IN REVERSING THE TRIAL COURT'S DECISION, THE APPELLATE COURT GRAVELY ERRED
IN CONTRADICTING AND IN DISTURBING THE FINDINGS OF THE FORMER;
(C)
THE APPELLATE COURT GRAVELY ERRED IN REVERSING THE DECISION OF THE TRIAL
COURT AND IN DISMISSING THE COMPLAINT.6
Common carriers, from the nature of their business and for reasons of public policy, are mandated
to observe extraordinary diligence in the vigilance over the goods and for the safety of the
passengers transported by them.7Owing to this high degree of diligence required of them, common
carriers, as a general rule, are presumed to have been at fault or negligent if the goods transported
by them are lost, destroyed or if the same deteriorated.8
However, this presumption of fault or negligence does not arise in the cases enumerated under
Article 1734 of the Civil Code:
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 or 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.
In order that a common carrier may be absolved from liability where the loss, destruction or
deterioration of the goods is due to a natural disaster or calamity, it must further be shown that the
such natural disaster or calamity was the proximate and only cause of the loss;9 there must be "an
entire exclusion of human agency from the cause of the injury of the loss."10
Moreover, even in cases where a natural disaster is the proximate and only cause of the loss, a
common carrier is still required to exercise due diligence to prevent or minimize loss before, during
and after the occurrence of the natural disaster, for it to be exempt from liability under the law for
the loss of the goods.11 If a common carrier fails to exercise due diligence--or that ordinary care
which the circumstances of the particular case demand12 -- to preserve and protect the goods
carried by it on the occasion of a natural disaster, it will be deemed to have been negligent, and the
loss will not be considered as having been due to a natural disaster under Article 1734 (1).
In the case at bar, the issues may be narrowed down to whether the loss of the cargo was due to the
occurrence of a natural disaster, and if so, whether such natural disaster was the sole and proximate
cause of the loss or whether private respondents were partly to blame for failing to exercise due
diligence to prevent the loss of the cargo.
The parties do not dispute that on the day the M/V Peatheray Patrick-G sunk, said vessel
encountered strong winds and huge waves ranging from six to ten feet in height. The vessel listed at
the port side and eventually sunk at Cawit Point, Cortes, Surigao del Sur.
The Court of Appeals, citing the decision of the Board of Marine Inquiry in the administrative case
against the vessel's crew (BMI--646-87), found that the loss of the cargo was due solely to the
existence of a fortuitous event, particularly the presence of strong winds and huge waves at Cortes,
Surigao del Sur on March 3, 1987:
x x x
III. WHAT WAS THE PROXIMATE CAUSE OF SINKING?
Evidence shows that when "LCT Peatheray Patrick-G" left the port of Mandawe, Cebu for
Bislig, Surigao del Sur on March 2, 1987 the Captain had observed the fair atmospheric
condition of the area of the pier and conVirmed this good weather condition with the Coast
Guard Detachment of Mandawe City. However, on March 3, 1987 at about 10:00 o'clock in
the evening, when the vessel had already passed Surigao Strait. the vessel started to
experience waves as high as 6 to 7 feet and that the Northeasterly wind was blowing at
about Vive (5) knot velocity. At about 11:00 o'clock P.M. when the vessel was already about
4.5 miles off Cawit Point, Cortes, Surigao del Sur, the vessel was discovered to be listing 15
degrees to port side and that the strength of the wind had increased to 15 knots and the
waves were about ten (10) feet high [Ramilo TSN 10-27-87 p. 32). Immediately thereafter,
emergency measures were taken by the crew. The ofVicers had suspected that a leak or crack
might had developed at the bottom hull particularly below one or two of the empty wing
tanks at port side serving as buoyancy tanks resulting in ingress of sea water in the tanks
was conVirmed when the Captain ordered to use the cargo pump. The suction valves to the
said tanks of port side were opened in order to suck or draw out any amount of water that
entered into the tanks. The suction pressure of the pump had drawn out sea water in large
quantity indicating therefore, that a leak or crack had developed in the hull as the vessel was
continuously batted and pounded by the huge waves. Bailing out of the water through the
pump was done continuously in an effort of the crew to prevent the vessel from sinking. but
then efforts were in vain. The vessel still continued to list even more despite the continuous
pumping and discharging of sea water from the wing tanks indicating that the amount of the
ingress of sea water was greater in volume that that was being discharged by the pump.
Considering therefore, the location of the suspected source of the ingress of sea water which
was a crack or hole at the bottom hull below the buoyancy tank's port side which was not
accessible (sic) for the crew to check or control the Vlow of sea water into the said tank. The
accumulation of sea water aggravated by the continuous pounding, rolling and pitching of
the vessel against huge waves and strong northeasterly wind, the Captain then had no other
recourse except to order abandonship to save their lives.13
The presence of a crack in the ill-fated vessel through which water seeped in was conVirmed by the
Greutzman Divers who were commissioned by the private respondents to conduct an underwater
survey and inspection of the vessel to determine the cause and circumstances of its sinking. In its
report, Greutzman Divers stated that "along the port side platings, a small hole and two separate
cracks were found at about midship."14
The Vindings of the Board of Marine Inquiry indicate that the attendance of strong winds and huge
waves while the M/V Peatheray Patrick-G was sailing through Cortes, Surigao del Norte on March 3,
1987 was indeed fortuitous. A fortuitous event has been deVined as one which could not be foreseen,
or which though foreseen, is inevitable.15An event is considered fortuitous if the following elements
concur:
xxx (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor
to comply with his obligations, must be independent of human will; (b) it must be
impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it
must be impossible to avoid; (c) the occurrence must be such as to render it impossible for
the debtor to fulVill his obligation in a normal manner; and (d) the obligor must be free from
any participation in the aggravation of the injury resulting to the creditor. xxx16
In the case at bar, it was adequately shown that before the M/V Peatheray Patrick-G left the port of
Mandaue City, the Captain conVirmed with the Coast Guard that the weather condition would permit
the safe travel of the vessel to Bislig, Surigao del Sur. Thus, he could not be expected to have
foreseen the unfavorable weather condition that awaited the vessel in Cortes, Surigao del Sur. It was
the presence of the strong winds and enormous waves which caused the vessel to list, keel over, and
consequently lose the cargo contained therein. The appellate court likewise found that there was no
negligence on the part of the crew of the M/V Peatheray Patrick-G, citing the following portion of
the decision of the Board of Marine Inquiry:
I. WAS LCT PEATHERAY PATRICK-G SEAWORTHY WHEN SHE LEFT THE PORT OF
MANDAWE, CEBU AND AT THE TIME OF SINKING?
Evidence clearly shows that the vessel was propelled with three (3) diesel engines of 250
BHP each or a total of 750 BHP. It had three (3) propellers which were operating
satisfactorily from the time the vessel left the port of Mandawe up to the time when the hull
on the double bottom tank was heavily Vloaded (sic) by uncontrollable entry of sea water
resulting in the stoppage of engines. The vessel was also equipped with operating generator
pumps for emergency cases. This equipment was also operating satisfactorily up to the time
when the engine room was heavily Vloaded (sic) with sea water. Further, the vessel had
undergone emergency drydocking and repair before the accident occurred (sic) on
November 9, 1986 at Trigon Shipyard, San Fernando, Cebu as shown by the billing for the
Drydocking and Repair and certiVicate of Inspection No. 2588-86 issued by the Philippine
coast Guard on December 5, 1986 which expired on November 8, 1987.
LCT Peatheray Patrick-G was skippered by Mr. Manuel P. Ramilo, competent and
experienced licensed Major Patron who had been in command of the vessel for more than
three (3) years from July 1984 up to the time of sinking March 3, 1987. His Chief Mate Mr.
Mariano Alalin also a licensed Major Patron had been the Chief Mate of " LCT Peatheray
Patrick-G" for one year and three months at the time of the accident. Further Chief Mate
Alalin had commanded a tanker vessel named M/T Mercedes of MGM Corporation for
almost two (2) years from 1983-1985 (Alalin TSN-4-13-88 pp. 32-33).
That the vessel was granted SOLAS clearance by the Philippine Coast Guard on March 1,
1987 to depart from Mandawe City for Bislig, Surigao del Sur as evidenced by a certiVication
issued to D.C. Gaerlan Oil Products by Coast Guard Station Cebu dated December 23,
1987.1wphi1.nt
Based on the foregoing circumstances, "LCT Peatheray Patrick-G" should be considered
seaworthy vessel at the time she undertook that fateful voyage on March 2, 1987.
To be seaworthy, a vessel must not only be staunch and Vit in the hull for the voyage to be
undertaken but also must be properly equipped and for that purpose there is a duty upon
the owner to provide a competent master and a crew adequate in number and competent
for their duty and equals in disposition and seamanship to the ordinary in that calling.
(Ralph 299 F-52, 1924 AMC 942). American President 2td v. Ren Fen Fed 629. AMC 1723
LCA 9 CAL 1924).17
Overloading was also eliminated as a possible cause of the sinking of the vessel, as the evidence
showed that its freeboard clearance was substantially greater than the authorized freeboard
clearance.18
Although the Board of Marine Inquiry ruled only on the administrative liability of the captain and
crew of the M/V Peatheray Patrick-G, it had to conduct a thorough investigation of the
circumstances surrounding the sinking of the vessel and the loss of its cargo in order to determine
their responsibility, if any. The results of its investigation as embodied in its decision on the
administrative case clearly indicate that the loss of the cargo was due solely to the attendance of
strong winds and huge waves which caused the vessel accumulate water, tilt to the port side and to
eventually keel over. There was thus no error on the part of the Court of Appeals in relying on the
factual Vindings of the Board of Marine Inquiry, for such factual Vindings, being supported by
substantial evidence are persuasive, considering that said administrative body is an expert in
matters concerning marine casualties.19
Since the presence of strong winds and enormous waves at Cortes, Surigao del Sur on March 3, 1987
was shown to be the proximate and only cause of the sinking of the M/V Peatheray Patrick-G and
the loss of the cargo belonging to San Miguel Corporation, private respondents cannot be held liable
for the said loss.
WHEREFORE, the assailed Decision of the Court of Appeals is hereby AFFIRMED and the petition is
hereby DENIED.
SO ORDERED.
G.R. No. 146018 June 25, 2003
EDGAR COKALIONG SHIPPING LINES, INC., Petitioner,
vs.
UCPB GENERAL INSURANCE COMPANY, INC., Respondent.
D E C I S I O N
PANGANIBAN, J.:
The liability of a common carrier for the loss of goods may, by stipulation in the bill of lading, be
limited to the value declared by the shipper. On the other hand, the liability of the insurer is
determined by the actual value covered by the insurance policy and the insurance premiums paid
therefor, and not necessarily by the value declared in the bill of lading.
The Case
Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to set aside
the August 31, 2000 Decision2 and the November 17, 2000 Resolution3 of the Court of Appeals4 (CA)
in CA-GR SP No. 62751. The dispositive part of the Decision reads:
"IN THE LIGHT OF THE FOREGOING, the appeal is GRANTED. The Decision appealed from
is REVERSED. [Petitioner] is hereby condemned to pay to [respondent] the total amount
of P148,500.00, with interest thereon, at the rate of 6% per annum, from date of this Decision of the
Court. [Respondents] claim for attorneys fees [is] DISMISSED. [Petitioners] counterclaims
are DISMISSED."5
The assailed Resolution denied petitioners Motion for Reconsideration.
On the other hand, the disposition of the Regional Trial Courts6 Decision,7 which was later reversed
by the CA, states:
"WHEREFORE, premises considered, the case is hereby DISMISSED for lack of merit.
"No cost."8
The Facts
The facts of the case are summarized by the appellate court in this wise:
"Sometime on December 11, 1991, Nestor Angelia delivered to the Edgar Cokaliong Shipping Lines,
Inc. (now Cokaliong Shipping Lines), [petitioner] for brevity, cargo consisting of one (1) carton of
Christmas dcor and two (2) sacks of plastic toys, to be transported on board the M/V Tandag on
its Voyage No. T-189 scheduled to depart from Cebu City, on December 12, 1991, for Tandag,
Surigao del Sur. [Petitioner] issued Bill of Lading No. 58, freight prepaid, covering the cargo. Nestor
Angelia was both the shipper and consignee of the cargo valued, on the face thereof, in the amount
of P6,500.00. Zosimo Mercado likewise delivered cargo to [petitioner], consisting of two (2) cartons
of plastic toys and Christmas decor, one (1) roll of Vloor mat and one (1) bundle of various or
assorted goods for transportation thereof from Cebu City to Tandag, Surigao del Sur, on board the
said vessel, and said voyage. [Petitioner] issued Bill of Lading No. 59 covering the cargo which, on
the face thereof, was valued in the amount of P14,000.00. Under the Bill of Lading, Zosimo Mercado
was both the shipper and consignee of the cargo.
"On December 12, 1991, Feliciana Legaspi insured the cargo, covered by Bill of Lading No. 59, with
the UCPB General Insurance Co., Inc., [respondent] for brevity, for the amount of P100,000.00
against all risks under Open Policy No. 002/9 1/254 for which she was issued, by
[respondent], Marine Risk Note No. 18409 on said date. She also insured the cargo covered by Bill
of Lading No. 58, with [respondent], for the amount of P50,000.00, under Open Policy No. 002/9
1/254 on the basis of which [respondent] issued Marine Risk Note No. 18410 on said date.
"When the vessel left port, it had thirty-four (34) passengers and assorted cargo on board, including
the goods of Legaspi. After the vessel had passed by the Mandaue-Mactan Bridge, Vire ensued in the
engine room, and, despite earnest efforts of the ofVicers and crew of the vessel, the Vire engulfed and
destroyed the entire vessel resulting in the loss of the vessel and the cargoes therein. The Captain
Viled the required Marine Protest.
"Shortly thereafter, Feliciana Legaspi Viled a claim, with [respondent], for the value of the cargo
insured under Marine Risk Note No. 18409 and covered by Bill of Lading No. 59. She submitted,
in support of her claim, a Receipt, dated December 11, 1991, purportedly signed by Zosimo
Mercado, and Order Slips purportedly signed by him for the goods he received from Feliciana
Legaspi valued in the amount of P110,056.00. [Respondent] approved the claim of Feliciana Legaspi
and drew and issued UCPB Check No. 612939, dated March 9, 1992, in the net amount
of P99,000.00, in settlement of her claim after which she executed a Subrogation Receipt/Deed,
for said amount, in favor of [respondent]. She also Viled a claim for the value of the cargo covered
by Bill of Lading No. 58. She submitted to [respondent] a Receipt, dated December 11, 1991
and Order Slips, purportedly signed by Nestor Angelia for the goods he received from Feliciana
Legaspi valued at P60,338.00. [Respondent] approved her claim and remitted to Feliciana Legaspi
the net amount of P49,500.00, after which she signed a Subrogation Receipt/Deed, dated March 9,
1992, in favor of [respondent].
"On July 14, 1992, [respondent], as subrogee of Feliciana Legaspi, Viled a complaint anchored on
torts against [petitioner], with the Regional Trial Court of Makati City, for the collection of the total
principal amount of P148,500.00, which it paid to Feliciana Legaspi for the loss of the cargo, praying
that judgment be rendered in its favor and against the [petitioner] as follows:
WHEREFORE, it is respectfully prayed of this Honorable Court that after due hearing, judgment be
rendered ordering [petitioner] to pay [respondent] the following.
1. Actual damages in the amount of P148,500.00 plus interest thereon at the legal rate from
the time of Viling of this complaint until fully paid;
2. Attorneys fees in the amount of P10,000.00; and
3. Cost of suit.
[Respondent] further prays for such other reliefs and remedies as this Honorable Court may deem
just and equitable under the premises.
"[Respondent] alleged, inter alia, in its complaint, that the cargo subject of its complaint was
delivered to, and received by, [petitioner] for transportation to Tandag, Surigao del Sur under Bill
of Ladings, Annexes A and B of the complaint; that the loss of the cargo was due to the negligence
of the [petitioner]; and that Feliciana Legaspi had executed Subrogation Receipts/Deeds in favor
of [respondent] after paying to her the value of the cargo on account of the Marine Risk Notes it
issued in her favor covering the cargo.
"In its Answer to the complaint, [petitioner] alleged that: (a) [petitioner] was cleared by the Board
of Marine Inquiry of any negligence in the burning of the vessel; (b) the complaint stated no cause of
action against [petitioner]; and (c) the shippers/consignee had already been paid the value of the
goods as stated in the Bill of Lading and, hence, [petitioner] cannot be held liable for the loss of the
cargo beyond the value thereof declared in the Bill of Lading.
"After [respondent] rested its case, [petitioner] prayed for and was allowed, by the Court a quo, to
take the depositions of Chester Cokaliong, the Vice-President and Chief Operating OfVicer of
[petitioner], and a resident of Cebu City, and of Noel Tanyu, an ofVicer of the Equitable Banking
Corporation, in Cebu City, and a resident of Cebu City, to be given before the Presiding Judge of
Branch 106 of the Regional Trial Court of Cebu City. Chester Cokaliong and Noel Tanyu did testify, by
way of deposition, before the Court and declared inter alia, that: [petitioner] is a family corporation
like the Chester Marketing, Inc.; Nestor Angelia had been doing business with [petitioner] and
Chester Marketing, Inc., for years, and incurred an account with Chester Marketing, Inc. for his
purchases from said corporation; [petitioner] did issue Bills of Lading Nos. 58 and 59 for the
cargo described therein with Zosimo Mercado and Nestor Angelia as shippers/consignees,
respectively; the engine room of the M/V Tandag caught Vire after it passed the Mandaue/Mactan
Bridge resulting in the total loss of the vessel and its cargo; an investigation was conducted by the
Board of Marine Inquiry of the Philippine Coast Guard which rendered a Report, dated February 13,
1992 absolving [petitioner] of any responsibility on account of the Vire, which Report of the Board
was approved by the District Commander of the Philippine Coast Guard; a few days after the sinking
of the vessel, a representative of the Legaspi Marketing Viled claims for the values of the goods
under Bills of Lading Nos. 58 and 59 in behalf of the shippers/consignees, Nestor Angelia and
Zosimo Mercado; [petitioner] was able to ascertain, from the shippers/consignees and the
representative of the Legaspi Marketing that the cargo covered by Bill of Lading No. 59 was owned
by Legaspi Marketing and consigned to Zosimo Mercado while that covered by Bill of Lading No.
58 was purchased by Nestor Angelia from the Legaspi Marketing; that [petitioner] approved the
claim of Legaspi Marketing for the value of the cargo under Bill of Lading No. 59 and remitted to
Legaspi Marketing the said amount under Equitable Banking Corporation Check No. 20230486
dated August 12, 1992, in the amount of P14,000.00 for which the representative of the Legaspi
Marketing signed Voucher No. 4379, dated August 12, 1992, for the said amount of P14,000.00 in
full payment of claims under Bill of Lading No. 59; that [petitioner] approved the claim of Nestor
Angelia in the amount of P6,500.00 but that since the latter owed Chester Marketing, Inc., for some
purchases, [petitioner] merely set off the amount due to Nestor Angelia under Bill of Lading No.
58 against his account with Chester Marketing, Inc.; [petitioner] lost/[misplaced] the original of the
check after it was received by Legaspi Marketing, hence, the production of the microVilm copy by
Noel Tanyu of the Equitable Banking Corporation; [petitioner] never knew, before settling with
Legaspi Marketing and Nestor Angelia that the cargo under both Bills of Lading were insured with
[respondent], or that Feliciana Legaspi Viled claims for the value of the cargo with [respondent] and
that the latter approved the claims of Feliciana Legaspi and paid the total amount of P148,500.00 to
her; [petitioner] came to know, for the Virst time, of the payments by [respondent] of the claims of
Feliciana Legaspi when it was served with the summons and complaint, on October 8, 1992; after
settling his claim, Nestor Angelia x x x executed the Release and Quitclaim, dated July 2, 1993,
and Afbidavit, dated July 2, 1993 in favor of [respondent]; hence, [petitioner] was absolved of any
liability for the loss of the cargo covered by Bills of Lading Nos. 58 and 59; and even if it was, its
liability should not exceed the value of the cargo as stated in the Bills of Lading.
"[Petitioner] did not anymore present any other witnesses on its evidence-in-chief. x x x"9 (Citations
omitted)
Ruling of the Court of Appeals
The CA held that petitioner had failed "to prove that the Vire which consumed the vessel and its
cargo was caused by something other than its negligence in the upkeep, maintenance and operation
of the vessel."10
Petitioner had paid P14,000 to Legaspi Marketing for the cargo covered by Bill of Lading No. 59. The
CA, however, held that the payment did not extinguish petitioners obligation to respondent,
because there was no evidence that Feliciana Legaspi (the insured) was the owner/proprietor of
Legaspi Marketing. The CA also pointed out the impropriety of treating the claim under Bill of
Lading No. 58 -- covering cargo valued therein at P6,500 -- as a setoff against Nestor Angelias
account with Chester Enterprises, Inc.
Finally, it ruled that respondent "is not bound by the valuation of the cargo under the Bills of Lading,
x x x nor is the value of the cargo under said Bills of Lading conclusive on the [respondent]. This is
so because, in the Virst place, the goods were insured with the [respondent] for the total amount
of P150,000.00, which amount may be considered as the face value of the goods."11
Hence this Petition.12
Issues
Petitioner raises for our consideration the following alleged errors of the CA:
"I
"The Honorable Court of Appeals erred, granting arguendo that petitioner is liable, in holding that
petitioners liability should be based on the actual insured value of the goods and not from actual
valuation declared by the shipper/consignee in the bill of lading.
"II
"The Court of Appeals erred in not afVirming the Vindings of the Philippine Coast Guard, as sustained
by the trial court a quo, holding that the cause of loss of the aforesaid cargoes under Bill of Lading
Nos. 58 and 59 was due to force majeure and due diligence was [exercised] by petitioner prior to,
during and immediately after the Vire on [petitioners] vessel.
"III
"The Court of Appeals erred in not holding that respondent UCPB General Insurance has no cause of
action against the petitioner."13
In sum, the issues are: (1) Is petitioner liable for the loss of the goods? (2) If it is liable, what is the
extent of its liability?
This Courts Ruling
The Petition is partly meritorious.
First Issue:
Liability for Loss
Petitioner argues that the cause of the loss of the goods, subject of this case, was force majeure. It
adds that its exercise of due diligence was adequately proven by the Vindings of the Philippine Coast
Guard.
We are not convinced. The uncontroverted Vindings of the Philippine Coast Guard show that the M/V
Tandag sank due to a Vire, which resulted from a crack in the auxiliary engine fuel oil service tank.
Fuel spurted out of the crack and dripped to the heating exhaust manifold, causing the ship to burst
into Vlames. The crack was located on the side of the fuel oil tank, which had a mere two-inch gap
from the engine room walling, thus precluding constant inspection and care by the crew.
Having originated from an unchecked crack in the fuel oil service tank, the Vire could not have been
caused by force majeure. Broadly speaking, force majeure generally applies to a natural accident,
such as that caused by a lightning, an earthquake, a tempest or a public enemy.14 Hence, Vire is not
considered a natural disaster or calamity. In Eastern Shipping Lines, Inc. v. Intermediate Appellate
Court,15 we explained:
"x x x. This must be so as it arises almost invariably from some act of man or by human means. It
does not fall within the category of an act of God unless caused by lighting or by other natural
disaster or calamity. It may even be caused by the actual fault or privity of the carrier.
"Article 1680 of the Civil Code, which considers Vire as an extraordinary fortuitous event refers to
leases or rural lands where a reduction of the rent is allowed when more than one-half of the fruits
have been lost due to such event, considering that the law adopts a protective policy towards
agriculture.
"As the peril of Vire is not comprehended within the exceptions in Article 1734, supra, Article 1735
of the Civil Code provides that in all cases other than those mentioned in Article 1734, 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."
Where loss of cargo results from the failure of the ofVicers of a vessel to inspect their ship frequently
so as to discover the existence of cracked parts, that loss cannot be attributed to force majeure, but
to the negligence of those ofVicials.16
The law provides that a common carrier is presumed to have been negligent if it fails to prove that it
exercised extraordinary vigilance over the goods it transported. Ensuring the seaworthiness of the
vessel is the Virst step in exercising the required vigilance. Petitioner did not present sufVicient
evidence showing what measures or acts it had undertaken to ensure the seaworthiness of the
vessel. It failed to show when the last inspection and care of the auxiliary engine fuel oil service
tank was made, what the normal practice was for its maintenance, or some other evidence to
establish that it had exercised extraordinary diligence. It merely stated that constant inspection and
care were not possible, and that the last time the vessel was dry-docked was in November 1990.
Necessarily, in accordance with Article 173517 of the Civil Code, we hold petitioner responsible for
the loss of the goods covered by Bills of Lading Nos. 58 and 59.
Second Issue:
Extent of Liability
Respondent contends that petitioners liability should be based on the actual insured value of the
goods, subject of this case. On the other hand, petitioner claims that its liability should be limited to
the value declared by the shipper/consignee in the Bill of Lading.
The records18 show that the Bills of Lading covering the lost goods contain the stipulation that in
case of claim for loss or for damage to the shipped merchandise or property, "[t]he liability of the
common carrier x x x shall not exceed the value of the goods as appearing in the bill of lading."19 The
attempt by respondent to make light of this stipulation is unconvincing. As it had the consignees
copies of the Bills of Lading,20 it could have easily produced those copies, instead of relying on mere
allegations and suppositions. However, it presented mere photocopies thereof to disprove
petitioners evidence showing the existence of the above stipulation.
A stipulation that limits liability is valid21 as long as it is not against public policy. In Everett
Steamship Corporation v. Court of Appeals,22 the Court stated:
"A stipulation in the bill of lading limiting the common carriers liability for loss or destruction of a
cargo to a certain sum, unless the shipper or owner declares a greater value, is sanctioned by law,
particularly Articles 1749 and 1750 of the Civil Code which provides:
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 Vixing the sum that may be recovered by the owner or shipper for the loss,
destruction, or deterioration of the goods is valid, if it is reasonable and just under the
circumstances, and has been freely and fairly agreed upon.
"Such limited-liability clause has also been consistently upheld by this Court in a number of cases.
Thus, in Sea-Land Service, Inc. vs. Intermediate Appellate Court, we ruled:
It seems clear that even if said section 4 (5) of the Carriage of Goods by Sea Act did not exist, the
validity and binding effect of the liability limitation clause in the bill of lading here are nevertheless
fully sustainable on the basis alone of the cited Civil Code Provisions. That said stipulation is just
and reasonable is arguable from the fact that it echoes Art. 1750 itself in providing a limit to liability
only if a greater value is not declared for the shipment in the bill of lading. To hold otherwise would
amount to questioning the justness and fairness of the law itself, and this the private respondent
does not pretend to do. But over and above that consideration, the just and reasonable character of
such stipulation is implicit in it giving the shipper or owner the option of avoiding accrual of liability
limitation by the simple and surely far from onerous expedient of declaring the nature and value of
the shipment in the bill of lading.
"Pursuant to the afore-quoted provisions of law, it is required that the stipulation limiting the
common carriers liability for loss must be reasonable and just under the circumstances, and has
been freely and fairly agreed upon.
"The bill of lading subject of the present controversy speciVically provides, among others:
18. All claims for which the carrier may be liable shall be adjusted and settled on the basis of the
shippers net invoice cost plus freight and insurance premiums, if paid, and in no event shall the
carrier be liable for any loss of possible proVits or any consequential loss.
The carrier shall not be liable for any loss of or any damage to or in any connection with, goods in
an amount exceeding One Hundred Thousand Yen in Japanese Currency (100,000.00) 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.
"The above stipulations are, to our mind, reasonable and just.1avvphi1 In the bill of lading, the
carrier made it clear that its liability would only be up to One Hundred Thousand (Y100,000.00)
Yen. However, the shipper, Maruman Trading, had the option to declare a higher valuation if the value
of its cargo was higher than the limited liability of the carrier. Considering that the shipper did not
declare a higher valuation, it had itself to blame for not complying with the stipulations." (Italics
supplied)
In the present case, the stipulation limiting petitioners liability is not contrary to public policy. In
fact, its just and reasonable character is evident. The shippers/consignees may recover the full
value of the goods by the simple expedient of declaring the true value of the shipment in the Bill of
Lading. Other than the payment of a higher freight, there was nothing to stop them from placing the
actual value of the goods therein. In fact, they committed fraud against the common carrier by
deliberately undervaluing the goods in their Bill of Lading, thus depriving the carrier of its proper
and just transport fare.
Concededly, the purpose of the limiting stipulation in the Bill of Lading is to protect the common
carrier. Such stipulation obliges the shipper/consignee to notify the common carrier of the amount
that the latter may be liable for in case of loss of the goods. The common carrier can then take
appropriate measures -- getting insurance, if needed, to cover or protect itself. This precaution on
the part of the carrier is reasonable and prudent. Hence, a shipper/consignee that undervalues the
real worth of the goods it seeks to transport does not only violate a valid contractual stipulation, but
commits a fraudulent act when it seeks to make the common carrier liable for more than the
amount it declared in the bill of lading.
Indeed, Zosimo Mercado and Nestor Angelia misled petitioner by undervaluing the goods in their
respective Bills of Lading. Hence, petitioner was exposed to a risk that was deliberately hidden from
it, and from which it could not protect itself.
It is well to point out that, for assuming a higher risk (the alleged actual value of the goods) the
insurance company was paid the correct higher premium by Feliciana Legaspi; while petitioner was
paid a fee lower than what it was entitled to for transporting the goods that had been deliberately
undervalued by the shippers in the Bill of Lading. Between the two of them, the insurer should bear
the loss in excess of the value declared in the Bills of Lading. This is the just and equitable solution.
In Aboitiz Shipping Corporation v. Court of Appeals,23 the description of the nature and the value of
the goods shipped were declared and reVlected in the bill of lading, like in the present case. The
Court therein considered this declaration as the basis of the carriers liability and ordered payment
based on such amount. Following this ruling, petitioner should not be held liable for more than
what was declared by the shippers/consignees as the value of the goods in the bills of lading.
We Vind no cogent reason to disturb the CAs Vinding that Feliciana Legaspi was the owner of the
goods covered by Bills of Lading Nos. 58 and 59. Undoubtedly, the goods were merely consigned to
Nestor Angelia and Zosimo Mercado, respectively; thus, Feliciana Legaspi or her subrogee
(respondent) was entitled to the goods or, in case of loss, to compensation therefor. There is no
evidence showing that petitioner paid her for the loss of those goods. It does not even claim to have
paid her.
On the other hand, Legaspi Marketing Viled with petitioner a claim for the lost goods under Bill of
Lading No. 59, for which the latter subsequently paid P14,000. But nothing in the records
convincingly shows that the former was the owner of the goods. Respondent was, however, able to
prove that it was Feliciana Legaspi who owned those goods, and who was thus entitled to payment
for their loss. Hence, the claim for the goods under Bill of Lading No. 59 cannot be deemed to have
been extinguished, because payment was made to a person who was not entitled thereto.
With regard to the claim for the goods that were covered by Bill of Lading No. 58 and valued
at P6,500, the parties have not convinced us to disturb the Vindings of the CA that compensation
could not validly take place. Thus, we uphold the appellate courts ruling on this point.
WHEREFORE, the Petition is hereby PARTIALLY GRANTED. The assailed Decision is MODIFIED in
the sense that petitioner is ORDERED to pay respondent the sums of P14,000 and P6,500, which
represent the value of the goods stated in Bills of Lading Nos. 59 and 58, respectively. No costs.
SO ORDERED.
G.R. No. L-21486 May 14, 1966
LA MALLORCA and PAMPANGA BUS COMPANY, petitioner,
vs.
VALENTIN DE JESUS, MANOLO TOLENTINO and COURT OF APPEALS, respondents.
Manuel O. Chan for petitioners.
Sixto T. Antonio for respondents.
MAKALINTAL, J.:
La Mallorca and Pampanga Bus Company, Inc., commonly known as La Mallorca-Pambusco, Viled
this appeal by certiorari from the decision of the Court of Appeals which afVirmed that rendered by
the Court of First Instance of Bulacan in its civil case No. 2100, entitled "Valentin de Jesus and
Manolo Tolentino vs. La Mallorca-Pambusco." The court a quo sentenced the defendant, now
petitioner, "to pay to plaintiffs the amount of P2,132.50 for actual damages; P14,400.00 as
compensatory damages; P10,000.00 to each plaintiff by way of moral damages; and P3,000.00 as
counsel fees."
Two errors are attributed to the appellate Court: (1) "in sustaining the decision (of the court a quo)
holding that the petitioners were liable for the accident which was caused by a blow-out of one of
the tires of the bus and in not considering the same as caso fortuito," and (2) in holding petitioners
liable for moral damages.
The suit arose by reason of the death of Lolita de Jesus, 20-year old daughter of Valentin de Jesus
and wife of Manolo Tolentino, in a head-on collision between petitioner's bus, on which she was a
passenger, and a freight truck traveling in the opposite direction, in a barrio in Marilao Bulacan, in
the morning of October 8, 1959. The immediate cause of the collision was the fact that the driver of
the bus lost control of the wheel when its left front tire suddenly exploded.
Petitioner maintains that a tire blow-out is a fortuitous event and gives rise to no liability for
negligence, citing the rulings of the Court of Appeals in Rodriguez vs. Red Line Transportation Co.,
CA-G.R. No. 8136, December 29, 1954, and People vs. Palapad, CA-G.R. No. 18480, June 27, 1958.
These rulings, however, not only are not not binding on this Court but were based on considerations
quite different from those that obtain in the at bar. The appellate Court there made no Vindings of
any speciVied acts of negligence on the part of the defendants and conVined itself to the question of
whether or not a tire blow-out, by itself alone and without a showing as to the causative factors,
would generate liability. In the present case, the cause of the blow-out was known. The inner tube of
the left front tire, according to petitioner's own evidence and as found by the Court of Appeals "was
pressed between the inner circle of the left wheel and the rim which had slipped out of the wheel."
This was, said Court correctly held, a mechanical defect of the conveyance or a fault in its equipment
which was easily discoverable if the bus had been subjected to a more thorough, or rigid check-up
before it took to the road that morning.
Then again both the trial court and the Court of Appeals found as a fact that the bus was running
quite fast immediately before the accident. Considering that the tire which exploded was not new
petitioner describes it as "hindi masyadong kalbo," or not so very worn out the plea of caso
fortuito cannot be entertained.1wph1.t
The second issue raised by petitioner is already a settled one. In this jurisdiction moral damages are
recoverable by reason of the death of a passenger caused by the breach of contract of a common
carrier, as provided in Article 1764, in relation to Article 2206, of the Civil Code. These articles have
been applied by this Court in a number of cases, among them Necesito, etc. vs. Paras, et al.,
L-10605-06, June 30, 1958; Mercado vs. Lira, L-13328-29, Sept. 29, 1961; Villa-Rey Transit vs. Bello,
L-18957, April 23, 1963.
Wherefore, the judgment appealed from is afVirmed, with costs against petitioners.

G.R. No. 77679 September 30, 1987


VICENTE VERGARA, petitioner,
vs.
THE COURT OF APPEALS and AMADEO AZARCON, respondents.
R E S O L U T I O N

PADILLA, J.:
An action for damages based on quasi-delict (Art. 2176 of the Civil Code) was Viled by private
respondent against petitioner. The action arose from a vehicular accident that occurred on 5 August
1979 in Gapan, Nueva Ecija, when Martin Belmonte, while driving a cargo truck belonging to
petitioner, rammed "head-on" the store-residence of the private respondent, causing damages
thereto which were inventoried and assessed at P53,024.22.
In his answer to the complaint, the petitioner alleged principally: "that his driver Martin Belmonte
operated said cargo truck in a very diligent (and) careful manner; that the steering wheel refused to
respond to his effort and as a result of a blown-out tire and despite application of his brakes, the
said cargo truck hit the store-residence of plaintiff (private respondent) and that the said accident
was an act of God for which he cannot be held liable." 1
Petitioner also Viled a third party complaint against Travellers Insurance and Surety Corporation,
alleging that said cargo truck involved in the vehicular accident, belonging to the petitioner, was
insured by the third party defendant insurance company. Petitioner asked that the latter be ordered
to pay him whatever amount he may be ordered by the court to pay to the private respondent.
The trial court rendered judgment in favor of private respondent. Upon appeal to the Court of
Appeals, the latter court afVirmed in toto the decision of the trial court, which ordered Petitioner to
pay, jointly and severally with Travellers Insurance and Surety Corporation, to the private,
respondent the following: (a) P53,024.22 as actual damages; (b) P10,000.00 as moral damages; (c)
P10,000.00 as exemplary damages; and (d) the sum of P5,000.00 for attorney's fees and the costs.
On the third party complaint, the insurance company was sentenced to pay to the petitioner the
following: (a) P50,000.00 for third party liability under its comprehensive accident insurance
policy; and (b) P3,000.00 for and as attorney's fees.
Hence, this petition for review on certiorari.
Petitioner's contention that the respondent court erred in Vinding him guilty of fault or negligence is
not tenable. It was established by competent evidence that the requisites of a quasi-delict are
present in the case at bar. These requisites are: (1) damages to the plaintiff; (2) negligence, by act or
omission, of which defendant, or some person for whose acts he must respond, was guilty; and (3)
the connection of cause and effect between such negligence and the damages.
It is undisputed that private respondent suffered damages as a result of an act or omission of
petitioner. The issue of whether or not this act or omission can be considered as a "negligent" act or
omission was passed upon by the trial court. The Vindings of said court, afVirmed by the respondent
court, which we are not prepared to now disturb, show that the fact of occurrence of the "vehicular
accident" was sufViciently established by the policy report and the testimony of Patrolman Masiclat.
And the fact of negligence may be deduced from the surrounding circumstances thereof. According
to the police report, "the cargo truck was travelling on the right side of the road going to Manila and
then it crossed to the center line and went to the left side of the highway; it then bumped a tricycle;
and then another bicycle; and then said cargo truck rammed the store warehouse of the plaintiff." 2
According to the driver of the cargo truck, he applied the brakes but the latter did not work due to
mechanical defect. Contrary to the claim of the petitioner, a mishap caused by defective brakes can
not be consideration as fortuitous in character. Certainly, the defects were curable and the accident
preventable.
Furthermore, the petitioner failed to adduce any evidence to overcome the disputable presumption
of negligence on his part in the selection and supervision of his driver.
Based on the foregoing Vinding by the respondent Court that there was negligence on the part of the
petitioner, the petitioner's contention that the respondent court erred in awarding private
respondent actual, moral and exemplary damages as well as attorney's fees and costs, is untenable.
ACCORDINGLY, the petition is DENIED.
SO ORDERED.

G.R. No. 150751 September 20, 2004


CENTRAL SHIPPING COMPANY, INC., petitioner,
vs.
INSURANCE COMPANY OF NORTH AMERICA, respondent.
D E C I S I O N
PANGANIBAN, J.:
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 insufVicient 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.
The Case
Before the Court is a Petition for Review1 under Rule 45 of the Rules of Court, seeking to reverse and
set aside the March 23, 2001 Decision2 of the Court of Appeals (CA) in CA-GR CV No. 48915. The
assailed Decision disposed as follows:
"WHEREFORE, the decision of the Regional Trial Court of Makati City, Branch 148 dated
August 4, 1994 is hereby MODIFIED in so far as the award of attorneys fees is DELETED.
The decision is AFFIRMED in all other respects."3
The CA denied petitioners Motion for Reconsideration in its November 7, 2001 Resolution.4
The Facts
The factual antecedents, summarized by the trial court and adopted by the appellate court, are as
follows:
"On July 25, 1990 at Puerto Princesa, Palawan, the [petitioner] received on board its vessel,
the M/V Central Bohol, 376 pieces [of] Philippine Apitong Round Logs and undertook to
transport said shipment to Manila for delivery to Alaska Lumber Co., Inc.
"The cargo was insured for P3,000,000.00 against total loss under [respondents] Marine
Cargo Policy No. MCPB-00170.
"On July 25, 1990, upon completion of loading of the cargo, the vessel left Palawan and
commenced the voyage to Manila.
"At about 0125 hours on July 26, 1990, while enroute to Manila, the vessel listed about 10
degrees starboardside, due to the shifting of logs in the hold.
"At about 0128 hours, after the listing of the vessel had increased to 15 degrees, the ship
captain ordered his men to abandon ship and at about 0130 hours of the same day the
vessel completely sank. Due to the sinking of the vessel, the cargo was totally lost.
"[Respondent] alleged that the total loss of the shipment was caused by the fault and
negligence of the [petitioner] and its captain and as direct consequence thereof the
consignee suffered damage in the sum of P3,000,000.00.
"The consignee, Alaska Lumber Co. Inc., presented a claim for the value of the shipment to
the [petitioner] but the latter failed and refused to settle the claim, hence [respondent],
being the insurer, paid said claim and now seeks to be subrogated to all the rights and
actions of the consignee as against the [petitioner].
"[Petitioner], while admitting the sinking of the vessel, interposed the defense that the
vessel was fully manned, fully equipped and in all respects seaworthy; that all the logs were
properly loaded and secured; that the vessels master exercised due diligence to prevent or
minimize the loss before, during and after the occurrence of the storm.
"It 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."5
The RTC was unconvinced that the sinking of M/V Central Bohol had been caused by the weather or
any other caso fortuito. It noted that monsoons, which were common occurrences during the
months of July to December, could have been foreseen and provided for by an ocean-going vessel.
Applying the rule of presumptive fault or negligence against the carrier, the trial court held
petitioner liable for the loss of the cargo. Thus, the RTC deducted the salvage value of the logs in the
amount of P200,000 from the principal claim of respondent and found that the latter was entitled to
be subrogated to the rights of the insured. The court a quo disposed as follows:
"WHEREFORE, premises considered, judgment is hereby rendered in favor of the
[respondent] and against the [petitioner] ordering the latter to pay the following:
1) the amount of P2,800,000.00 with legal interest thereof from the Viling of this
complaint up to and until the same is fully paid;
2) P80,000.00 as and for attorneys fees;
3) Plus costs of suit."6
Ruling of the Court of Appeals
The CA afVirmed the trial courts Vinding 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.
Thus, the carrier was held responsible for the consequent loss of or damage to the cargo, because its
own negligence had contributed thereto.
The CA found no merit in petitioners assertion of the vessels seaworthiness. It held that the
CertiVicates of Inspection and Drydocking were not conclusive proofs thereof. In order to consider a
vessel to be seaworthy, it must be Vit to meet the perils of the sea.
Found untenable was petitioners insistence that the trial court should have given greater weight to
the factual Vindings of the Board of Marine Inquiry (BMI) in the investigation of the Marine Protest
Viled by the ship captain, Enriquito Cahatol. The CA further observed that what petitioner had
presented to the court a quo were mere excerpts of the testimony of Captain Cahatol given during
the course of the proceedings before the BMI, not the actual Vindings and conclusions of the agency.
Citing Arada v. CA,7 it said that Vindings of the BMI were limited to the administrative liability of the
owner/operator, ofVicers and crew of the vessel. However, the determination of whether the carrier
observed extraordinary diligence in protecting the cargo it was transporting was a function of the
courts, not of the BMI.
The CA concluded that the doctrine of limited liability was not applicable, in view of petitioners
negligence -- particularly its improper stowage of the logs.
Hence, this Petition.8
Issues
In its Memorandum, petitioner submits the following issues for our consideration:
"(i) Whether or not the weather disturbance which caused the sinking of the vessel M/V
Central Bohol was a fortuitous event.
"(ii) Whether or not the investigation report prepared by Claimsmen Adjustment
Corporation is hearsay evidence under Section 36, Rule 130 of the Rules of Court.
"(iii) Whether or not the Vinding of the Court of Appeals that the logs in the hold shifted and
such shifting could only be due to improper stowage has a valid and factual basis.
"(iv) Whether or not M/V Central Bohol is seaworthy.
"(v) Whether or not the Court of Appeals erred in not giving credence to the factual Vinding
of the Board of Marine Inquiry (BMI), an independent government agency tasked to conduct
inquiries on maritime accidents.
"(vi) Whether or not the Doctrine of Limited Liability is applicable to the case at bar."9
The issues boil down to two: (1) whether the carrier is liable for the loss of the cargo; and (2)
whether the doctrine of limited liability is applicable. These issues involve a determination of
factual questions of whether the loss of the cargo was due to the occurrence of a natural disaster;
and if so, whether its sole and proximate cause was such natural disaster or whether petitioner was
partly to blame for failing to exercise due diligence in the prevention of that loss.
The Courts Ruling
The Petition is devoid of merit.
First Issue:
Liability for Lost Cargo
From the nature of their business and for reasons of public policy, common carriers are bound to
observe extraordinary diligence over the goods they transport, according to all the circumstances of
each case.10 In the event of loss, destruction or deterioration of the insured goods, common carriers
are responsible; that is, unless they can prove that such loss, destruction or deterioration was
brought about -- among others -- by "Vlood, storm, earthquake, lightning or other natural disaster or
calamity."11 In all other cases not speciVied under Article 1734 of the Civil Code, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove that they
observed extraordinary diligence.12
In the present case, petitioner disclaims responsibility for the loss of the cargo by claiming the
occurrence of a "storm" under Article 1734(1). It attributes the sinking of its vessel solely to the
weather condition between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on July 26, 1990.
At the outset, it must be stressed that only questions of law13 may be raised in a petition for review
on certiorari under Rule 45 of the Rules of Court. Questions of fact are not proper subjects in this
mode of appeal,14 for "[t]he Supreme Court is not a trier of facts."15 Factual Vindings of the CA may be
reviewed on appeal16 only under exceptional circumstances such as, among others, when the
inference is manifestly mistaken,17 the judgment is based on a misapprehension of facts,18 or the CA
manifestly overlooked certain relevant and undisputed facts that, if properly considered, would
justify a different conclusion.19
In the present case, petitioner has not given the Court sufVicient cogent reasons to disturb the
conclusion of the CA that the weather encountered by the vessel was not a "storm" as contemplated
by Article 1734(1). Established is the fact that between 10:00 p.m. on July 25, 1990 and 1:25 a.m. on
July 26, 1990, M/V Central Bohol encountered a southwestern monsoon in the course of its voyage.
The Note of Marine Protest,20 which the captain of the vessel issued under oath, stated that he and
his crew encountered a southwestern monsoon about 2200 hours on July 25, 1990, and another
monsoon about 2400 hours on July 26, 1990. Even petitioner admitted in its Answer that the
sinking of M/V Central Bohol had been caused by the strong southwest monsoon.21 Having made
such factual representation, it cannot now be allowed to retreat and claim that the southwestern
monsoon was a "storm."
The pieces of evidence with respect to the weather conditions encountered by the vessel showed
that there was a southwestern monsoon at the time. Normally expected on sea voyages, however,
were such monsoons, during which strong winds were not unusual. Rosa S. Barba, weather
specialist of the Philippine Atmospheric Geophysical and Astronomical Services Administration
(PAGASA), testiVied that a thunderstorm might occur in the midst of a southwest monsoon.
According to her, one did occur between 8:00 p.m. on July 25, 1990, and 2 a.m. on July 26, 1990, as
recorded by the PAGASA Weather Bureau.22
Nonetheless, to our mind it would not be sufVicient to categorize the weather condition at the time
as a "storm" within the absolutory causes enumerated in the law. SigniVicantly, no typhoon was
observed within the Philippine area of responsibility during that period.23
According to PAGASA, a storm has a wind force of 48 to 55 knots,24 equivalent to 55 to 63 miles per
hour or 10 to 11 in the Beaufort Scale. The second mate of the vessel stated that the wind was
blowing around force 7 to 8 on the Beaufort Scale.25 Consequently, the strong winds accompanying
the southwestern monsoon could not be classiVied as a "storm." Such winds are the ordinary
vicissitudes of a sea voyage.26
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.27 The defense of
fortuitous event or natural disaster cannot be successfully made when the injury could have been
avoided by human precaution.28
Hence, if a common carrier fails to exercise due diligence -- or that ordinary care that the
circumstances of the particular case demand -- to prevent or minimize the loss before, during and
after the occurrence of the natural disaster, the carrier shall be deemed to have been negligent. The
loss or injury is not, in a legal sense, due to a natural disaster under Article 1734(1).29
We also Vind no reason to disturb the CAs Vinding that the loss of the vessel was caused not only by
the southwestern monsoon, but also by the shifting of the logs in the hold. Such shifting could been
due only to improper stowage. The assailed Decision stated:
"Notably, in Master Cahatols account, the vessel encountered the Virst southwestern
monsoon at about 1[0]:00 in the evening. The monsoon was coupled with heavy rains and
rough seas yet the vessel withstood the onslaught. The second monsoon attack occurred at
about 12:00 midnight. During this occasion, the master felt that the logs in the hold shifted,
prompting him to order second mate Percival Dayanan to look at the bodega. Complying
with the captains order, 2nd mate Percival Dayanan found that there was seawater in the
bodega. 2nd mate Dayanans account was:
14.T Kung inyo pong natatandaan ang mga pangyayari, maari mo bang isalaysay
ang naganap na paglubog sa barkong M/V Central Bohol?
S Opo, noong ika-26 ng Julio 1990 humigit kumulang alas 1:20 ng umaga (dst)
habang kami ay nagnanabegar patungong Maynila sa tapat ng Cadlao Island at
Cauayan Island sakop ng El Nido, Palawan, inutusan ako ni Captain Enriquito Cahatol
na tingnan ko ang bodega; nang ako ay nasa bodega, nakita ko ang loob nang bodega
na maraming tubig at naririnig ko ang malakas na agos ng tubig-dagat na
pumapasok sa loob ng bodega ng barko; agad bumalik ako kay Captain Enriquito
Cahatol at sinabi ko ang malakas na pagpasok ng tubig-dagat sa loob nang bodega ng
barko na ito ay naka-tagilid humigit kumulang sa 020 degrees, nag-order si Captain
Cahatol na standby engine at tinawag ang lahat ng mga ofVicials at mga crew nang
maipon kaming lahat ang barko ay naka-tagilid at ito ay tuloy-tuloy ang pagtatagilid
na ang ilan sa mga ofVicials ay naka-hawak na sa barandilla ng barko at di-nagtagal
sumigaw nang ABANDO[N] SHIP si Captain Cahatol at kami ay nagkanya-kanya nang
talunan at languyan sa dagat na malakas ang alon at nang ako ay lumingon sa barko
ito ay di ko na nakita.
"Additionally, [petitioners] own witnesses, boatswain Eduardo Vias Castro and oiler
Frederick Perena, are one in saying that the vessel encountered two weather disturbances,
one at around 10 oclock to 11 oclock in the evening and the other at around 12 oclock
midnight. Both disturbances were coupled with waves and heavy rains, yet, the vessel
endured the Virst and not the second. Why? The reason is plain. The vessel felt the strain
during the second onslaught because the logs in the bodega shifted and there were already
seawater that seeped inside."30
The above conclusion is supported by the fact that the vessel proceeded through the Virst
southwestern monsoon without any mishap, and that it began to list only during the second
monsoon immediately after the logs had shifted and seawater had entered the hold. In the hold, the
sloshing of tons of water back and forth had created pressures that eventually caused the ship to
sink. Had the logs not shifted, the ship could have survived and reached at least the port of El Nido.
In fact, there was another motor launch that had been buffeted by the same weather condition
within the same area, yet it was able to arrive safely at El Nido.31
In its Answer, petitioner categorically admitted the allegation of respondent in paragraph 5 of the
latters Complaint "[t]hat at about 0125 hours on 26 July 1990, while enroute to Manila, the M/V
Central Bohol listed about 10 degrees starboardside, due to the shifting of logs in the hold."
Further, petitioner averred that "[t]he vessel, while navigating through this second southwestern
monsoon, was under extreme stress. At about 0125 hours, 26 July 1990, a thud was heard in the
cargo hold and the logs therein were felt to have shifted. The vessel thereafter immediately listed by
ten (10) degrees starboardside."32
Yet, petitioner now claims that the CAs conclusion was grounded on mere speculations and
conjectures. It alleges that it was impossible for the logs to have shifted, because they had Vitted
exactly in the hold from the port to the starboard side.
After carefully studying the records, we are inclined to believe that the logs did indeed shift, and
that they had been improperly loaded.
According to the boatswains testimony, the logs were piled properly, and the entire shipment was
lashed to the vessel by cable wire.33 The ship captain testiVied that out of the 376 pieces of round
logs, around 360 had been loaded in the lower hold of the vessel and 16 on deck. The logs stored in
the lower hold were not secured by cable wire, because they Vitted exactly from Vloor 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.34
It is obvious, as a matter of common sense, that the manner of stowage in the lower hold was not
sufVicient 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.35 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 adjusters Report, which was heavily relied upon by petitioner to strengthen its claim that the
logs had not shifted, stated that "the logs were still properly lashed by steel chains on deck."
Parenthetically, this statement referred only to those loaded on deck and did not mention anything
about the condition of those placed in the lower hold. Thus, the Vinding of the surveyor that the logs
were still intact clearly pertained only to those lashed on deck.
The evidence indicated that strong southwest monsoons were common occurrences during the
month of July. Thus, the ofVicers 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.
Second Issue:
Doctrine of Limited Liability
The doctrine of limited liability under Article 587 of the Code of Commerce36 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 captain.37 It has already been established that the
sinking of M/V Central Bohol had been caused by the fault or negligence of the ship captain and the
crew, as shown by the improper stowage of the cargo of logs. "Closer supervision on the part of the
shipowner could have prevented this fatal miscalculation."38As such, the shipowner was equally
negligent. It cannot escape liability by virtue of the limited liability rule.
WHEREFORE, the Petition is DENIED, and the assailed Decision and Resolution AFFIRMED. Costs
against petitioner.
SO ORDERED.
G.R. No. L-31379 August 29, 1988
COMPAIA MARITIMA, petitioner,
vs.
COURT OF APPEALS and VICENTE CONCEPCION, respondents.
Rafael Dinglasan for petitioner.
Benjamin J. Molina for private respondent.

FERNAN, C.J.:
Petitioner Compaia Maritima seeks to set aside through this petition for review on certiorari the
decision 1 of the Court of Appeals dated December 5, 1965, adjudging petitioner liable to private
respondent Vicente E. Concepcion for damages in the amount of P24,652.97 with legal interest from
the date said decision shall have become Vinal, for petitioner's failure to deliver safely private
respondent's payloader, and for costs of suit. The payloader was declared abandoned in favor of
petitioner.
The facts of the case are as follows:
Private respondent Vicente E. Concepcion, a civil engineer doing business under the name and style
of Consolidated Construction with ofVice address at Room 412, Don Santiago Bldg., Taft Avenue,
Manila, had a contract with the Civil Aeronautics Administration (CAA) sometime in 1964 for the
construction of the airport in Cagayan de Oro City Misamis Oriental.
Being a Manila based contractor, Vicente E. Concepcion had to ship his construction equipment
to Cagayan de Oro City. Having shipped some of his equipment through petitioner and having
settled the balance of P2,628.77 with respect to said shipment, Concepcion negotiated anew with
petitioner, thru its collector, PaciVico Fernandez, on August 28, 1964 for the shipment to Cagayan de
Oro City of one (1) unit payloader, four (4) units 6x6 Reo trucks and two (2) pieces of water tanks.
He was issued Bill of Lading 113 on the same date upon delivery of the equipment at the Manila
North Harbor. 2
These equipment were loaded aboard the MV Cebu in its Voyage No. 316, which left Manila on
August 30, 1964 and arrived at Cagayan de Oro City in the afternoon of September 1, 1964. The Reo
trucks and water tanks were safely unloaded within a few hours after arrival, but while the
payloader was about two (2) meters above the pier in the course of unloading, the swivel pin of the
heel block of the port block of Hatch No. 2 gave way, causing the payloader to fall. 3 The payloader
was damaged and was thereafter taken to petitioner's compound in Cagayan de Oro City.
On September 7, 1964, Consolidated Construction, thru Vicente E. Concepcion, wrote Compaia
Maritima to demand a replacement of the payloader which it was considering as a complete loss
because of the extent of damage. 4 Consolidated Construction likewise notiVied petitioner of its
claim for damages. Unable to elicit response, the demand was repeated in a letter dated October 2,
1964. 5
Meanwhile, petitioner shipped the payloader to Manila where it was weighed at the San Miguel
Corporation. Finding that the payloader weighed 7.5 tons and not 2.5 tons as declared in the B-111
of Lading, petitioner denied the claim for damages of Consolidated Construction in its letter dated
October 7, 1964, contending that had Vicente E. Concepcion declared the actual weight of the
payloader, damage to their ship as well as to his payloader could have been prevented. 6
To replace the damaged payloader, Consolidated Construction in the meantime bought a new one at
P45,000.00 from Bormaheco Inc. on December 3, 1964, and on July 6, 1965., Vicente E. Concepcion
Viled an action for damages against petitioner with the then Court of First Instance of Manila, Branch
VII, docketed as Civil Case No. 61551, seeking to recover damages in the amount of P41,225.00
allegedly suffered for the period of 97 days that he was not able to employ a payloader in the
construction job at the rate of P450.00 a day; P34,000.00 representing the cost of the damaged
payloader; Pl 1, 000. 00 representing the difference between the cost of the damaged payloader and
that of the new payloader; P20,000.00 representing the losses suffered by him due to the diversion
of funds to enable him to buy a new payloader; P10,000.00 as attorney's fees; P5,000.00 as
exemplary damages; and cost of the suit. 7
After trial, the then Court of First Instance of Manila, Branch VII, dismissed on April 24, 1968 the
complaint with costs against therein plaintiff, herein private respondent Vicente E. Concepcion,
stating that the proximate cause of the fall of the payloader was Vicente E. Concepcion's act or
omission in having misrepresented the weight of the payloader as 2.5 tons instead of its true weight
of 7.5 tons, which underdeclaration was intended to defraud Compaia Maritima of the payment of
the freight charges and which likewise led the Chief OfVicer of the vessel to use the heel block of
hatch No. 2 in unloading the payloader. 8
From the adverse decision against him, Vicente E. Concepcion appealed to the Court of Appeals
which, on December 5, 1965 rendered a decision, the dispositive portion of which reads:
IN VIEW WHEREOF, judgment must have to be as it is hereby reversed; defendant is
condemned to pay unto plaintiff the sum in damages of P24,652.07 with legal
interest from the date the present decision shall have become Vinal; the payloader is
declared abandoned to defendant; costs against the latter. 9
Hence, the instant petition.
The principal issue in the instant case is whether or not the act of private respondent Vicente E.
Concepcion in furnishing petitioner Compaia Maritima with an inaccurate weight of 2.5 tons
instead of the payloader's actual weight of 7.5 tons was the proximate and only cause of the damage
on the Oliver Payloader OC-12 when it fell while being unloaded by petitioner's crew, as would
absolutely exempt petitioner from liability for damages under paragraph 3 of Article 1734 of the
Civil Code, which provides:
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:
xxx xxx xxx
(3) Act or omission of the shipper or owner of the goods.
Petitioner claims absolute exemption under this provision upon the reasoning that private
respondent's act of furnishing it with an inaccurate weight of the payloader constitutes
misrepresentation within the meaning of "act or omission of the shipper or owner of the goods"
under the above- quoted article. It likewise faults the respondent Court of Appeals for reversing the
decision of the trial court notwithstanding that said appellate court also found that by representing
the weight of the payloader to be only 2.5 tons, private respondent had led petitioner's ofVicer to
believe that the same was within the 5 tons capacity of the heel block of Hatch No. 2. Petitioner
would thus insist that the proximate and only cause of the damage to the payloader was private
respondent's alleged misrepresentation of the weight of the machinery in question; hence, any
resultant damage to it must be borne by private respondent Vicente E. Concepcion.
The general rule under Articles 1735 and 1752 of the Civil Code is that common carriers are
presumed to have been at fault or to have acted negligently in case the goods transported by them
are lost, destroyed or had deteriorated. To overcome the presumption of liability for the loss,
destruction or deterioration of the goods under Article 1735, the common carriers must prove that
they observed extraordinary diligence as required in Article 1733 of the Civil Code. The
responsibility of observing extraordinary diligence in the vigilance over the goods is further
expressed in Article 1734 of the same Code, the article invoked by petitioner to avoid liability for
damages.
Corollary is the rule that mere proof of delivery of the goods in good order to a common carrier, and
of their arrival at the place of destination in bad order, makes out prima facie case against the
common carrier, so that if no explanation is given as to how the loss, deterioration or destruction of
the goods occurred, the common carrier must be held responsible. 10 Otherwise stated, it is
incumbent upon the common carrier to prove that the loss, deterioration or destruction was due to
accident or some other circumstances inconsistent with its liability.
In the instant case, We are not persuaded by the proferred explanation of petitioner alleged to be
the proximate cause of the fall of the payloader while it was being unloaded at the Cagayan de Oro
City pier. Petitioner seems to have overlooked the extraordinary diligence required of common
carriers in the vigilance over the goods transported by them by virtue of the nature of their
business, which is impressed with a special public duty.
Thus, Article 1733 of the Civil Code provides:
Art. 1733. Common carriers, from the nature of their business and for reason of
public policy, are bound to observe extraordinary diligence in the vigilance over the
goods and for the safety of the passengers transported by them according to all the
circumstances of each case.
Such extraordinary diligence in the vigilance over the goods is further expressed in
Articles 1734, 1735 and 1745, Nos. 5, 6 and 7, ...
The extraordinary diligence in the vigilance over the goods tendered for shipment requires the
common carrier to know and to follow the required precaution for avoiding damage to, or
destruction of the goods entrusted to it for safe carriage and delivery. It requires common carriers
to render service with the greatest skill and foresight and "to use all reasonable means to ascertain
the nature and characteristic of goods tendered for shipment, and to exercise due care in the
handling and stowage including such methods as their nature requires." 11 Under Article 1736 of the
Civil Code, the responsibility to observe extraordinary diligence commences and 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 the right to receive them without prejudice to the provisions of
Article 1738.
Where, as in the instant case, petitioner, upon the testimonies of its own crew, failed to take the
necessary and adequate precautions for avoiding damage to, or destruction of, the payloader
entrusted to it for safe carriage and delivery to Cagayan de Oro City, it cannot be reasonably
concluded that the damage caused to the payloader was due to the alleged misrepresentation of
private respondent Concepcion as to the correct and accurate weight of the payloader. As found by
the respondent Court of Appeals, the fact is that petitioner used a 5-ton capacity lifting apparatus to
lift and unload a visibly heavy cargo like a payloader. Private respondent has, likewise, sufViciently
established the laxity and carelessness of petitioner's crew in their methods of ascertaining the
weight of heavy cargoes offered for shipment before loading and unloading them, as is customary
among careful persons.
It must be noted that the weight submitted by private respondent Concepcion appearing at the left-
hand portion of Exhibit 8 12 as an addendum to the original enumeration of equipment to be
shipped was entered into the bill of lading by petitioner, thru PaciVico Fernandez, a company
collector, without seeing the equipment to be shipped. 13 Mr. Mariano Gupana, assistant trafVic
manager of petitioner, conVirmed in his testimony that the company never checked the information
entered in the bill of lading. 14 Worse, the weight of the payloader as entered in the bill of lading was
assumed to be correct by Mr. Felix Pisang, Chief OfVicer of MV Cebu. 15
The weights stated in a bill of lading are prima facie evidence of the amount received and the fact
that the weighing was done by another will not relieve the common carrier where it accepted such
weight and entered it on the bill of lading. 16 Besides, common carriers can protect themselves
against mistakes in the bill of lading as to weight by exercising diligence before issuing the same. 17
While petitioner has proven that private respondent Concepcion did furnish it with an inaccurate
weight of the payloader, petitioner is nonetheless liable, for the damage caused to the machinery
could have been avoided by the exercise of reasonable skill and attention on its part in overseeing
the unloading of such a heavy equipment. And circumstances clearly show that the fall of the
payloader could have been avoided by petitioner's crew. Evidence on record sufViciently show that
the crew of petitioner had been negligent in the performance of its obligation by reason of their
having failed to take the necessary precaution under the circumstances which usage has established
among careful persons, more particularly its Chief OfVicer, Mr. Felix Pisang, who is tasked with the
over-all supervision of loading and unloading heavy cargoes and upon whom rests the burden of
deciding as to what particular winch the unloading of the payloader should be undertaken. 18 While
it was his duty to determine the weight of heavy cargoes before accepting them. Mr. Felix Pisang
took the bill of lading on its face value and presumed the same to be correct by merely "seeing"
it. 19 Acknowledging that there was a "jumbo" in the MV Cebu which has the capacity of lifting 20 to
25 ton cargoes, Mr. Felix Pisang chose not to use it, because according to him, since the ordinary
boom has a capacity of 5 tons while the payloader was only 2.5 tons, he did not bother to use the
"jumbo" anymore. 20
In that sense, therefore, private respondent's act of furnishing petitioner with an inaccurate weight
of the payloader upon being asked by petitioner's collector, cannot be used by said petitioner as an
excuse to avoid liability for the damage caused, as the same could have been avoided had petitioner
utilized the "jumbo" lifting apparatus which has a capacity of lifting 20 to 25 tons of heavy cargoes.
It is a fact known to the Chief OfVicer of MV Cebu that the payloader was loaded aboard the MV Cebu
at the Manila North Harbor on August 28, 1964 by means of a terminal crane. 21 Even if petitioner
chose not to take the necessary precaution to avoid damage by checking the correct weight of the
payloader, extraordinary care and diligence compel the use of the "jumbo" lifting apparatus as the
most prudent course for petitioner.
While the act of private respondent in furnishing petitioner with an inaccurate weight of the
payloader cannot successfully be used as an excuse by petitioner to avoid liability to the damage
thus caused, said act constitutes a contributory circumstance to the damage caused on the
payloader, which mitigates the liability for damages of petitioner in accordance with Article 1741 of
the Civil Code, to wit:
Art. 1741. If the shipper or owner merely contributed to the loss, destruction or
deterioration of the goods, the proximate cause thereof being the negligence of the
common carrier, the latter shall be liable in damages, which however, shall be
equitably reduced.
We Vind equitable the conclusion of the Court of Appeals reducing the recoverable amount of
damages by 20% or 1/5 of the value of the payloader, which at the time the instant case arose, was
valued at P34,000. 00, thereby reducing the recoverable amount at 80% or 4/5 of P34,000.00 or the
sum of P27,200.00. Considering that the freight charges for the entire cargoes shipped by private
respondent amounting to P2,318.40 remained unpaid.. the same would be deducted from the
P27,000.00 plus an additional deduction of P228.63 representing the freight charges for the
undeclared weight of 5 tons (difference between 7.5 and 2.5 tons) leaving, therefore, a Vinal
recoverable amount of damages of P24,652.97 due to private respondent Concepcion.
Notwithstanding the favorable judgment in his favor, private respondent assailed the Court of
Appeals' decision insofar as it limited the damages due him to only P24,652.97 and the cost of the
suit. Invoking the provisions on damages under the Civil Code, more particularly Articles 2200 and
2208, private respondent further seeks additional damages allegedly because the construction
project was delayed and that in spite of his demands, petitioner failed to take any steps to settle his
valid, just and demandable claim for damages.
We Vind private respondent's submission erroneous. It is well- settled that an appellee, who is not
an appellant, may assign errors in his brief where his purpose is to maintain the judgment on other
grounds, but he may not do so if his purpose is to have the judgment modiVied or reversed, for, in
such case, he must appeal. 22 Since private respondent did not appeal from the judgment insofar as
it limited the award of damages due him, the reduction of 20% or 1/5 of the value of the payloader
stands.
WHEREFORE, in view of the foregoing, the petition is DENIED. The decision of the Court of Appeals
is hereby AFFIRMED in all respects with costs against petitioner. In view of the length of time this
case has been pending, this decision is immediately executory.
G.R. No. 143133 June 5, 2002
BELGIAN OVERSEAS CHARTERING AND SHIPPING N.V. and JARDINE DAVIES TRANSPORT
SERVICES, INC., petitioners,
vs.
PHILIPPINE FIRST INSURANCE CO., INC., respondents.
PANGANIBAN, J.:
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.
Statement of the Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the July 15, 1998
Decision1 and the May 2, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 53571.
The decretal portion of the Decision reads as follows:
"WHEREFORE, in the light of the foregoing disquisition, the decision appealed from is
hereby REVERSED and SET ASIDE. Defendants-appellees are ORDERED to jointly and
severally pay plaintiffs-appellants the following:
'1) FOUR Hundred Fifty One Thousand Twenty-Seven Pesos and 32/100
(P451,027.32) as actual damages, representing the value of the damaged cargo, plus
interest at the legal rate from the time of Viling of the complaint on July 25, 1991,
until fully paid;
'2) Attorney's fees amounting to 20% of the claim; and
'3) Costs of suit.'"4
The assailed Resolution denied petitioner's Motion for Reconsideration.
The CA reversed the Decision of the Regional Trial Court (RTC) of Makati City (Branch 134), which
had disposed as follows:
"WHEREFORE, in view of the foregoing, judgment is hereby rendered, dismissing the
complaint, as well as defendant's counterclaim."5
The Facts
The factual antecedents of the case are summarized by the Court of Appeals in this wise:
"On June 13, 1990, CMC Trading A.G. shipped on board the M/V 'Anangel Sky' at Hamburg,
Germany 242 coils of various Prime Cold Rolled Steel sheets for transportation to Manila
consigned to the Philippine Steel Trading Corporation. On July 28, 1990, M/V Anangel Sky
arrived at the port of Manila and, within the subsequent days, discharged the subject cargo.
Four (4) coils were found to be in bad order B.O. Tally sheet No. 154974. Finding the four (4)
coils in their damaged state to be unVit for the intended purpose, the consignee Philippine
Steel Trading Corporation declared the same as total loss.1wphi1.nt
"Despite receipt of a formal demand, defendants-appellees refused to submit to the
consignee's claim. Consequently, plaintiff-appellant paid the consignee Vive hundred six
thousand eighty six & 50/100 pesos (P506,086.50), and was subrogated to the latter's
rights and causes of action against defendants-appellees. Subsequently, plaintiff-appellant
instituted this complaint for recovery of the amount paid by them, to the consignee as
insured.
"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 insufViciency of packing
thereof, or to the act or omission of the shipper of the goods or their representatives. In
addition thereto, defendants-appellees argued that their liability, if there be any, should not
exceed the limitations of liability provided for in the bill of lading and other pertinent laws.
Finally, defendants-appellees averred that, in any event, they exercised due diligence and
foresight required by law to prevent any damage/loss to said shipment."6
Ruling of the Trial Court
The RTC dismissed the Complaint because respondent had failed to prove its claims with the
quantum of proof required by law.7
It likewise debunked petitioners' counterclaim, because respondent's suit was not manifestly
frivolous or primarily intended to harass them.8
Ruling of the Court of Appeals
In reversing the trial court, the CA ruled that petitioners were liable for the loss or the damage of
the goods shipped, because they had failed to overcome the presumption of negligence imposed on
common carriers.
The CA further held as inadequately proven petitioners' claim that the loss or the deterioration of
the goods was due to pre-shipment damage.9 It likewise opined that the notation "metal envelopes
rust stained and slightly dented" placed on the Bill of Lading had not been the proximate cause of
the damage to the four (4) coils.10
As to the extent of petitioners' liability, the CA held that the package limitation under COGSA was
not applicable, because the words "L/C No. 90/02447" indicated that a higher valuation of the cargo
had been declared by the shipper. The CA, however, afVirmed the award of attorney's fees.
Hence, this Petition.11
Issues
In their Memorandum, petitioners raise the following issues for the Court's consideration:
I
"Whether or not plaintiff by presenting only one witness who has never seen the subject
shipment and whose testimony is purely hearsay is sufVicient to pave the way for the
applicability of Article 1735 of the Civil Code;
II
"Whether or not the consignee/plaintiff Viled the required notice of loss within the time
required by law;
III
"Whether or not a notation in the bill of lading at the time of loading is sufVicient to show
pre-shipment damage and to exempt herein defendants from liability;
IV
"Whether or not the "PACKAGE LIMITATION" of liability under Section 4 (5) of COGSA is
applicable to the case at bar."12
In sum, the issues boil down to three:
1. Whether petitioners have overcome the presumption of negligence of a common carrier
2. Whether the notice of loss was timely Viled
3. Whether the package limitation of liability is applicable
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Proof of Negligence
Petitioners contend that the presumption of fault imposed on common carriers should not be
applied on the basis of the lone testimony offered by private respondent. The contention is
untenable.
Well-settled is the rule that common carriers, from the nature of their business and for reasons of
public policy, are bound to observe extraordinary diligence and vigilance with respect to the safety
of the goods and the passengers they transport.13 Thus, common carriers are required to render
service with the greatest skill and foresight and "to use all reason[a]ble means to ascertain the
nature and characteristics of the goods tendered for shipment, and to exercise due care in the
handling and stowage, including such methods as their nature requires."14 The extraordinary
responsibility lasts from the time the goods are unconditionally placed in the possession of and
received for transportation by the carrier until they are delivered, actually or constructively, to the
consignee or to the person who has a right to receive them.15
This strict requirement is justiVied by the fact that, without a hand or a voice in the preparation of
such contract, the riding public enters into a contract of transportation with common carriers.
16 Even if it wants to, it cannot submit its own stipulations for their approval.17 Hence, it merely

adheres to the agreement prepared by them.


Owing to this high degree of diligence required of them, 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.18 That is, unless they prove that they exercised extraordinary diligence in transporting
the goods.19 In order to avoid responsibility for any loss or damage, therefore, they have the burden
of proving that they observed such diligence.20
However, the presumption of fault or negligence will not arise21 if the loss is due to any of the
following causes: (1) Vlood, storm, earthquake, lightning, or other natural disaster or calamity; (2)
an act of the public enemy in war, whether international or civil; (3) an act or omission of the
shipper or owner of the goods; (4) the character of the goods or defects in the packing or the
container; or (5) an order or act of competent public authority.22 This is a closed list. If the cause of
destruction, loss or deterioration is other than the enumerated circumstances, then the carrier is
liable therefor.23
Corollary to the foregoing, 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, the
loss or the destruction of the goods happened, the transporter shall be held responsible.24
That petitioners failed to rebut the prima facie presumption of negligence is revealed in the case at
bar by a review of the records and more so by the evidence adduced by respondent.25
First, as stated in the Bill of Lading, petitioners received the subject shipment in good order and
condition in Hamburg, Germany.26
Second, prior to the unloading of the cargo, an Inspection Report27 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. 15497928 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.29
Fourth, the CertiVicate of Analysis30 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 letter31 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.
These facts were conVirmed by Ruperto Esmerio, head checker of BM Santos Checkers Agency.
Pertinent portions of his testimony are reproduce hereunder:
"Q. Mr. Esmerio, you mentioned that you are a Head Checker. Will you inform the
Honorable Court with what company you are connected?
A. BM Santos Checkers Agency, sir.
Q. How is BM Santos checkers Agency related or connected with defendant Jardine
Davies Transport Services?
A. It is the company who contracts the checkers, sir.
Q. You mentioned that you are a Head Checker, will you inform this Honorable Court your
duties and responsibilities?
A. I am the representative of BM Santos on board the vessel, sir, to supervise the
discharge of cargoes.
x x x x x x x x x
Q. On or about August 1, 1990, were you still connected or employed with BM Santos as a
Head Checker?
A. Yes, sir.
Q. And, on or about that date, do you recall having attended the discharging and
inspection of cold steel sheets in coil on board the MV/AN ANGEL SKY?
A. Yes, sir, I was there.
x x x x x x x x x
Q. Based on your inspection since you were also present at that time, will you inform this
Honorable Court the condition or the appearance of the bad order cargoes that were
unloaded from the MV/ANANGEL SKY?
ATTY. MACAMAY:
Objection, Your Honor, I think the document itself reVlects the condition of the cold
steel sheets and the best evidence is the document itself, Your Honor that shows the
condition of the steel sheets.
COURT:
Let the witness answer.
A. The scrap of the cargoes is broken already and the rope is loosen and the cargoes are
dent on the sides."32
All these conclusively prove the fact of shipment in good order and condition and the consequent
damage to the four coils while in the possession of petitioner,33 who notably failed to explain why.34
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.35
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.
36 Having been in the service for several years, 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.37 Equipped with the proper knowledge of the nature of steel sheets in coils and of
the proper way of transporting them, 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.38 Having failed to discharge the burden of proving that they have exercised the
extraordinary diligence required by law, petitioners cannot escape liability for the damage to the
four coils.39
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. We are not convinced.
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.40 The aforecited exception 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.
41 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.42 Thus, petitioners have not successfully proven
the application of any of the aforecited exceptions in the present case.43
Second Issue:
Notice of Loss
Petitioners claim that pursuant to Section 3, paragraph 6 of the Carriage of Goods by Sea
Act44 (COGSA), respondent should have Viled its Notice of Loss within three days from delivery. They
assert that the cargo was discharged on July 31, 1990, but that respondent Viled its Notice of Claim
only on September 18, 1990.45
We are not persuaded. First, the above-cited provision of COGSA provides that the notice of claim
need not be given if the state of the goods, at the time of their receipt, has been the subject of a joint
inspection or survey. As stated earlier, prior to unloading the cargo, an Inspection Report46 as to the
condition of the goods was prepared and signed by representatives of both parties.47
Second, as stated in the same provision, a failure to Vile a notice of claim within three days will not
bar recovery if it is nonetheless Viled within one year.48 This one-year prescriptive period also
applies to the shipper, the consignee, the insurer of the goods or any legal holder of the bill of lading.
49

In Loadstar Shipping Co., Inc, v. Court of Appeals,50 we ruled that a claim is not barred by prescription
as long as the one-year period has not lapsed. Thus, in the words of the ponente, Chief Justice Hilario
G. Davide Jr.:
"Inasmuch as the neither the Civil Code nor the Code of Commerce states a speciVic
prescriptive period on the matter, the Carriage of Goods by Sea Act (COGSA)--which
provides for a one-year period of limitation on claims for loss of, or damage to, cargoes
sustained during transit--may be applied suppletorily to the case at bar."
In the present case, the cargo was discharged on July 31, 1990, while the Complaint51 was Viled by
respondent on July 25, 1991, within the one-year prescriptive period.
Third Issue:
Package Limitation
Assuming arguendo they are liable for respondent's claims, petitioners contend that their liability
should be limited to US$500 per package as provided in the Bill of Lading and by Section 4(5)52 of
COGSA.53
On the other hand, respondent argues that Section 4(5) of COGSA is inapplicable, because the value
of the subject shipment was declared by petitioners beforehand, as evidenced by the reference to
and the insertion of the Letter of Credit or "L/C No. 90/02447" in the said Bill of Lading.54
A bill of lading serves two functions. First, it is a receipt for the goods shipped.53 Second, it is a
contract by which three parties -- namely, the shipper, the carrier, and the consignee -- undertake
speciVic responsibilities and assume stipulated obligations.56 In a nutshell, the acceptance of the bill
of lading by the shipper and the consignee, with full knowledge of its contents, gives rise to the
presumption that it constituted a perfected and binding contract.57
Further, a stipulation in the bill of lading limiting to a certain sum the common carrier's liability for
loss or destruction of a cargo -- unless the shipper or owner declares a greater value58 -- is
sanctioned by law.59 There are, however, two conditions to be satisVied: (1) the contract is
reasonable and just under the circumstances, and (2) it has been fairly and freely agreed upon by
the parties.60 The rationale for this rule is to bind the shippers by their agreement to the value
(maximum valuation) of their goods.61
It is to be noted, however, that the Civil Code does not limit the liability of the common carrier to a
Vixed amount per package.62 In all matters not regulated by the Civil Code, the right and the
obligations of common carriers shall be governed by the Code of Commerce and special laws.
63 Thus, the COGSA, which is suppletory to the provisions of the Civil Code, supplements the latter

by establishing a statutory provision limiting the carrier's liability in the absence of a shipper's
declaration of a higher value in the bill of lading.64 The provisions on limited liability are as much a
part of the bill of lading as though physically in it and as though placed there by agreement of the
parties.65
In the case before us, there was no stipulation in the Bill of Lading66 limiting the carrier's liability.
Neither did the shipper declare a higher valuation of the goods to be shipped. This fact
notwithstanding, the insertion of the words "L/C No. 90/02447 cannot be the basis for petitioners'
liability.
First, a notation in the Bill of Lading which indicated the amount of the Letter of Credit obtained by
the shipper for the importation of steel sheets did not effect a declaration of the value of the goods
as required by the bill.67 That notation was made only for the convenience of the shipper and the
bank processing the Letter of Credit.68
Second, in Keng Hua Paper Products v. Court of Appeals,69 we held that a bill of lading was separate
from the Other Letter of Credit arrangements. We ruled thus:
"(T)he contract of carriage, as stipulated in the bill of lading in the present case, must be
treated independently of the contract of sale between the seller and the buyer, and the
contract of issuance of a letter of credit between the amount of goods described in the
commercial invoice in the contract of sale and the amount allowed in the letter of credit will
not affect the validity and enforceability of the contract of carriage as embodied in the bill of
lading. As the bank cannot be expected to look beyond the documents presented to it by the
seller pursuant to the letter of credit, neither can the carrier be expected to go beyond the
representations of the shipper in the bill of lading and to verify their accuracy vis--vis the
commercial invoice and the letter of credit. Thus, the discrepancy between the amount of
goods indicated in the invoice and the amount in the bill of lading cannot negate petitioner's
obligation to private respondent arising from the contract of transportation."70
In the light of the foregoing, petitioners' liability should be computed based on US$500 per package
and not on the per metric ton price declared in the Letter of Credit.71 In Eastern Shipping Lines, Inc.
v. Intermediate Appellate Court,72 we explained the meaning of packages:
"When what would ordinarily be considered packages are shipped in a container supplied
by the carrier and the number of such units is disclosed in the shipping documents, each of
those units and not the container constitutes the 'package' referred to in the liability
limitation provision of Carriage of Goods by Sea Act."
Considering, therefore, the ruling in Eastern Shipping Lines and the fact that the Bill of Lading clearly
disclosed the contents of the containers, the number of units, as well as the nature of the steel
sheets, the four damaged coils should be considered as the shipping unit subject to the US$500
limitation.1wphi1.nt
WHEREFORE, the Petition is partly granted and the assailed Decision MODIFIED. Petitioners'
liability is reduced to US$2,000 plus interest at the legal rate of six percent from the time of the
Viling of the Complaint on July 25, 1991 until the Vinality of this Decision, and 12 percent thereafter
until fully paid. No pronouncement as to costs.
SO ORDERED.
G.R. No. L-48757 May 30, 1988
MAURO GANZON, petitioner,
vs.
COURT OF APPEALS and GELACIO E. TUMAMBING, respondents.
Antonio B. Abinoja for petitioner.
Quijano, Arroyo & Padilla Law Of`ice for respondents.

SARMIENTO, J.:
The private respondent instituted in the Court of First Instance of Manila 1 an action against the
petitioner for damages based on culpa contractual. The antecedent facts, as found by the
respondent Court, 2 are undisputed:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B. Ganzon to haul 305
tons of scrap iron from Mariveles, Bataan, to the port of Manila on board the lighter LCT
"Batman" (Exhibit 1, Stipulation of Facts, Amended Record on Appeal, p. 38). Pursuant to that
agreement, Mauro B. Ganzon sent his lighter "Batman" to Mariveles where it docked in three feet of
water (t.s.n., September 28, 1972, p. 31). On December 1, 1956, Gelacio Tumambing delivered the
scrap iron to defendant Filomeno Niza, captain of the lighter, for loading which was actually begun
on the same date by the crew of the lighter under the captain's supervision. When about half of the
scrap iron was already loaded (t.s.n., December 14, 1972, p. 20), Mayor Jose Advincula of Mariveles,
Bataan, arrived and demanded P5,000.00 from Gelacio Tumambing. The latter resisted the
shakedown and after a heated argument between them, Mayor Jose Advincula drew his gun and
Vired at Gelacio Tumambing (t.s.n., March 19, 1971, p. 9; September 28, 1972, pp. 6-7).<re||
an1w> The gunshot was not fatal but Tumambing had to be taken to a hospital in Balanga,
Bataan, for treatment (t.s.n., March 19, 1971, p. 13; September 28, 1972, p. 15).
After sometime, the loading of the scrap iron was resumed. But on December 4, 1956, Acting Mayor
Basilio Rub, accompanied by three policemen, ordered captain Filomeno Niza and his crew to dump
the scrap iron (t.s.n., June 16, 1972, pp. 8-9) where the lighter was docked (t.s.n., September 28,
1972, p. 31). The rest was brought to the compound of NASSCO (Record on Appeal, pp. 20-22). Later
on Acting Mayor Rub issued a receipt stating that the Municipality of Mariveles had taken custody of
the scrap iron (Stipulation of Facts, Record on Appeal, p. 40; t.s.n., September 28, 1972, p. 10.)
On the basis of the above Vindings, the respondent Court rendered a decision, the dispositive portion
of which states:
WHEREFORE, the decision appealed from is hereby reversed and set aside and a
new one entered ordering defendant-appellee Mauro Ganzon to pay plaintiff-
appellant Gelacio E. Tumambimg the sum of P5,895.00 as actual damages, the sum
of P5,000.00 as exemplary damages, and the amount of P2,000.00 as attorney's fees.
Costs against defendant-appellee Ganzon. 3
In this petition for review on certiorari, the alleged errors in the decision of the Court of Appeals
are:
I
THE COURT OF APPEALS FINDING THE HEREIN PETITIONER GUILTY OF BREACH OF THE
CONTRACT OF TRANSPORTATION AND IN IMPOSING A LIABILITY AGAINST HIM COMMENCING
FROM THE TIME THE SCRAP WAS PLACED IN HIS CUSTODY AND CONTROL HAVE NO BASIS IN
FACT AND IN LAW.
II
THE APPELLATE COURT ERRED IN CONDEMNING THE PETITIONER FOR THE ACTS OF HIS
EMPLOYEES IN DUMPING THE SCRAP INTO THE SEA DESPITE THAT IT WAS ORDERED BY THE
LOCAL GOVERNMENT OFFICIAL WITHOUT HIS PARTICIPATION.
III
THE APPELLATE COURT FAILED TO CONSIDER THAT THE LOSS OF THE SCRAP WAS DUE TO A
FORTUITOUS EVENT AND THE PETITIONER IS THEREFORE NOT LIABLE FOR LOSSES AS A
CONSEQUENCE THEREOF. 4
The petitioner, in his Virst assignment of error, insists that the scrap iron had not been
unconditionally placed under his custody and control to make him liable. However, he completely
agrees with the respondent Court's Vinding that on December 1, 1956, the private respondent
delivered the scraps to Captain Filomeno Niza for loading in the lighter "Batman," That the
petitioner, thru his employees, actually received the scraps is freely admitted. SigniVicantly, there is
not the slightest allegation or showing of any condition, qualiVication, or restriction accompanying
the delivery by the private respondent-shipper of the scraps, or the receipt of the same by the
petitioner. On the contrary, soon after the scraps were delivered to, and received by the petitioner-
common carrier, loading was commenced.
By the said act of delivery, the scraps were unconditionally placed in the possession and control of
the common carrier, and upon their receipt by the carrier for transportation, the contract of
carriage was deemed perfected. Consequently, the petitioner-carrier's extraordinary responsibility
for the loss, destruction or deterioration of the goods commenced. Pursuant to Art. 1736, such
extraordinary responsibility would cease only upon the delivery, actual or constructive, by the
carrier to the consignee, or to the person who has a right to receive them. 5 The fact that part of the
shipment had not been loaded on board the lighter did not impair the said contract of
transportation as the goods remained in the custody and control of the carrier, albeit still unloaded.
The petitioner has failed to show that the loss of the scraps was due to any of the following causes
enumerated in Article 1734 of the Civil Code, namely:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
(2) Act of the public enemy in war, whether international or civil;
(3) Act or omission of the shipper or owner of the goods;
(4) The character of the goods or defects in the packing or in the containers;
(5) Order or act of competent public authority.
Hence, the petitioner is presumed to have been at fault or to have acted negligently. 6 By reason of
this presumption, the court is not even required to make an express Vinding of fault or negligence
before it could hold the petitioner answerable for the breach of the contract of carriage. Still, the
petitioner could have been exempted from any liability had he been able to prove that he observed
extraordinary diligence in the vigilance over the goods in his custody, according to all the
circumstances of the case, or that the loss was due to an unforeseen event or to force majeure. As it
was, there was hardly any attempt on the part of the petitioner to prove that he exercised such
extraordinary diligence.
It is in the second and third assignments of error where the petitioner maintains that he is exempt
from any liability because the loss of the scraps was due mainly to the intervention of the municipal
ofVicials of Mariveles which constitutes a caso fortuito as deVined in Article 1174 of the Civil Code. 7
We cannot sustain the theory of caso fortuito. In the courts below, the petitioner's defense was that
the loss of the scraps was due to an "order or act of competent public authority," and this contention
was correctly passed upon by the Court of Appeals which ruled that:
... In the second place, before the appellee Ganzon could be absolved from
responsibility on the ground that he was ordered by competent public authority to
unload the scrap iron, it must be shown that Acting Mayor Basilio Rub had the
power to issue the disputed order, or that it was lawful, or that it was issued under
legal process of authority. The appellee failed to establish this. Indeed, no authority
or power of the acting mayor to issue such an order was given in evidence. Neither
has it been shown that the cargo of scrap iron belonged to the Municipality of
Mariveles. What we have in the record is the stipulation of the parties that the cargo
of scrap iron was accilmillated by the appellant through separate purchases here
and there from private individuals (Record on Appeal, pp. 38-39). The fact remains
that the order given by the acting mayor to dump the scrap iron into the sea was
part of the pressure applied by Mayor Jose Advincula to shakedown the appellant for
P5,000.00. The order of the acting mayor did not constitute valid authority for
appellee Mauro Ganzon and his representatives to carry out.
Now the petitioner is changing his theory to caso fortuito. Such a change of theory on appeal we
cannot, however, allow. In any case, the intervention of the municipal ofVicials was not In any case, of
a character that would render impossible the fulVillment by the carrier of its obligation. The
petitioner was not duty bound to obey the illegal order to dump into the sea the scrap iron.
Moreover, there is absence of sufVicient proof that the issuance of the same order was attended with
such force or intimidation as to completely overpower the will of the petitioner's employees. The
mere difViculty in the fullVilment of the obligation is not considered force majeure. We agree with the
private respondent that the scraps could have been properly unloaded at the shore or at the
NASSCO compound, so that after the dispute with the local ofVicials concerned was settled, the
scraps could then be delivered in accordance with the contract of carriage.
There is no incompatibility between the Civil Code provisions on common carriers and Articles
361 8 and 362 9 of the Code of Commerce which were the basis for this Court's ruling in Government
of the Philippine Islands vs. Ynchausti & Co.10 and which the petitioner invokes in tills petition. For
Art. 1735 of the Civil Code, conversely stated, means that the shipper will suffer the losses and
deterioration arising from the causes enumerated in Art. 1734; and in these instances, the burden of
proving that damages were caused by the fault or negligence of the carrier rests upon him. However,
the carrier must Virst establish that the loss or deterioration was occasioned by one of the excepted
causes or was due to an unforeseen event or to force majeure. Be that as it may, insofar as Art. 362
appears to require of the carrier only ordinary diligence, the same is .deemed to have been modiVied
by Art. 1733 of the Civil Code.
Finding the award of actual and exemplary damages to be proper, the same will not be disturbed by
us. Besides, these were not sufViciently controverted by the petitioner.
WHEREFORE, the petition is DENIED; the assailed decision of the Court of Appeals is hereby
AFFIRMED. Costs against the petitioner.
This decision is IMMEDIATELY EXECUTORY.
G.R. No. L-9840 April 22, 1957
LU DO & LU YM CORPORATION, petitioner-defendant,
vs.
I. V. BINAMIRA, respondent-plaintiff.
Ross, Selph, Carrascoso and Janda for petitioner.
I. V. Binamira in his own behalf.
BAUTISTA ANGELO, J.:
On April 4, 1954, plaintiff Viled an action in the Court of First Instance of Cebu against defendant to
recover the sum of P324.63 as value of certain missing shipment, P150 as actual and compensatory
damages, and P600 as moral and pecuniary damages. After trial, the court rendered judgment
ordering defendant to pay plaintiff the sum of P216.84, with legal interest. On appeal, the Court of
Appeals afVirmed the judgment, hence the present petition for review.
On August 10, 1951, the Delta Photo Supply Company of New York shipped on board the M/S
"FERNSIDE" at New York, U.S.A., six cases of Vilms and/or photographic supplies consigned to the
order of respondent I. V. Binamira. For this shipment, Bill of Lading No. 29 was issued. The ship
arrived at the port of Cebu on September 23, 1951 and discharged her cargo on September 23, and
24, 1951, including the shipment in question, placing it in the possession and custody of the
arrastre operator of said port, the Visayan Cebu Terminal Company, Inc.
Petitioner, as agent of the carrier, hired the Cebu Stevedoring Company, Inc. to unload its cargo.
During the discharge, good order cargo was separated from the bad order cargo on board the ship,
and a separate list of bad order cargo was prepared by Pascual Villamor, checker of the stevedoring
company. All the cargo unloaded was received at the pier by the Visayan Cebu Terminal Company
Inc, arrastre operator of the port. This terminal company had also its own checker, Romeo Quijano,
who also recorded and noted down the good cargo from the bad one. The shipment in question, was
not included in the report of bad order cargo of both checkers, indicating that it was discharged
from the, ship in good order and condition.
On September 26, 1951, three days after the goods were unloaded from the ship, respondent took
delivery of his six cases of photographic supplies from the arrastre operator. He discovered that the
cases showed signs of pilferage and, consequently, he hired marine surveyors, R. J. del Pan &
Company, Inc., to examine them. The surveyors examined the cases and made a physical count of
their contents in the presence of representatives of petitioner, respondent and the stevedoring
company. The surveyors examined the cases and made a physical count of their contents in the
presence of representatives of petitioner, respondent and the stevedoring company. The Vinding of
the surveyors showed that some Vilms and photographic supplies were missing valued at P324.63.
It appears from the evidence that the six cases of Vilms and photographic supplies were discharged
from the ship at the port of Cebu by the stevedoring company hired by petitioner as agent of the
carrier. All the unloaded cargo, including the shipment in question, was received by the Visayan
Cebu Terminal Company Inc., the arrastre operator appointed by the Bureau of Customs. It also
appears that during the discharge, the cargo was checked both by the stevedoring company hired by
petitioner as well as by the arrastre operator of the port, and the shipment in question, when
discharged from the ship, was found to be in good order and condition. But after it was delivered to
respondent three days later, the same was examined by a marine surveyor who found that some
Vilms and supplies were missing valued at P324.63.
The question now to be considered is: Is the carrier responsible for the loss considering that the
same occurred after the shipment was discharged from the ship and placed in the possession and
custody of the customs authorities?
The Court of Appeals found for the afVirmative, making on this point the following comment:
In this jurisdiction, a common carrier has the legal duty to deliver goods to a consignee in
the same condition in which it received them. Except where the loss, destruction or
deterioration of the merchandise was due to any of the cases enumerated in Article 1734 of
the new Civil Code, a carrier is presumed to have been at fault and to have acted negligently,
unless it could prove that it observed extraordinary diligence in the care and handling of the
goods (Article 1735, supra). Such presumption and the liability of the carrier attach until the
goods are delivered actually or constructively, to the consignee, or to the person who has a
right to receive them (Article 1736, supra), and we believe delivery to the customs
authorities is not the delivery contemplated by Article 1736, supra, in connection with
second paragraph of Article 1498, supra, because, in such a case, the goods are then still in
the hands of the Government and their owner could not exercise dominion whatever over
them until the duties are paid. In the case at bar, the presumption against the carrier,
represented appellant as its agent, has not been successfully rebutted.
It is now contended that the Court of Appeals erred in its Vinding not only because it made wrong
interpretation of the law on the matter, but also because it ignored the provisions of the bill of
lading covering the shipment wherein it was stipulated that the responsibility of the carrier is
limited only to losses that may occur while the cargo is still under its custody and control.
We believe this contention is well taken. It is true that, as a rule, a common carrier is responsible for
the loss, destruction or deterioration of the goods it assumes to carry from one place to another
unless the same is due to any to any of the causes mentioned in Article 1734 on the new Civil Code,
and that, if the goods are lost, destroyed or deteriorated, for causes other that those mentioned, the
common carrier is presumed to have been at fault or to have acted negligently, unless it proves that
it has observed extraordinary diligence in their care (Article 1735, Idem.), and that this
extraordinary liability lasts from the time the goods are placed in the possession of the carrier until
they are delivered to the consignee, or "to the person who has the right to receive them" (Article
1736, Idem.), but these provisions only apply when the loss, destruction or deterioration takes place
while the goods are in the possession of the carrier, and not after it has lost control of them. The
reason is obvious. While the goods are in its possession, it is but fair that it exercise extraordinary
diligence in protecting them from damage, and if loss occurs, the law presumes that it was due to its
fault or negligence. This is necessary to protect the interest the interest of the owner who is at its
mercy. The situation changes after the goods are delivered to the consignee.
While we agree with the Court of Appeals that while delivery of the cargo to the consignee, or to the
person who has a right to receive them", contemplated in Article 1736, because in such case the
goods are still in the hands of the Government and the owner cannot exercise dominion over them,
we believe however that the parties may agree to limit the liability of the carrier considering that
the goods have still to through the inspection of the customs authorities before they are actually
turned over to the consignee. This is a situation where we may say that the carrier losses control of
the goods because of a custom regulation and it is unfair that it be made responsible for what may
happen during the interregnum. And this is precisely what was done by the parties herein. In the
bill of lading that was issued covering the shipment in question, both the carrier and the consignee
have stipulated to limit the responsibility of the carrier for the loss or damage that may because to
the goods before they are actually delivered by insert in therein the following provisions:
1. . . . The Carrier shall not be liable in any capacity whatsoever for any delay, nondelivery or
misdelivery, or loss of or damage to the goods occurring while the goods are not in the
actual custody of the Carrier. . . . (Emphasis ours.)
(Paragraph 1, Exhibit "1")
2. . . . The responsibility of the Carrier in any capacity shall altogether cease and the goods
shall be considered to be delivered and at their own risk and expense in every respect when
taken into the custody of customs or other authorities. The Carrier shall not be required to
give any notiVication of disposition of the goods. . . . (Emphasis ours.)
(Paragraph 12, Exhibit "1")
3. Any provisions herein to the contrary notwithstanding, goods may be . . . by Carrier at
ship's tackle . . . and delivery beyond ship's tackle shall been tirely at the option of the
Carrier and solely at the expense of the shipper or consignee.
(Paragraph 22, Exhibit "1")
It therefore appears clear that the carrier does not assume liability for any loss or damage to the
goods once they have been "taken into the custody of customs or other authorities", or when they
have been delivered at ship's tackle. These stipulations are clear. They have been adopted precisely
to mitigate the responsibility of the carrier considering the present law on the matter, and we Vind
nothing therein that is contrary to morals or public policy that may justify their nulliVication. We are
therefore persuaded to conclude that the carrier is not responsible for the loss in question, it
appearing that the same happened after the shipment had been delivered to the customs
authorities.
Wherefore, the decision appealed from is reversed, without pronouncement as to costs.

G.R. No. L-28673 October 23, 1984


SAMAR MINING COMPANY, INC., plaintiff-appellee,
vs.
NORDEUTSCHER LLOYD and C.F. SHARP & COMPANY, INC., defendants-appellants.

CUEVAS, J.:+.wph!1
This is an appeal taken directly to Us on certiorari from the decision of the defunct Court of First
Instance of Manila, Vinding defendants carrier and agent, liable for the value of goods never
delivered to plaintiff consignee. The issue raised is a pure question of law, which is, the liability of
the defendants, now appellants, under the bill of lading covering the subject shipment.
The case arose from an importation made by plaintiff, now appellee, SAMAR MINING COMPANY,
INC., of one (1) crate Optima welded wedge wire sieves through the M/S SCHWABENSTEIN a vessel
owned by defendant-appellant 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 COMPANY, INC. Upon arrival of the aforesaid vessel at the port of Manila,
the aforementioned importation was unloaded and delivered in good order and condition to the
bonded warehouse of AMCYL. 1 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 defendants failed to elicit the desired response, consignee
herein appellee, Viled 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. Hence, the Viling of the instant suit to
enforce payment. Defendants-appellants brought in AMCYL as third party defendant.
The trial court rendered judgment in favor of plaintiff, ordering defendants to pay the amount of
P1,691.93 plus attorney's fees and costs. However, the Court stated that defendants may recoup
whatever they may pay plaintiff by enforcing the judgment against third party defendant AMCYL
which had earlier been declared in default. Only the defendants appealed from said decision.
The issue at hand demands a close scrutiny of Bill of Lading No. 18 and its various clauses and
stipulations which should be examined in the light of pertinent legal provisions and settled
jurisprudence. This undertaking is not only proper but necessary as well because of the nature of
the bill of lading which operates both as a receipt for the goods; and more importantly, as a contract
to transport and deliver the same as stipulated therein. 2 Being a contract, it is the law between the
parties thereto 3 who are bound by its terms and conditions 4 provided that these are not contrary
to law, morals, good customs, public order and public policy. 5
Bill of Lading No. 18 sets forth in page 2 thereof 6 that one (1) crate of Optima welded wedge wire
sieves was received by the carrier NORDEUTSCHER LLOYD at the "port of loading" which is Bremen,
Germany, while the freight had been prepaid up to the port of destination or the "port of discharge
of goods in this case, Davao, the carrier undertook to transport the goods in its vessel, M/S
SCHWABENSTEIN only up to the "port of discharge from ship-Manila. Thereafter, the goods were to
be transshipped by the carrier to the port of destination or "port of discharge of goods The
stipulation is plainly indicated on the face of the bill which contains the following phrase printed
below the space provided for the port of discharge from ship", thus: t.hqw
if goods are to be transshipped at port of discharge, show destination under the
column for "description of contents" 7
As instructed above, the following words appeared typewritten under the column for "description
of contents": t.hqw
PORT OF DISCHARGE OF GOODS: DAVAO
FREIGHT PREPAID 8
It is clear, then, that in discharging the goods from the ship at the port of Manila, and delivering the
same into the custody of AMCYL, the bonded warehouse, appellants were acting in full accord with
the contractual stipulations contained in Bill of Lading No. 18. The delivery of the goods to AMCYL
was part of appellants' duty to transship the goods from Manila to their port of destination-Davao.
The word "transship" means: t.hqw
to transfer for further transportation from one ship or conveyance to another 9
The extent of appellant carrier's responsibility and/or liability in the transshipment of the goods in
question are spelled out and delineated under Section 1, paragraph 3 of Bill of Lading No. 18, to
wit: t.hqw
The carrier shall not be liable in any capacity whatsoever for any delay, loss or
damage occurring before the goods enter ship's tackle to be loaded or after the goods
leave ship's tackle to be discharged, transshipped or forwarded ... (Emphasis supplied)
and in Section 11 of the same Bill, which provides: t.hqw
Whenever the carrier or m aster may deem it advisable or in any case where the
goods are placed at carrier's disposal at or consigned to a point where the ship does
not expect to load or discharge, the carrier or master may, without notice, forward
the whole or any part of the goods before or after loading at the original port of
shipment, ... This carrier, in making arrangements for any transshipping or
forwarding vessels or means of transportation not operated by this carrier shall be
considered solely the forwarding agent of the shipper and without any other
responsibility whatsoever even though the freight for the whole transport has been
collected by him. ... Pending or during forwarding or transshipping the carrier may
store the goods ashore or aVloat solely as agent of the shipper and at risk and
expense of the goods and the carrier shall not be liable for detention nor responsible
for the acts, neglect, delay or failure to act of anyone to whom the goods are
entrusted or delivered for storage, handling or any service incidental thereto
(Emphasis supplied) 10
Defendants-appellants now shirk liability for the loss of the subject goods by claiming that they
have discharged the same in full and good condition unto the custody of AMCYL at the port of
discharge from ship Manila, and therefore, pursuant to the aforequoted stipulation (Sec. 11) in
the bill of lading, their responsibility for the cargo had ceased. 11
We Vind merit in appellants' stand. The validity of stipulations in bills of lading exempting the
carrier from liability for loss or damage to the goods when the same are not in its actual custody has
been upheld by Us in PHOENIX ASSURANCE CO., LTD. vs. UNITED STATES LINES, 22 SCRA 674 (1968).
Said case matches the present controversy not only as to the material facts but more importantly, as
to the stipulations contained in the bill of lading concerned. As if to underline their awesome
likeness, the goods in question in both cases were destined for Davao, but were discharged from
ship in Manila, in accordance with their respective bills of lading.
The stipulations in the bill of lading in the PHOENIX case which are substantially the same as the
subject stipulations before Us, provides: t.hqw
The carrier shall not be liable in any capacity whatsoever for any loss or damage to
the goods while the goods are not in its actual custody. (Par. 2, last subpar.)
xxx xxx xxx
The carrier or master, in making arrangements with any person for or in connection
with all transshipping or forwarding of the goods or the use of any means of
transportation or forwarding of goods not used or operated by the carrier, shall be
considered solely the agent of the shipper and consignee and without any other
responsibility whatsoever or for the cost thereof ... (Par. 16). 12
Finding the above stipulations not contrary to law, morals, good customs, public order or public
policy, We sustained their validity 13 Applying said stipulations as the law between the parties in
the aforecited case, the Court concluded that: t.hqw
... The short form Bill of Lading ( ) states in no uncertain terms that the port of
discharge of the cargo is Manila, but that the same was to be transshipped beyond
the port of discharge to Davao City. Pursuant to the terms of the long form 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. ... (Emphasis supplied) 14
Coming now to the case before Us, We hold, that by the authority of the above pronouncements, and
in conformity with the pertinent provisions of the New 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.
The liability of the common carrier for the loss, destruction or deterioration of goods transported
from a foreign country to the Philippines is governed primarily by the New Civil Code. 15 In all
matters not regulated by said Code, the rights and obligations of common carriers shall be governed
by the Code of Commerce and by special laws. 16 A careful perusal of the provisions of the New Civil
Code on common carriers (Section 4, Title VIII, Book IV) directs our attention to Article 1736
thereof, which reads: t.hqw
Article 1736. 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.
Article 1738 referred to in the foregoing provision runs thus: t.hqw
Article 1738. 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.
There is no doubt that Art. 1738 Vinds 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 third party when last seen and/or heard
of. However, Article 1736 is applicable to the instant suit. Under said article, the carrier may be
relieved of the responsibility for loss or damage to the goods upon actual or constructive delivery of
the same by the carrier to the consignee, or to the person who has a right to receive them. In sales,
actual delivery has been deVined as the ceding of corporeal possession by the seller, and the actual
apprehension of corporeal possession by the buyer or by some person authorized by him to receive
the goods as his representative for the purpose of custody or disposal. 17 By the same token, there
is actual delivery in contracts for the transport of goods when possession has been turned over to
the consignee or to his duly authorized agent and a reasonable time is given him to remove the
goods. 18 The court a quo found that there was actual delivery to the consignee through its duly
authorized agent, the carrier.
It becomes necessary at this point to dissect the complex relationship that had developed between
appellant and appellee in the course of the transactions that gave birth to the present suit. Two
undertakings appeared embodied and/or provided for in the Bill of Lading 19 in question. The Virst
is FOR THE TRANSPORT OF GOODS from Bremen, Germany to Manila. The second, THE
TRANSSHIPMENT OF THE SAME GOODS from Manila to Davao, with appellant acting as agent of the
consignee. 20 At the hiatus between these two undertakings of appellant which is the moment when
the subject goods are discharged in Manila, its personality changes from that of carrier to that of
agent of the consignee. Thus, the character of appellant's possession also changes, from possession
in its own name as carrier, into possession in the name of consignee as the latter's agent. Such being
the case, there was, in effect, actual delivery of the goods from appellant as carrier to the same
appellant as agent of the consignee. Upon such delivery, the appellant, as erstwhile carrier, ceases to
be responsible for any loss or damage that may befall the goods from that point onwards. This is the
full import of Article 1736, as applied to the case before Us.
But even as agent of the consignee, the appellant cannot be made answerable for the value of the
missing goods, It is true that the transshipment of the goods, which was the object of the agency,
was not fully performed. However, appellant had commenced said performance, the completion of
which was aborted by circumstances beyond its control. An agent who carries out the orders and
instructions of the principal without being guilty of negligence, deceit or fraud, cannot be held
responsible for the failure of the principal to accomplish the object of the agency, 21 This can be
gleaned from the following provisions of the New Civil Code on the obligations of the agent: t.
hqw
Article 1884. The agent is bound by his acceptance to carry out the agency, and is
liable for the damages which, through his non-performance, the principal may suffer.
xxx xxx xxx
Article 1889. The agent shall be liable for damages if, there being a conVlict between
his interests and those of the principal, he should prefer his own.
Article 1892. The agent may appoint a substitute if the principal has not prohibited
him from doing so; but he shall be responsible for the acts of the substitute:
(1) When he was not given the power to appoint one;
(2) When he was given such power but without designating the person and the
person appointed was notoriously incompetent or insolvent.
xxx xxx xxx
Article 1909. The agent is responsible not only for fraud, but also for negligence
which shall be judged with more or less rigor by the courts, according to whether
the agency was or was not for a compensation.
The records fail to reveal proof of negligence, deceit or fraud committed by appellant or by its
representative in the Philippines. Neither is there any showing of notorious incompetence or
insolvency on the part of AMCYT, which acted as appellant's substitute in storing the goods awaiting
transshipment.
The actions of appellant carrier and of its representative in the Philippines being in full faith with
the lawful stipulations of Bill of Lading No. 18 and in conformity with the provisions of the New
Civil Code on common carriers, agency and contracts, they incur no liability for the loss of the goods
in question.
WHEREFORE, the appealed decision is hereby REVERSED. Plaintiff-appellee's complaint is hereby
DISMISSED. No costs. SO ORDERED.
G.R. No. 95536 March 23, 1992
ANICETO G. SALUDO, JR., MARIA SALVACION SALUDO, LEOPOLDO G. SALUDO and SATURNINO
G. SALUDO, petitioners,
vs.
HON. COURT OF APPEALS, TRANS WORLD AIRLINES, INC., and PHILIPPINE AIRLINES,
INC., respondents.

REGALADO, J.:
Assailed in this petition for review on certiorari is the decision in CA-G.R. CV No. 20951 of
respondent Court of Appeals 1 which afVirmed the decision of the trial court 2 dismissing for lack of
evidence herein petitioners' complaint in Civil Case No R-2101 of the then Court of First Instance of
Southern Leyte, Branch I.
The facts, as recounted by the court a quo and adopted by respondent court after "considering the
evidence on record," are as follows:
After the death of plaintiffs' mother, Crispina Galdo Saludo, in Chicago Illinois, (on)
October 23, 1976 (Exh. A), Pomierski and Son Funeral Home of Chicago, made the
necessary preparations and arrangements for the shipment, of the remains from
Chicago to the Philippines. The funeral home had the remains embalmed (Exb. D)
and secured a permit for the disposition of dead human body on October 25, 1976
(Exh. C), Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00
p.m. on October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping
case containing a hermetically sealed casket that is airtight and waterproof wherein
was contained the remains of Crispina Saludo Galdo (sic) (Exb. B). On the same date,
October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary
Air Services) at the airport (Chicago) which made the necessary arrangements such
as Vlights, transfers, etc.; C.M.A.S. is a national service used by undertakers to
throughout the nation (U.S.A.), they furnish the air pouch which the casket is
enclosed in, and they see that the remains are taken to the proper air freight
terminal (Exh. 6-TWA). C.M.A.S. booked the shipment with PAL thru the carrier's
agent Air Care International, with Pomierski F.H. as the shipper and Mario (Maria)
Saludo as the consignee. PAL Airway Bill No. 079-01180454 Ordinary was issued
wherein the requested routing was from Chicago to San Francisco on board TWA
Flight 131 of October 27, 1976 and from San Francisco to Manila on board PAL Flight
No. 107 of the same date, and from Manila to Cebu on board PAL Flight 149 of
October 29, 1976 (See Exh. E., Also Exh. 1-PAL).
In the meantime, plaintiffs Maria Salvacion Saludo and Saturnino Saludo, thru a
travel agent, were booked with United Airlines from Chicago to California, and with
PAL from California to Manila. She then went to the funeral director of Pomierski
Funeral Home who had her mother's remains and she told the director that they
were booked with United Airlines. But the director told her that the remains were
booked with TWA Vlight to California. This upset her, and she and her brother had to
change reservations from UA to the TWA Vlight after she conVirmed by phone that
her mother's remains should be on that TWA Vlight. They went to the airport and
watched from the look-out area. She saw no body being brought. So, she went to the
TWA counter again, and she was told there was no body on that Vlight. Reluctantly,
they took the TWA Vlight upon assurance of her cousin, Ani Bantug, that he would
look into the matter and inform her about it on the plane or have it radioed to her.
But no conVirmation from her cousin reached her that her mother was on the West
Coast.
Upon arrival at San Francisco at about 5:00 p.m., she went to the TWA counter there
to inquire about her mother's remains. She was told they did not know anything
about it.
She then called Pomierski that her mother's remains were not at the West Coast
terminal, and Pomierski immediately called C.M.A.S., which in a matter of 10 minutes
informed him that the remains were on a plane to Mexico City, that there were two
bodies at the terminal, and somehow they were switched; he relayed this
information to Miss Saludo in California; later C.M.A.S. called and told him they were
sending the remains back to California via Texas (see Exh. 6-TWA).
It-turned out that TWA had carried a shipment under PAL Airway Bill No. 079-
ORD-01180454 on TWA Flight 603 of October 27, 1976, a Vlight earlier than TWA
Flight 131 of the same date. TWA delivered or transferred the said shipment said to
contain human remains to PAL at 1400H or 2:00 p.m. of the same date, October 27,
1976 (Bee Exh. 1- TWA). "Due to a switch(ing) in Chicago", this shipment was
withdrawn from PAL by CMAS at 1805H (or 6:05 p.m.) of the same date, October 27
(Exh. 3-PAL, see Exh. 3-a-PAL).
What transpired at the Chicago (A)irport is explained in a memo or incident report
by Pomierski (Exh. 6-TWA) to Pomierski's lawyers who in turn referred to said'
memo and enclosed it in their (Pomierski's lawyers) answer dated July 18, 1981 to
herein plaintiff's counsel (See Exh. 5-TWA). In that memo or incident report (Exh. 6-
TWA), it is stated that the remains (of Crispina Saludo) were taken to CMAS at the
airport; that there were two bodies at the (Chicago Airport) terminal, and somehow
they were switched, that the remains (of Crispina Saludo) were on a plane to Mexico
City; that CMAS is a national service used by undertakers throughout the nation
(U.S.A.), makes all the necessary arrangements, such as Vlights, transfers, etc., and
see(s) to it that the remains are taken to the proper air freight terminal.
The following day October 28, 1976, the shipment or remains of Crispina Saludo
arrived (in) San Francisco from Mexico on board American Airlines. This shipment
was transferred to or received by PAL at 1945H or 7:45 p.m. (Exh. 2-PAL, Exh. 2-a-
PAL). This casket bearing the remains of Crispina Saludo, which was mistakenly sent
to Mexico and was opened (there), was resealed by Crispin F. Patagas for shipment
to the Philippines (See Exh. B-1). The shipment was immediately loaded on PAL
Vlight for Manila that same evening and arrived (in) Manila on October 30, 1976, a
day after its expected arrival on October 29, 1976. 3
In a letter dated December 15, 1976, 4 petitioners' counsel informed private respondent Trans
World Airlines (TWA) of the misshipment and eventual delay in the delivery of the cargo containing
the remains of the late Crispin Saludo, and of the discourtesy of its employees to petitioners Maria
Salvacion Saludo and Saturnino Saludo. In a separate letter on June 10, 1977 addressed to co-
respondent Philippine Airlines (PAL), 5 petitioners stated that they were holding PAL liable for said
delay in delivery and would commence judicial action should no favorable explanation be given.
Both private respondents denied liability. Thus, a damage suit 6 was Viled by petitioners before the
then Court of First Instance, Branch III, Leyte, praying for the award of actual damages of
P50,000.00, moral damages of P1,000,000.00, exemplary damages, attorney's fees and costs of suit.
As earlier stated, the court below absolved the two respondent airlines companies of liability. The
Court of Appeals afVirmed the decision of the lower court in toto, and in a subsequent
resolution, 7 denied herein petitioners' motion for reconsideration for lack of merit.
In predictable disagreement and dissatisfaction with the conclusions reached by respondent
appellate court, petitioners now urge this Court to review the appealed decision and to resolve
whether or not (1) the delay in the delivery of the casketed remains of petitioners' mother was due
to the fault of respondent airline companies, (2) the one-day delay in the delivery of the same
constitutes contractual breach as would entitle petitioners to damages, (3) damages are recoverable
by petitioners for the humiliating, arrogant and indifferent acts of the employees of TWA and PAL,
and (4) private respondents should be held liable for actual, moral and exemplary damages, aside
from attorney's fees and litigation expenses. 8
At the outset and in view of the spirited exchanges of the parties on this aspect, it is to be stressed
that only questions of law may be raised in a petition Viled in this Court to review on certiorari the
decision of the Court of Appeals. 9 This being so, the factual Vindings of the Court of Appeals are Vinal
and conclusive and cannot be reviewed by the Supreme Court. The rule, however, admits of
established exceptions, to wit: (a) where there is grave abuse of discretion; (b) when the Vinding is
grounded entirely on speculations, surmises or conjectures;(c) when the inference made is
manifestly-mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was
based on a misapprehension of facts; (e) when the factual Vindings are conVlicting; (f) when the
Court of Appeals, in making its Vindings, went beyond the issues of the case and the same are
contrary to the admissions of both appellant and appellee; 10 (g) when the Court of Appeals
manifestly overlooked certain relevant facts not disputed by the parties and which, if properly
considered, would justify a different conclusion; 11 and (h) where the Vindings of fact of the Court of
Appeals are contrary to those of the trial court, or are mere conclusions without citation of speciVic
evidence, or where the facts of set forth by the petitioner are not disputed by the respondent, or
where the Vindings of fact of the Court of Appeals are premised on the absence of evidence and are
contradicted by the evidence on record. 12
To distinguish, a question of law is one which involves a doubt or controversy on what the law is on
a certain state of facts; and, a question of fact, contrarily, is one in which there is a doubt or
difference as to the truth or falsehood of the alleged facts. 13 One test, it has been held, is whether
the appellate court can determine the issue raised without reviewing or evaluating the evidence, in
which case it is a question of law, otherwise it will be a question of fact. 14
Respondent airline companies object to the present recourse of petitioners on the ground that this
petition raises only factual questions. 15 Petitioners maintain otherwise or, alternatively, they are of
the position that, assuming that the petition raises factual questions, the same are within the
recognized exceptions to the general rule as would render the petition cognizable and worthy of
review by the Court. 16
Since it is precisely the soundness of the inferences or conclusions that may be drawn from the
factual issues which are here being assayed, we Vind that the issues raised in the instant petition
indeed warrant a second look if this litigation is to come to a reasonable denouement. A
discussion seriatim of said issues will further reveal that the sequence of the events involved is in
effect disputed. Likewise to be settled is whether or not the conclusions of the Court of Appeals
subject of this review indeed Vind evidentiary and legal support.
I. Petitioners fault respondent court for "not Vinding that private respondents failed to exercise
extraordinary diligence required by law which resulted in the switching and/or misdelivery of the
remains of Crispina Saludo to Mexico causing gross delay in its shipment to the Philippines, and
consequently, damages to petitioners." 17
Petitioner allege that private respondents received the casketed remains of petitioners' mother on
October 26, 1976, as evidenced by the issuance of PAL Air Waybill No. 079-01180454 18 by Air Care
International as carrier's agent; and from said date, private respondents were charged with the
responsibility to exercise extraordinary diligence so much so that for the alleged switching of the
caskets on October 27, 1976, or one day after private respondents received the cargo, the latter
must necessarily be liable.
To support their assertion, petitioners rely on the jurisprudential dictum, both under American and
Philippine law, that "(t)he issuance of a bill of lading carries the presumption that the goods were
delivered to the carrier issuing the bill, for immediate shipment, and it is nowhere questioned that a
bill of lading is prima facie evidence of the receipt of the goods by the carrier. . . . In the absence of
convincing testimony establishing mistake, recitals in the bill of lading showing that the carrier
received the goods for shipment on a speciVied date control (13 C.J.S. 235)." 19
A bill of lading is a written acknowledgment of the receipt of the goods and an agreement to
transport and deliver them at a speciVied place to a person named or on his order. Such instrument
may be called a shipping receipt, forwarder's receipt and receipt for transportation. 20 The
designation, however, is immaterial. It has been hold that freight tickets for bus companies as well
as receipts for cargo transported by all forms of transportation, whether by sea or land, fall within
the deVinition. Under the Tariff and Customs Code, a bill of lading includes airway bills of
lading. 21 The two-fold character of a bill of lading is all too familiar; it is a receipt as to the quantity
and description of the goods shipped and a contract to transport the goods to the consignee or
other person therein designated, on the terms speciVied in such instrument. 22
Logically, since a bill of lading acknowledges receipt of goods to be transported, delivery of the
goods to the carrier normally precedes the issuance of the bill; or, to some extent, delivery of the
goods and issuance of the bill are regarded in commercial practice as simultaneous acts. 23 However,
except as may be prohibited by law, there is nothing to prevent an inverse order of events, that is,
the execution of the bill of lading even prior to actual possession and control by the carrier of the
cargo to be transported. There is no law which requires that the delivery of the goods for carriage
and the issuance of the covering bill of lading must coincide in point of time or, for that matter, that
the former should precede the latter.
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 modiVied 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. 24
While we agree with petitioners' statement that "an airway bill estops the carrier from denying
receipt of goods of the quantity and quality described in the bill," a further reading and a more
faithful quotation of the authority cited would reveal that "(a) bill of lading may contain constituent
elements of estoppel and thus become something more than a contract between the shipper and the
carrier. . . . (However), as between the shipper and the carrier, when no goods have been delivered for
shipment no recitals in the bill can estop the carrier from showing the true facts . . . Between the
consignor of goods and receiving carrier, recitals in a bill of lading as to the goods shipped raise only a
rebuttable presumption that such goods were delivered for shipment. As between the consignor and a
receiving carrier, the fact must outweigh the recital." 25 (Emphasis supplied)
For this reason, we must perforce allow explanation by private respondents why, despite the
issuance of the airway bill and the date thereof, they deny having received the remains of Crispina
Saludo on October 26, 1976 as alleged by petitioners.
The Vindings of the trial court, as favorably adopted by the Court of Appeals and which we have
earner quoted, provide us with the explanation that sufViciently over comes the presumption relied
on by petitioners in insisting that the remains of their mother were delivered to and received by
private respondents on October 26, 1976. Thus
. . . Philippine Vice Consul in Chicago, Illinois, Bienvenido M. Llaneta, at 3:00 p.m. on
October 26, 1976 at the Pomierski & Son Funeral Home, sealed the shipping case
containing a hermetically sealed casket that is airtight and waterproof wherein was
contained the remains of Crispina Saludo Galdo (sic) (Exh. B). On the same date
October 26, 1976, Pomierski brought the remains to C.M.A.S. (Continental Mortuary Air
Services) at the airport (Chicago) which made the necessary arrangements such as
`lights, transfers, etc; C.M.A.S. is a national service used by undertakers throughout
the nation (U.S.A.), they furnish the air pouch which the casket is enclosed in,
and they see that the remains are taken to the proper air freight terminal (Exh. G-
TWA). C.M.A.S. booked the shipment with PAL thru the carrier's agent Air Care
International, with Pomierski F.H. as the shipper and Mario (Maria) Saludo as the
consignee. PAL Airway Bill No. 079- 01180454 Ordinary was issued wherein the
requested routing was from Chicago to San Francisco on board TWA Flight-131 of
October 27;1976, and from San Francisco to Manila on board PAL Flight No. 107 of the
same date, and from Manila to Cebu on board PAL Flight 149 of October 29, 1976 (See
Exh. E, also Exh. 1-PAL). 26(Emphasis ours.)
Moreover, we are persuaded to believe private respondent PAL's account as to what transpired
October 26, 1976:
. . . Pursuant thereto, on 26 October 1976, CMAS acting upon the instruction of
Pomierski, F.H., the shipper requested booking of the casketed remains of Mrs. Cristina
(sic) Saludo on board PAL's San Francisco-Manila Flight No. PR 107 on October 27,
1976.
2. To signify acceptance and con`irmation of said booking, PAL issued to said Pomierski
F.H., PAL Airway Bill No. 079-01180454 dated October 27, 1976 (sic, "10/26/76"). PAL
conVirmed the booking and transporting of the shipment on board of its Flight PR
107 on October 27, 1976 on the basis of the representation of the shipper and/or
CMAS that the said cargo would arrive in San Francisco from Chicago on board
United Airlines Flight US 121 on 27 October 1976. 27
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 conVirmation of the booking thus made for the San Francisco-
Manila Vlight 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. 28
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, 29 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. 30 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. 31 Where such a delivery has
thus been accepted by the carrier, the liability of the common carrier commences eo instanti. 32
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.
Petitioners, proceeding on the premise that there was delivery of the cargo to private respondents
on October 26,1976 and that the latter's extraordinary responsibility had by then become operative,
insist on foisting the blame on private respondents for the switching of the two caskets which
occurred on October 27, 1976. It is argued that since there is no clear evidence establishing the fault
Continental Mortuary Air Services (CMAS) for the mix-up, private respondents are presumably
negligent pursuant to Article 1735 of the Civil Code and, for failure to rebut such presumption, they
must necessarily be held liable; or, assuming that CMAS was at fault, the same does not absolve
private respondents of liability because whoever brought the cargo to the airport or loaded it on the
plane did so as agent of private respondents.
This contention is without merit. As pithily explained by the Court of Appeals:
The airway bill expressly provides that "Carrier certiVies goods described below
were received for carriage", and said cargo was "casketed human remains of
Crispina Saludo," with "Maria Saludo as Consignee; Pomierski F.H. as Shipper; Air
Care International as carrier's agent." On the face of the said airway bill, the speciVic
Vlight numbers, speciVic routes of shipment and dates of departure and arrival were
typewritten, to wit: Chicago TWA Flight 131/27 to San Francisco and from San
Francisco by PAL 107 on, October 27, 1976 to Philippines and to Cebu via PAL Flight
149 on October 29, 1976. The airway bill also contains the following typewritten
words, as follows: all documents have been examined (sic). Human remains of
Crispina Saludo. Please return back (sic) Virst available Vlight to SFO.
But, as it turned out and was discovered later the casketed human remains which
was issued PAL Airway Bill #079-1180454 was not the remains of Crispina Saludo,
the casket containing her remains having been shipped to Mexico City.
However, it should be noted that, Pomierski F.H., the shipper of Mrs. Saludo's
remains, hired Continental Mortuary Services (hereafter referred to as C.M.A.S.),
which is engaged in the business of transporting and forwarding human remains.
Thus, C.M.A.S. made all the necessary arrangements such as Vlights, transfers, etc.
for shipment of the remains of Crispina Saludo.
The remains were taken on October 26th, 1976, to C.M.A.S. at the
airport. These people made all the necessary arrangements, such as
Vlights, transfers, etc. This is a national service used by undertakers
throughout the nation. They furnished the air pouch which the
casket is enclosed in, and they see that the remains are taken to the
proper air frieght terminal. I was very surprised when Miss Saludo
called me to say that the remains were not at the west coast
terminal. I immediately called C.M.A.S. They called me back in a matter
of ten minutes to inform me that the remains were on a plane to
Mexico City. The man said that there were two bodies at the terminal,
and somehow they were switched. . . . (Exb. 6 "TWA", which is the
memo or incident report enclosed in the stationery of Walter
Pomierski & Sons Ltd.)
Consequently, when the cargo was received from C.M.A.S. at the Chicago airport
terminal for shipment, which was supposed to contain the remains of Crispina
Saludo, Air Care International and/or TWA, had no way of determining its actual
contents, since the casket was hermetically sealed by the Philippine Vice-Consul in
Chicago and in an air pouch of C.M.A.S., to the effect that Air Care International and/or
TWA had to rely on the information furnished by the shipper regarding the cargo's
content. Neither could Air Care International and/or TWA open the casket for further
veri`ication, since they were not only without authority to do so, but even prohibited.
Thus, under said circumstances, no fault and/or negligence can be attributed to PAL
(even if Air Care International should be considered as an agent of PAL) and/or
TWA, the entire fault or negligence being exclusively with C.M.A.S. 33 (Emphasis
supplied.)
It can correctly and logically be concluded, therefore, that the switching occurred or, more
accurately, was discovered on October 27, 1976; and based on the above Vindings of the Court of
appeals, it happened while the cargo was still with CMAS, well before the same was place in the
custody of private respondents.
Thus, while the Air Cargo Transfer Manifest of TWA of October 27, 1976 34 was signed by Garry
Marcial of PAL at 1400H, or 2:00 P.M., on the same date, thereby indicating acknowledgment by PAL
of the transfer to them by TWA of what was in truth the erroneous cargo, said misshipped cargo was
in fact withdrawn by CMAS from PAL as shown by the notation on another copy of said
manifest 35 stating "Received by CMAS Due to switch in Chicago 10/27-1805H," the authenticity
of which was never challenged. This shows that said misshipped cargo was in fact withdrawn by
CMAS from PAL and the correct shipment containing the body of Crispina Saludo was received by
PAL only on October 28, 1976, at 1945H, or 7:45 P.M., per American Airlines Interline Freight
Transfer Manifest No. AA204312. 36
Witness the deposition of TWA's ramp serviceman, Michael Giosso, on this matter:
ATTY. JUAN COLLAS, JR.:
On that date, do (sic) you have occasion to handle or deal with the
transfer of cargo from TWA Flight No. 603 to PAL San Francisco?
MICHAEL GIOSSO:
Yes, I did.
ATTY. JUAN COLLAS, JR.:
What was your participation with the transfer of the cargo?
MICHAEL GIOSSO:
I manifested the freight on a transfer manifest and physically moved
it to PAL and concluded the transfer by signing it off.
ATTY. JUAN COLLAS, JR.:
You brought it there yourself?
MICHAEL GIOSSO:
Yes sir.
ATTY. JUAN COLIAS, JR.:
Do you have anything to show that PAL received the cargo from TWA
on October 27, 1976?
MICHAEL GIOSSO:
Yes, I do.
(Witness presenting a document)
ATTY. JUAN COLLAS, JR.:
For purposes of clarity, Exhibit I is designated as Exhibit I-TWA.
xxx xxx xxx
ATTY. JUAN COLLAS, JR.:
This Exhibit I-TWA, could you tell what it is, what it shows?
MICHAEL GIOSSO:
It shows transfer of manifest on 10-27-76 to PAL at 1400 and
veriVied with two signatures as it completed the transfer.
ATTY. JUAN COLLAS, JR.:
Very good,. Who was the PAL employee who received the cargo?
MICHAEL GIOSSO:
The name is Garry Marcial." 37
The deposition of Alberto A. Lim, PAL's cargo supervisor at San Francisco, as deponent-witness for
PAL, makes this further clariVication:
ATTY. CESAR P. MANALAYSAY:
You mentioned Airway Bill, Mr. Lim. I am showing to you a PAL
Airway Bill Number 01180454 which for purposes of evidence, I
would like to request that the same be marked as evidence Exhibit I
for PAL.
xxx xxx xxx
In what circumstances did you encounter Exhibit I-PAL?
ALBERTO A. LIM:
If I recall correctly, I was queried by Manila, our Manila ofVice with
regard to a certain complaint that a consignee Viled that this
shipment did not arrive on the day that the consignee expects the
shipment to arrive.
ATTY CESAR P. MANALAYSAY:
Okay. Now, upon receipt of that query from your Manila ofVice, did
you conduct any investigation to pinpoint the possible causes of
mishandling?
ALBERTO A. LIM:
Yes.
xxx xxx xxx
ATTY. CESAR P. MANALAYSAY:
What is the result of your investigation?
ALBERTO A. LIM:
In the course of my investigation, I found that we received the body
on October 28, 1976, from American Airlines.
ATTY. CESAR P. MANALAYSAY:
What body are you referring to?
xxx xxx xxx
ALBERTO A. LIM:
The remains of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MANALAYSAY:
Is that the same body mentioned in this Airway Bill?
ALBERTO A. LIM:
Yes.
ATTY. CESAR P. MANALAYSAY:
What time did you receive said body on October 28, 1976?
ALBERTO A. LIM:
If I recall correctly, approximately 7:45 of October 28, 1976.
ATTY. CESAR P. MANALAYSAY:
Do you have any proof with you to back the statement?
ALBERTO A. LIM:
Yes. We have on our records a Transfer Manifest from American
Airlines Number 204312 showing that we received a human remains
shipment belong to Mrs. Cristina (sic) Saludo or the human remains
of Mrs. Cristina (sic) Saludo.
ATTY. CESAR P. MAIALAYSAY:
At this juncture, may I request that the Transfer Manifest referred to
by the witness be marked as an evidence as Exhibit II-PAL.
xxx xxx xxx
Mr. Lim, yesterday your co-defendant TWA presented as their Exhibit
I evidence tending to show that on October 27, 1976 at about 2:00 in
the, afternoon they delivered to you a cargo bearing human remains.
Could you go over this Exhibit I and please give us your comments as
to that exhibit?
ATTY. ALBERTO C. MENDOZA:
That is a vague question. I would rather request that counsel
propound speciVic questions rather than asking for comments on
Exhibit I-TWA.
ATTY. CESAR P. MANALAYSAY:
In that case, I will reform my question. Could you tell us whether
TWA in fact delivered to you the human remains as indicated in that
Transfer Manifest?
ALBERTO A. LIM:
Yes, they did.
ATTY. CESAR P. MANALAYSAY:
I noticed that the Transfer Manifest of TWA marked as Exhibit I-TWA
bears the same numbers or the same entries as the Airway Bill
marked as Exhibit I-A PAL tending to show that this is the human
remains of Mrs Cristina (sic) Saludo. Could you tell us whether this is
true?
ALBERTO A. LIM:
It is true that we received human remains shipment from TWA as
indicated on this Transfer Manifest. But in the course of
investigation, it was found out that the human remains transferred to
us is not the remains of Mrs. Cristina (sic) Saludo this is the reason
why we did not board it on our Vlight. 38
Petitioners consider TWA's statement that "it had to rely on the information furnished by the
shipper" a lame excuse and that its failure to prove that its personnel veriVied and identiVied the
contents of the casket before loading the same constituted negligence on the part of TWA. 39
We upbold the favorable consideration by the Court of Appeals of the following Vindings of the trial
court:
It was not (to) TWA, but to C.M.A.S. that the Pomierski & Son Funeral Home
delivered the casket containing the remains of Crispina Saludo. TWA would have no
knowledge therefore that the remains of Crispina Saludo were not the ones inside
the casket that was being presented to it for shipment. TWA would have to rely on
there presentations of C.M.A.S. The casket was hermetically sealed and also sealed by
the Philippine Vice Consul in Chicago. TWA or any airline for that matter would not
have opened such a sealed casket just for the purpose of ascertaining whose body was
inside and to make sure that the remains inside were those of the particular person
indicated to be by C.M.A.S. TWA had to accept whatever information was being
furnished by the shipper or by the one presenting the casket for shipment. And so as a
matter of fact, TWA carried to San Francisco and transferred to defendant PAL a
shipment covered by or under PAL Airway Bill No. 079-ORD-01180454, the airway
bill for the shipment of the casketed remains of Crispina Saludo. Only, it turned out
later, while the casket was already with PAL, that what was inside the casket was not
the body of Crispina Saludo so much so that it had to be withdrawn by C.M.A.S. from
PAL. The body of Crispina Saludo had been shipped to Mexico. The casket containing
the remains of Crispina Saludo was transshipped from Mexico and arrived in San
Francisco the following day on board American Airlines. It was immediately loaded
by PAL on its Vlight for Manila.
The foregoing points at C.M.A.S., not defendant TWA much less defendant PAL, as the
ONE responsible for the switching or mix-up of the two bodies at the Chicago
Airport terminal, and started a chain reaction of the misshipment of the body of
Crispina Saludo and a one-day delay in the delivery thereof to its destination. 40
Verily, no amount of inspection by respondent airline companies could have guarded against the
switching that had already taken place. Or, granting that they could have opened the casket to
inspect its contents, private respondents had no means of ascertaining whether the body therein
contained was indeed that of Crispina Saludo except, possibly, if the body was that of a male person
and such fact was visually apparent upon opening the casket. However, to repeat, private
respondents had no authority to unseal and open the same nor did they have any reason or
justiVication to resort thereto.
It is the right of the carrier to require good faith on the part of those persons who deliver goods to
be carried, or enter into contracts with it, and inasmuch as the freight may depend on the value of
the article to be carried, the carrier ordinarily has the right to inquire as to its value. Ordinarily, too,
it is the duty of the carrier to make inquiry as to the general nature of the articles shipped and of
their value before it consents to carry them; and its failure to do so cannot defeat the shipper's right
to recovery of the full value of the package if lost, in the absence of showing of fraud or deceit on the
part of the shipper. In the absence of more deVinite information, the carrier has a the right to accept
shipper's marks as to the contents of the package offered for transportation and is not bound to
inquire particularly about them in order to take advantage of a false classiVication and where a
shipper expressly represents the contents of a package to be of a designated character, it is not the
duty of the carrier to ask for a repetition of the statement nor disbelieve it and open the box and see
for itself. 41 However, where a common carrier has reasonable ground to suspect that the offered
goods are of a dangerous or illegal character, the carrier has the right to know the character of such
goods and to insist on an inspection, if reasonable and practical under the circumstances, as a
condition of receiving and transporting such goods. 42
It can safely be said then that a common carrier is entitled to fair representation of the nature and
value of the goods to be carried, with the concomitant right to rely thereon, and further noting at
this juncture that a carrier has no obligation to inquire into the correctness or sufViciency of such
information. 43 The consequent duty to conduct an inspection thereof arises in the event that there
should be reason to doubt the veracity of such representations. Therefore, to be subjected to
unusual search, other than the routinary inspection procedure customarily undertaken, there must
exist proof that would justify cause for apprehension that the baggage is dangerous as to warrant
exhaustive inspection, or even refusal to accept carriage of the same; and it is the failure of the
carrier to act accordingly in the face of such proof that constitutes the basis of the common carrier's
liability. 44
In the case at bar, private respondents had no reason whatsoever to doubt the truth of the shipper's
representations. The airway bill expressly providing that "carrier certiVies goods received below
were received for carriage," and that the cargo contained "casketed human remains of Crispina
Saludo," was issued on the basis of such representations. The reliance thereon by private
respondents was reasonable and, for so doing, they cannot be said to have acted negligently.
Likewise, no evidence was adduced to suggest even an iota of suspicion that the cargo presented for
transportation was anything other than what it was declared to be, as would require more than
routine inspection or call for the carrier to insist that the same be opened for scrutiny of its contents
per declaration.
Neither can private respondents be held accountable on the basis of petitioners' preposterous
proposition that whoever brought the cargo to the airport or loaded it on the airplane did so as
agent of private respondents, so that even if CMAS whose services were engaged for the transit
arrangements for the remains was indeed at fault, the liability therefor would supposedly still be
attributable to private respondents.
While we agree that the actual participation of CMAS has been sufViciently and correctly established,
to hold that it acted as agent for private respondents would be both an inaccurate appraisal and an
unwarranted categorization of the legal position it held in the entire transaction.
It bears repeating that CMAS was hired to handle all the necessary shipping arrangements for the
transportation of the human remains of Crispina Saludo to Manila. Hence, it was to CMAS that the
Pomierski & Son Funeral Home, as shipper, brought the remains of petitioners' mother for
shipment, with Maria Saludo as consignee. Thereafter, CMAS booked the shipment with PAL through
the carrier's agent, Air Care International. 45 With its aforestated functions, CMAS may accordingly
be classiVied as a forwarder which, by accepted commercial practice, is regarded as an agent of the
shipper and not of the carrier. As such, it merely contracts for the transportation of goods by
carriers, and has no interest in the freight but receives compensation from the shipper as his
agent. 46
At this point, it can be categorically stated that, as culled from the Vindings of both the trial court
and appellate courts, the entire chain of events which culminated in the present controversy was
not due to the fault or negligence of private respondents. Rather, the facts of the case would point to
CMAS as the culprit. Equally telling of the more likely possibility of CMAS' liability is petitioners'
letter to and demanding an explanation from CMAS regarding the statement of private respondents
laying the blame on CMAS for the incident, portions of which, reading as follows:
. . . we were informed that the unfortunate a mix-up occurred due to your negligence.
. . .
Likewise, the two airlines pinpoint the responsibility upon your agents. Evidence
were presented to prove that allegation.
On the face of this overwhelming evidence we could and should have Viled a case
against you. . . . 47
clearly allude to CMAS as the party at fault. This is tantamount to an admission by petitioners that
they consider private respondents without fault, or is at the very least indicative of the fact that
petitioners entertained serious doubts as to whether herein private respondents were responsible
for the unfortunate turn of events.
Undeniably, petitioners' grief over the death of their mother was aggravated by the unnecessary
inconvenience and anxiety that attended their efforts to bring her body home for a decent burial.
This is unfortunate and calls for sincere commiseration with petitioners. But, much as we would like
to give them consolation for their undeserved distress, we are barred by the inequity of allowing
recovery of the damages prayed for by them at the expense of private respondents whose fault or
negligence in the very acts imputed to them has not been convincingly and legally demonstrated.
Neither are we prepared to delve into, much less deVinitively rule on, the possible liability of CMAS
as the evaluation and adjudication of the same is not what is presently at issue here and is best
deferred to another time and addressed to another forum.
II. Petitioners further fault the Court of Appeals for ruling that there was no contractual breach on
the part of private respondents as would entitle petitioners to damages.
Petitioners hold that respondent TWA, by agreeing to transport the remains of petitioners' mother
on its Flight 131 from Chicago to San Francisco on October 27, 1976, made itself a party to the
contract of carriage and, therefore, was bound by the terms of the issued airway bill. When TWA
undertook to ship the remains on its Flight 603, ten hours earlier than scheduled, it supposedly
violated the express agreement embodied in the airway bill. It was allegedly this breach of
obligation which compounded, if not directly caused, the switching of the caskets.
In addition, petitioners maintain that since there is no evidence as to who placed the body on board
Flight 603, or that CMAS actually put the cargo on that Vlight, or that the two caskets at the Chicago
airport were to be transported by the same airline, or that they came from the same funeral home,
or that both caskets were received by CMAS, then the employees or agents of TWA presumably
caused the mix-up by loading the wrong casket on the plane. For said error, they contend, TWA must
necessarily be presumed negligent and this presumption of negligence stands undisturbed unless
rebutting evidence is presented to show that the switching or misdelivery was due to circumstances
that would exempt the carrier from liability.
Private respondent TWA professes otherwise. Having duly delivered or transferred the cargo to its
co-respondent PAL on October 27, 1976 at 2:00 P.M., as supported by the TWA Transfer Manifest,
TWA faithfully complied with its obligation under the airway bill. Said faithful compliance was not
affected by the fact that the remains were shipped on an earlier Vlight as there was no Vixed time for
completion of carriage stipulated on. Moreover, the carrier did not undertake to carry the cargo
aboard any speciVied aircraft, in view of the condition on the back of the airway bill which provides:
CONDITIONS OF CONTRACT
xxx xxx xxx
It is agreed that no time is Vixed for the completion of carriage hereunder and that
Carrier may without notice substitute alternate carriers or aircraft. Carrier assumes
no obligation to carry the goods by any speciVied aircraft or over any particular route
or routes or to make connection at any point according to any particular schedule,
and Carrier is hereby authorized to select, or deviate from the route or routes of
shipment, notwithstanding that the same may be stated on the face hereof. The
shipper guarantees payment of all charges and advances. 48
Hence, when respondent TWA shipped the body on earlier Vlight and on a different aircraft, it was
acting well within its rights. We Vind this argument tenable.
The contention that there was contractual breach on the part of private respondents is founded on
the postulation that there was ambiguity in the terms of the airway bill, hence petitioners'
insistence on the application of the rules on interpretation of contracts and documents. We Vind no
such ambiguity. The terms are clear enough as to preclude the necessity to probe beyond the
apparent intendment of the contractual provisions.
The hornbook rule on interpretation of contracts consecrates the primacy of the intention of the
parties, the same having the force of law between them. When the terms of the agreement are clear
and explicit, that they do not justify an attempt to read into any alleged intention of the parties, the
terms are to be understood literally just as they appear on the face of the contract. 49 The various
stipulations of a contract shall be interpreted together 50 and such a construction is to be adopted as
will give effect to all provisions thereof. 51 A contract cannot be construed by parts, but its clauses
should be interpreted in relation to one another. The whole contract must be interpreted or read
together in order to arrive at its true meaning. Certain stipulations cannot be segregated and then
made to control; neither do particular words or phrases necessarily determine the character of a
contract. The legal effect of the contract is not to be determined alone by any particular provision
disconnected from all others, but in the ruling intention of the parties as gathered from all the
language they have used and from their contemporaneous and subsequent acts. 52
Turning to the terms of the contract at hand, as presented by PAL Air Waybill No. 079-01180454,
respondent court approvingly quoted the trial court's disquisition on the aforequoted condition
appearing on the reverse side of the airway bill and its disposition of this particular assigned error:
The foregoing stipulation fully answers plaintiffs' objections to the one-day delay
and the shipping of the remains in TWA Flight 603 instead of TWA Flight 131. Under
the stipulation, parties agreed that no time was Vixed to complete the contract of
carriage and that the carrier may, without notice, substitute alternate carriers or
aircraft. The carrier did not assume the obligation to carry the shipment on any
speciVied aircraft.
xxx xxx xxx
Furthermore, contrary to the claim of plaintiffs-appellants, the conditions of the Air
Waybill are big enough to be read and noticed. Also, the mere fact that the cargo in
question was shipped in TWA Flight 603, a Vlight earlier on the same day than TWA
Flight 131, did not in any way cause or add to the one-day delay complained of and/
or the switching or mix-up of the bodies. 53
Indubitably, that private respondent can use substitute aircraft even without notice and without the
assumption of any obligation whatsoever to carry the goods on any speciVied aircraft is clearly
sanctioned by the contract of carriage as speciVically provided for under the conditions thereof.
Petitioners' invocation of the interpretative rule in the Rules of Court that written words control
printed words in documents, 54 to bolster their assertion that the typewritten provisions regarding
the routing and Vlight schedule prevail over the printed conditions, is tenuous. Said rule may be
considered only when there is inconsistency between the written and printed words of the contract.
As previously stated, we Vind no ambiguity in the contract subject of this case that would call for the
application of said rule. In any event, the contract has provided for such a situation by explicitly
stating that the above condition remains effective "notwithstanding that the same (Vixed time for
completion of carriage, speciVied aircraft, or any particular route or schedule) may be stated on the
face hereof." While petitioners hinge private respondents' culpability on the fact that the carrier
"certiVies goods described below were received for carriage," they may have overlooked that the
statement on the face of the airway bill properly and completely reads
Carrier certiVies goods described below were received for carriage subject to the
Conditions on the reverse hereof the goods then being in apparent good order and
condition except as noted hereon. 55 (Emphasis ours.)
Private respondents further aptly observe that the carrier's certiVication regarding receipt of the
goods for carriage "was of a smaller print than the condition of the Air Waybill, including Condition
No. 5 and thus if plaintiffs-appellants had recognized the former, then with more reason they
were aware of the latter. 56
In the same vein, it would also be incorrect to accede to the suggestion of petitioners that the
typewritten speciVications of the Vlight, routes and dates of departures and arrivals on the face of the
airway bill constitute a special contract which modiVies the printed conditions at the back thereof.
We reiterate that typewritten provisions of the contract are to be read and understood subject to
and in view of the printed conditions, fully reconciling and giving effect to the manifest intention of
the parties to the agreement.
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. 57 But where a carrier has made an express contract to transport and deliver property
within a speciVied time, it is bound to fulVill its contract and is liable for any delay, no matter from
what cause it may have arisen. 58 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. 59
Echoing the Vindings 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 speciVied aircraft or on a speciVied 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 speciVic contract entered into by the
parties (Mendoza vs. PAL, 90 Phil. 836).
There is no showing by plaintiffs that such a special or speciVic 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.60
Also, the theory of petitioners that the speciVication of the Vlights and dates of departure and arrivals
constitute a special contract that could prevail over the printed stipulations at the back of the
airway bill is vacuous. To countenance such a postulate would unduly burden the common carrier
for that would have the effect of unilaterally transforming every single bill of lading or trip ticket
into a special contract by the simple expedient of Villing it up with the particulars of the Vlight, trip or
voyage, and thereby imposing upon the carrier duties and/or obligations which it may not have
been ready or willing to assume had it been timely, advised thereof.
Neither does the fact that the challenged condition No. 5 was printed at the back of the airway bill
militate against its binding effect on petitioners as parties to the contract, for there were sufVicient
indications on the face of said bill that would alert them to the presence of such additional condition
to put them on their guard. Ordinary prudence on the part of any person entering or contemplating
to enter into a contract would prompt even a cursory examination of any such conditions, terms
and/or stipulations.
There is a holding in most jurisdictions that the acceptance of a bill of lading without dissent raises
a presumption that all terms therein were brought to the knowledge of the shipper and agreed to by
him, and in the absence of fraud or mistake, he is estopped from thereafter denying that he assented
to such terms. This rule applies with particular force where a shipper accepts a bill of lading with
full knowledge of its contents, and acceptance under such circumstances makes it a binding
contract. In order that any presumption of assent to a stipulation in a bill of lading limiting the
liability of a carrier may arise, it must appear that the clause containing this exemption from
liability plainly formed a part of the contract contained in the bill of lading. A stipulation printed on
the back of a receipt or bill of lading or on papers attached to such receipt will be quite as effective
as if printed on its face, if it is shown that the consignor knew of its terms. Thus, where a shipper
accepts a receipt which states that its conditions are to be found on the back, such receipt comes
within the general rule, and the shipper is held to have accepted and to be bound by the conditions
there to be found. 61
Granting arguendo that Condition No. 5 partakes of the nature of a contract of adhesion and as such
must be construed strictly against the party who drafted the same or gave rise to any ambiguity
therein, it should be borne in mind that a contract of adhesion may be struck down as void and
unenforceable, for being subversive of public policy, only when the weaker party is imposed upon in
dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving
it, completely deprived of the opportunity to bargain on equal footing. 62However, Ong Yiu vs. Court
of Appeals, et al 63 instructs us that contracts of adhesion are not entirely prohibited. The one who
adheres to the contract is in reality free to reject it entirely; if he adheres, be gives his consent.
Accordingly, petitioners, far from being the weaker party in this situation, duly signiVied their
presumed assent to all terms of the contract through their acceptance of the airway bill and are
consequently bound thereby. It cannot be gainsaid that petitioners' were not without several
choices as to carriers in Chicago with its numerous airways and airliner servicing the same.
We wish to allay petitioners' apprehension that Condition No. 5 of the airway bill is productive of
mischief as it would validate delay in delivery, sanction violations of contractual obligations with
impunity or put a premium on breaches of contract.
Just because we have said that condition No. 5 of the airway bill is binding upon the parties to and
fully operative in this transaction, it does not mean, and let this serve as fair warning to respondent
carriers, that they can at all times whimsically seek refuge from liability in the exculpatory
sanctuary of said Condition No. 5 or arbitrarily vary routes, Vlights and schedules to the prejudice of
their customers. This condition only serves to insulate the carrier from liability in those instances
when changes in routes, Vlights and schedules are clearly justiVied by the peculiar circumstances of a
particular case, or by general transportation practices, customs and usages, or by contingencies or
emergencies in aviation such as weather turbulence, mechanical failure, requirements of national
security and the like. And even as it is conceded that speciVic routing and other navigational
arrangements for a trip, Vlight or voyage, or variations therein, generally lie within the discretion of
the carrier in the absence of speciVic routing instructions or directions by the shipper, it is plainly
incumbent upon the carrier to exercise its rights with due deference to the rights, interests and
convenience of its customers.
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. 64 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, 65 a conclusion concurred in by
respondent court and which we are not inclined to disturb.
We are further convinced that when TWA opted to ship the remains of Crispina Saludo on an earlier
Vlight, it did so in the exercise of sound discretion and with reasonable prudence, as shown by the
explanation of its counsel in his letter of February 19, 1977 in response to petitioners' demand
letter:
Investigation of TWA's handling of this matter reveals that although the shipment
was scheduled on TWA Flight 131 of October 27, 1976, it was actually boarded on
TWA Flight 603 of the same day, approximately 10 hours earlier, in order to assure
that the shipment would be received in San Francisco in sufVicient time for transfer
to PAL. This transfer was effected in San Francisco at 2:00 P.M. on October 27,
1976. 66
Precisely, private respondent TWA knew of the urgency of the shipment by reason of this notation
on the lower portion of the airway bill: "All documents have been certiVied. Human remains of
Cristina (sic) Saludo. Please return bag Virst available Vlight to SFO." Accordingly, TWA took it upon
itself to carry the remains of Crispina Saludo on an earlier Vlight, which we emphasize it could do
under the terms of the airway bill, to make sure that there would be enough time for loading said
remains on the transfer Vlight on board PAL.
III. Petitioners challenge the validity of respondent court's Vinding that private respondents are not
liable for tort on account of the humiliating, arrogant and indifferent acts of their ofVicers and
personnel. They posit that since their mother's remains were transported ten hours earlier than
originally scheduled, there was no reason for private respondents' personnel to disclaim knowledge
of the arrival or whereabouts of the same other than their sheer arrogance, indifference and
extreme insensitivity to the feelings of petitioners. Moreover, being passengers and not merely
consignors of goods, petitioners had the right to be treated with courtesy, respect, kindness and due
consideration.
In riposte, TWA claims that its employees have always dealt politely with all clients, customers and
the public in general. PAL, on the other hand, declares that in the performance of its obligation to
the riding public, other customers and clients, it has always acted with justice, honesty, courtesy and
good faith.
Respondent appellate court found merit in and reproduced the trial court's refutation of this
assigned error:
About the only evidence of plaintiffs that may have reference to the manner with
which the personnel of defendants treated the two plaintiffs at the San Francisco
Airport are the following pertinent portions of Maria Saludo's testimony:
Q When you arrived there, what did you do, if any?
A I immediately went to the TWA counter and I inquired about
whether my mother was there or if' they knew anything about it.
Q What was the answer?
A They said they do not know. So, we waited.
Q About what time was that when you reached San Francisco from
Chicago?
A I think 5 o'clock. Somewhere around that in the afternoon.
Q You made inquiry it was immediately thereafter?
A Right after we got off the plane.
Q Up to what time did you stay in the airport to wait until the TWA
people could tell you the whereabouts?
A Sorry, Sir, but the TWA did not tell us anything. We stayed there
until about 9 o'clock. They have not heard anything about it. They did
not say anything.
Q Do you want to convey to the Court that from 5 up to 9 o'clock in
the evening you yourself went back to the TWA and they could not
tell you where the remains of your mother were?
A Yes sir.
Q And after nine o'clock, what did you do?
A I told my brother my Mom was supposed to be on the Philippine
Airlines Vlight. "Why don't" we check with PAL instead to see if she
was there?" We tried to comfort each other. I told him anyway that
was a shortest Vlight from Chicago to California. We will be with our
mother on this longer Vlight. So, we checked with the PAL.
Q What did you Vind?
A We learned, Yes, my Mom would be on the Vlight.
Q Who was that brother?
A Saturnino Saludo.
Q And did you Vind what was your Vlight from San Francisco to the
Philippines?
A I do not know the number. It was the evening Vlight of the
Philippine Airline(s) from San Francisco to Manila.
Q You took that Vlight with your mother?
A We were scheduled to, Sir.
Q Now, you could not locate the remains of your mother in San
Francisco could you tell us what did you feel?
A After we were told that my mother was not there?
Q After you learned that your mother could not Vly with you from
Chicago to California?
A Well, I was very upset. Of course, I wanted the conVirmation that
my mother was in the West Coast. The Vliqht was about 5 hours from
Chicago to California. We waited anxiously all that time on the plane.
I wanted to be assured about my mother's remains. But there was
nothing and we could not get any assurance from anyone about it.
Q Your feeling when you reached San Francisco and you could not
Vind out from the TWA the whereabouts of the remains, what did you
feel?
A Something nobody would be able to describe unless he
experiences it himself. It is a kind of panic. I think it's a feeling you
are about to go crazy. It is something I do not want to live through
again. (Inting, t.s.n., Aug. 9, 1983, pp. 14-18).
The foregoing does not show any humiliating or arrogant manner with which the
personnel of both defendants treated the two plaintiffs. Even their alleged
indifference is not clearly established. The initial answer of the TWA personnel at
the counter that they did not know anything about the remains, and later, their
answer that they have not heard anything about the remains, and the inability of the
TWA counter personnel to inform the two plaintiffs of the whereabouts of the
remains, cannot be said to be total or complete indifference to the said plaintiffs. At
any rate, it is any rude or discourteous conduct, malfeasance or neglect, the use of
abusive or insulting language calculated to humiliate and shame passenger or had
faith by or on the part of the employees of the carrier that gives the passenger an
action for damages against the carrier (Zulueta vs. Pan American World Airways, 43
SCRA 397; Air France vs. Carrascoso, et al., 18 SCRA 155; Lopez, et al. vs. Pan
American World Airways, 16 SCRA 431; Northwest Airlines, Inc. vs. Cuenca, 14 SCRA
1063), and none of the above is obtaining in the instant case. 67
We stand by respondent court's Vindings on this point, but only to the extent where it holds that the
manner in which private respondent TWA's employees dealt with petitioners was not grossly
humiliating, arrogant or indifferent as would assume the proportions of malice or bad faith and lay
the basis for an award of the damages claimed. It must however, be pointed out that the lamentable
actuations of respondent TWA's employees leave much to be desired, particularly so in the face of
petitioners' grief over the death of their mother, exacerbated by the tension and anxiety wrought by
the impasse and confusion over the failure to ascertain over an appreciable period of time what
happened to her remains.
Airline companies are hereby sternly admonished that it is their duty not only to cursorily instruct
but to strictly require their personnel to be more accommodating towards customers, passengers
and the general public. After all, common carriers such as airline companies are in the business of
rendering public service, which is the primary reason for their enfranchisement and recognition in
our law. Because the passengers in a contract of carriage do not contract merely for transportation,
they have a right to be treated with kindness, respect, courtesy and consideration. 68 A contract to
transport passengers is quite different in kind and degree from any other contractual relation, and
generates a relation attended with public duty. The operation of a common carrier is a business
affected with public interest and must be directed to serve the comfort and convenience of
passengers. 69 Passengers are human beings with human feelings and emotions; they should not be
treated as mere numbers or statistics for revenue.
The records reveal that petitioners, particularly Maria and Saturnino Saludo, agonized for nearly
Vive hours, over the possibility of losing their mother's mortal remains, unattended to and without
any assurance from the employees of TWA that they were doing anything about the situation. This is
not to say that petitioners were to be regaled with extra special attention. They were, however,
entitled to the understanding and humane consideration called for by and commensurate with the
extraordinary diligence required of common carriers, and not the cold insensitivity to their
predicament. It is hard to believe that the airline's counter personnel were totally helpless about the
situation. Common sense would and should have dictated that they exert a little extra effort in
making a more extensive inquiry, by themselves or through their superiors, rather than just shrug
off the problem with a callous and uncaring remark that they had no knowledge about it. With all
the modern communications equipment readily available to them, which could have easily
facilitated said inquiry and which are used as a matter of course by airline companies in their daily
operations, their apathetic stance while not legally reprehensible is morally deplorable.
Losing a loved one, especially one's, parent, is a painful experience. Our culture accords the
tenderest human feelings toward and in reverence to the dead. That the remains of the deceased
were subsequently delivered, albeit belatedly, and eventually laid in her Vinal resting place is of little
consolation. The imperviousness displayed by the airline's personnel, even for just that fraction of
time, was especially condemnable particularly in the hour of bereavement of the family of Crispina
Saludo, intensiVied by anguish due to the uncertainty of the whereabouts of their mother's remains.
Hence, it is quite apparent that private respondents' personnel were remiss in the observance of
that genuine human concern and professional attentiveness required and expected of them.
The foregoing observations, however, do not appear to be applicable or imputable to respondent
PAL or its employees. No attribution of discourtesy or indifference has been made against PAL by
petitioners and, in fact, petitioner Maria Saludo testiVied that it was to PAL that they repaired after
failing to receive proper attention from TWA. It was from PAL that they received conVirmation that
their mother's remains would be on the same Vlight to Manila with them.
We Vind the following substantiation on this particular episode from the deposition of Alberto A.
Lim, PAL's cargo supervisor earlier adverted to, regarding their investigation of and the action taken
on learning of petitioner's problem:
ATTY. ALBERTO C. MENDOZA:
Yes.
Mr. Lim, what exactly was your procedure adopted in your so called
investigation?
ALBERTO A. LIM:
I called the lead agent on duty at that time and requested for a copy
of airway bill, transfer manifest and other documents concerning the
shipment.
ATTY ALBERTO C. MENDOZA:
Then, what?
ALBERTO A. LIM:
They proceeded to analyze exactly where PAL failed, if any, in
forwarding the human remains of Mrs. Cristina (sic) Saludo. And I
found out that there was not (sic) delay in shipping the remains of
Mrs. Saludo to Manila. Since we received the body from American
Airlines on 28 October at 7:45 and we expedited the shipment so
that it could have been loaded on our Vlight leaving at 9:00 in the
evening or just barely one hour and 15 minutes prior to the
departure of the aircraft. That is so (sic) being the case, I reported to
Manila these circumstances. 70
IV. Finally, petitioners insist, as a consequence of the delay in the shipment of their mother's
remains allegedly caused by wilful contractual breach, on their entitlement to actual, moral and
exemplary damages as well as attorney's fees, litigation expenses, and legal interest.
The uniform decisional tenet in our jurisdiction bolds that moral damages may be awarded for
wilful or fraudulent breach of contract 71 or when such breach is attended by malice or bad
faith. 72 However, in the absence of strong and positive evidence of fraud, malice or bad faith, said
damages cannot be awarded. 73 Neither can there be an award of exemplary damages 74 nor of
attorney's fees 75 as an item of damages in the absence of proof that defendant acted with malice,
fraud or bad faith.
The censurable conduct of TWA's employees cannot, however, be said to have approximated the
dimensions of fraud, malice or bad faith. It can be said to be more of a lethargic reaction produced
and engrained in some people by the mechanically routine nature of their work and a racial or
societal culture which stultiVies what would have been their accustomed human response to a
human need under a former and different ambience.
Nonetheless, the facts show that petitioners' right to be treated with due courtesy in accordance
with the degree of diligence required by law to be exercised by every common carrier was violated
by TWA and this entitles them, at least, to nominal damages from TWA alone. Articles 2221 and
2222 of the Civil Code make it clear that nominal damages are not intended for indemniVication of
loss suffered but for the vindication or recognition of a right violated of invaded. They are
recoverable where some injury has been done but the amount of which the evidence fails to show,
the assessment of damages being left to the discretion of the court according to the circumstances
of the case. 76 In the exercise of our discretion, we Vind an award of P40,000.00 as nominal damages
in favor of, petitioners to be a reasonable amount under the circumstances of this case.
WHEREFORE, with the modiVication that an award of P40,000.00 as and by way of nominal damages
is hereby granted in favor of petitioners to be paid by respondent Trans World Airlines, the
appealed decision is AFFIRMED in all other respects.
SO ORDERED.
G.R. No. L-27010 April 30, 1969
MARLENE DAUDEN-HERNAEZ, petitioner,
vs.
HON. WALFRIDO DE LOS ANGELES, Judge of the Court of First Instance of Quezon City,
HOLLYWOOD FAR EAST PRODUCTIONS, INC., and RAMON VALENZUELA, respondents.
R. M. Coronado and Associates for petitioner.
Francisco Lavides for respondent.
REYES, J.B.L., Acting C.J.:
Petition for a writ of certiorari to set aside certain orders of the Court of First Instance of Quezon
City (Branch IV), in its Civil Case No. Q-10288, dismissing a complaint for breach of contract and
damages, denying reconsideration, refusing to admit an amended complaint, and declaring the
dismissal Vinal and unappealable.
The essential facts are the following:
Petitioner Marlene Dauden-Hernaez, a motion picture actress, had Viled a complaint against herein
private respondents, Hollywood Far East Productions, Inc., and its President and General Manager,
Ramon Valenzuela, to recover P14,700.00 representing a balance allegedly due said petitioner for
her services as leading actress in two motion pictures produced by the company, and to recover
damages. Upon motion of defendants, the respondent court (Judge Walfrido de los Angeles
presiding) ordered the complaint dismissed, mainly because the "claim of plaintiff was not
evidenced by any written document, either public or private", and the complaint "was defective on
its face" for violating Articles 1356 and 1358 of the Civil, Code of the Philippines, as well as for
containing defective allege, petitions. Plaintiff sought reconsideration of the dismissal and for
admission of an amended complaint, attached to the motion. The court denied reconsideration and
the leave to amend; whereupon, a second motion for reconsideration was Viled. Nevertheless, the
court also denied it for being pro forma, as its allegations "are, more or less, the same as the Virst
motion", and for not being accompanied by an afVidavit of merits, and further declared the dismissal
Vinal and unappealable. In view of the attitude of the Court of First Instance, plaintiff resorted to this
Court.
The answer sets up the defense that "the proposed amended complaint did not vary in any material
respect from the original complaint except in minor details, and suffers from the same vital defect of
the original complaint", which is the violation of Article 1356 of the Civil Code, in that the contract
sued upon was not alleged to be in writing; that by Article 1358 the writing was absolute and
indispensable, because the amount involved exceeds Vive hundred pesos; and that the second
motion for reconsideration did not interrupt the period for appeal, because it was not served on
three days' notice.
We shall take up Virst the procedural question. It is a well established rule in our jurisprudence that
when a court sustains a demurrer or motion to dismiss it is error for the court to dismiss the
complaint without giving the party plaintiff an opportunity to amend his complaint if he so
chooses. 1 Insofar as the Virst order of dismissal (Annex D, Petition) did not provide that the same
was without prejudice to amendment of the complaint, or reserve to the plaintiff the right to amend
his complaint, the said order was erroneous; and this error was compounded when the motion to
accept the amended complaint was denied in the subsequent order of 3 October 1966 (Annex F,
Petition). Hence, the petitioner-plaintiff was within her rights in Viling her so-called second motion
for reconsideration, which was actually a Virst motion against the refusal to admit the amended
complaint.
It is contended that the second motion for reconsideration was merely pro forma and did not
suspend the period to appeal from the Virst order of dismissal (Annex D) because (1) it merely
reiterated the Virst motion for reconsideration and (2) it was Viled without giving the counsel for
defendant-appellee the 3 days' notice provided by the rules. This argument is not tenable, for the
reason that the second motion for reconsideration was addressed to the court' refusal to allow an
amendment to the original complaint, and this was a ground not invoked in the Virst motion for
reconsideration. Thus, the second motion to reconsider was really not pro forma, as it was based on
a different ground, even if in its Virst part it set forth in greater detail the arguments against the
correctness of the Virst order to dismiss. And as to the lack of 3 days' notice, the record shows that
appellees had Viled their opposition (in detail) to the second motion to reconsider (Answer, Annex
4); so that even if it were true that respondents were not given the full 3 days' notice they were not
deprived of any substantial right. Therefore, the claim that the Virst order of dismissal had become
Vinal and unappealable must be overruled.
It is well to observe in this regard that since a motion to dismiss is not a responsive pleading, the
plaintiff-petitioner was entitled as of right to amend the original dismissed complaint. In Paeste vs.
Jaurigue 94 Phil. 179, 181, this Court ruled as follows:
Appellants contend that the lower court erred in not admitting their amended complaint
and in holding that their action had already prescribed. Appellants are right on both counts.
Amendments to pleadings are favored and should be liberally allowed in the furtherance of
justice. (Torres vs. Tomacruz, 49 Phil. 913). Moreover, under section 1 of Rule 17, Rules of
Court, a party may amend his pleading once as a matter of course, that is, without leave of
court, at any time before a responsive pleading is served. A motion to dismiss is not a
"responsive pleading". (Moran on the Rules of Court, vol. 1, 1952, ed., p. 376). As plaintiffs
amended their complaint before it was answered, the motion to admit the amendment
should not have been denied. It is true that the amendment was presented after the original
complaint had been ordered dismissed. But that order was not yet Vinal for it was still under
reconsideration.
The foregoing observations leave this Court free to discuss the main issue in this petition. Did the
court below abuse its discretion in ruling that a contract for personal services involving more than
P500.00 was either invalid of unenforceable under the last paragraph of Article 1358 of the Civil
Code of the Philippines?
We hold that there was abuse, since the ruling herein contested betrays a basic and lamentable
misunderstanding of the role of the written form in contracts, as ordained in the present Civil Code.
In the matter of formalities, the contractual system of our Civil Code still follows that of the Spanish
Civil Code of 1889 and of the "Ordenamiento de Alcala" 2 of upholding the spirit and intent of the
parties over formalities: hence, in general, contracts are valid and binding from their perfection
regardless of form whether they be oral or written. This is plain from Articles 1315 and 1356 of the
present Civil Code. Thus, the Virst cited provision prescribes:
ART. 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulVillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and
law. (Emphasis supplied)
Concordantly, the Virst part of Article 1356 of the Code Provides:
ART. 1356. Contracts shall be obligatory in whatever form they may have been entered into,
provided all the essential requisites for their validity are present.... (Emphasis supplied)
These essential requisites last mentioned are normally (1) consent (2) proper subject matter, and
(3) consideration or causa for the obligation assumed (Article 1318). 3 So that once the three
elements exist, the contract is generally valid and obligatory, regardless of the form, oral or written,
in which they are couched.lawphi1.nt
To this general rule, the Code admits exceptions, set forth in the second portion of Article 1356:
However, when the law requires that a contract be in some form in order that it may be valid
or enforceable, or that a contract be proved in a certain way, that requirement is absolute
and indispensable....
It is thus seen that to the general rule that the form (oral or written) is irrelevant to the binding
effect inter partes of a contract that possesses the three validating elements of consent, subject
matter, and causa, Article 1356 of the Code establishes only two exceptions, to wit:
(a) Contracts for which the law itself requires that they be in some particular form (writing) in
order to make them valid and enforceable (the so-called solemn contracts). Of these the typical
example is the donation of immovable property that the law (Article 749) requires to be embodied
in a public instrument in order "that the donation may be valid", i.e., existing or binding. Other
instances are the donation of movables worth more than P5,000.00 which must be in writing,
"otherwise the donation shall be void" (Article 748); contracts to pay interest on loans (mutuum)
that must be "expressly stipulated in writing" (Article 1956); and the agreements contemplated by
Article 1744, 1773, 1874 and 2134 of the present Civil Code.
(b) Contracts that the law requires to be proved by some writing (memorandum) of its terms, as in
those covered by the old Statute of Frauds, now Article 1403(2) of the Civil Code. Their existence
not being provable by mere oral testimony (unless wholly or partly executed), these contracts are
exceptional in requiring a writing embodying the terms thereof for their enforceability by action in
court.
The contract sued upon by petitioner herein (compensation for services) does not come under
either exception. It is true that it appears included in Article 1358, last clause, providing that "all
other contracts where the amount involved exceeds Vive hundred pesos must appear in writing,
even a private one." But Article 1358 nowhere provides that the absence of written form in this case
will make the agreement invalid or unenforceable. On the contrary, Article 1357 clearly indicates
that contracts covered by Article 1358 are binding and enforceable by action or suit despite the
absence of writing.
ART. 1357. If the law requires a document or other special form, as in the acts and contracts
enumerated in the following article, the contracting parties may compel each other to
observe that form, once the contract has been perfected. This right may be
exercised simultaneously with the action the contract. (Emphasis supplied) .
It thus becomes inevitable to conclude that both the court a quo as well as the private respondents
herein were grossly mistaken in holding that because petitioner Dauden's contract for services was
not in writing the same could not be sued upon, or that her complaint should be dismissed for
failure to state a cause of action because it did not plead any written agreement.
The basic error in the court's decision lies in overlooking that in our contractual system it is not
enough that the law should require that the contract be in writing, as it does in Article 1358. The
law must further prescribe that without the writing the contract is not valid or not enforceable by
action.
WHEREFORE, the order dismissing the complaint is set aside, and the case is ordered remanded to
the court of origin for further proceedings not at variance with this decision.
Costs to be solidarity paid by private respondents Hollywood Far East Productions, Inc., and Ramon
Valenzuela.
G.R. No. L-25599 April 4, 1968
HOME INSURANCE COMPANY, plaintiff-appellee,
vs.
AMERICAN STEAMSHIP AGENCIES, INC. and LUZON STEVEDORING CORPORATION, defendants,
AMERICAN STEAMSHIP AGENCIES, INC., defendant-appellant.
William H. Quasha and Associates for plaintiff-appellee.
Ross, Selph, Salcedo and Associates for defendant-appellant.
BENGZON, J.P., J.:
"Consorcio Pesquero del Peru of South America" shipped freight pre-paid at Chimbate, Peru, 21,740
jute bags of Peruvian Vish meal through SS Crowborough, covered by clean bills of lading Numbers 1
and 2, both dated January 17, 1963. The cargo, consigned to San Miguel Brewery, Inc., now San
Miguel Corporation, and insured by Home Insurance Company for $202,505, arrived in Manila on
March 7, 1963 and was discharged into the lighters of Luzon Stevedoring Company. When the cargo
was delivered to consignee San Miguel Brewery Inc., there were shortages amounting to
P12,033.85, causing the latter to lay claims against Luzon Stevedoring Corporation, Home Insurance
Company and the American Steamship Agencies, owner and operator of SS Crowborough.
Because the others denied liability, Home Insurance Company paid the consignee P14,870.71 the
insurance value of the loss, as full settlement of the claim. Having been refused reimbursement by
both the Luzon Stevedoring Corporation and American Steamship Agencies, Home Insurance
Company, as subrogee to the consignee, Viled against them on March 6, 1964 before the Court of
First Instance of Manila a complaint for recovery of P14,870.71 with legal interest, plus attorney's
fees.
In answer, Luzon Stevedoring Corporation alleged that it delivered with due diligence the goods in
the same quantity and quality that it had received the same from the carrier. It also claimed that
plaintiff's claim had prescribed under Article 366 of the Code of Commerce stating that the claim
must be made within 24 hours from receipt of the cargo.
American Steamship Agencies denied liability by alleging that under the provisions of the Charter
party referred to in the bills of lading, the charterer, not the shipowner, was responsible for any loss
or damage of the cargo. Furthermore, it claimed to have exercised due diligence in stowing the
goods and that as a mere forwarding agent, it was not responsible for losses or damages to the
cargo.
On November 17, 1965, the Court of First Instance, after trial, absolved Luzon Stevedoring
Corporation, having found the latter to have merely delivered what it received from the carrier in
the same condition and quality, and ordered American Steamship Agencies to pay plaintiff
P14,870.71 with legal interest plus P1,000 attorney's fees. Said court cited the following grounds:
(a) The non-liability claim of American Steamship Agencies under the charter party contract
is not tenable because Article 587 of the Code of Commerce makes the ship agent also civilly
liable for damages in favor of third persons due to the conduct of the captain of the carrier;
(b) The stipulation in the charter party contract exempting the owner from liability is
against public policy under Article 1744 of the Civil Code;
(c) In case of loss, destruction or deterioration of goods, common carriers are presumed at
fault or negligent under Article 1735 of the Civil Code unless they prove extraordinary
diligence, and they cannot by contract exempt themselves from liability resulting from their
negligence or that of their servants; and
(d) When goods are delivered to the carrier in good order and the same are in bad order at
the place of destination, the carrier is prima facie liable.
Disagreeing with such judgment, American Steamship Agencies appealed directly to Us. The appeal
brings forth for determination this legal issue: Is the stipulation in the charter party of the owner's
non-liability valid so as to absolve the American Steamship Agencies from liability for loss?
The bills of lading,1 covering the shipment of Peruvian Vish meal provide at the back thereof that the
bills of lading shall be governed by and subject to the terms and conditions of the charter party, if
any, otherwise, the bills of lading prevail over all the agreements.2 On the of the bills are stamped
"Freight prepaid as per charter party. Subject to all terms, conditions and exceptions of charter
party dated London, Dec. 13, 1962."
A perusal of the charter party3 referred to shows that while the possession and control of the ship
were not entirely transferred to the charterer,4 the vessel was chartered to its full and complete
capacity (Exh. 3). Furthermore, the, charter had the option to go north or south or vice-versa,
5 loading, stowing and discharging at its risk and expense.6 Accordingly, the charter party contract is

one of affreightment over the whole vessel rather than a demise. As such, the liability of the
shipowner for acts or negligence of its captain and crew, would remain in the absence of stipulation.
Section 2, paragraph 2 of the charter party, provides that the owner is liable for loss or damage to
the goods caused by personal want of due diligence on its part or its manager to make the vessel in
all respects seaworthy and to secure that she be properly manned, equipped and supplied or by the
personal act or default of the owner or its manager. Said paragraph, however, exempts the owner of
the vessel from any loss or damage or delay arising from any other source, even from the neglect or
fault of the captain or crew or some other person employed by the owner on board, for whose acts
the owner would ordinarily be liable except for said paragraph..
Regarding the stipulation, the Court of First Instance declared the contract as contrary to Article
587 of the Code of Commerce making the ship agent civilly liable for indemnities suffered by third
persons arising from acts or omissions of the captain in the care of the goods and Article 1744 of
the Civil Code under which a stipulation between the common carrier and the shipper or owner
limiting the liability of the former for loss or destruction of the goods to a degree less than
extraordinary diligence is valid provided it be reasonable, just and not contrary to public policy. The
release from liability in this case was held unreasonable and contrary to the public policy on
common carriers.
The provisions of our Civil Code on common carriers were taken from Anglo-American law.7 Under
American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a
special person only, becomes a private carrier.8 As a private carrier, a stipulation exempting the
owner from liability for the negligence of its agent is not against public policy,9 and is deemed valid.
Such doctrine We Vind reasonable. The Civil Code provisions on common carriers should not be
applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter
party absolving the owner from liability for loss due to the negligence of its agent would be void
only if the strict public policy governing common carriers is applied. Such policy has no force where
the public at large is not involved, as in the case of a ship totally chartered for the use of a single
party.
And furthermore, in a charter of the entire vessel, the bill of lading issued by the master to the
charterer, as shipper, is in fact and legal contemplation merely a receipt and a document of title not
a contract, for the contract is the charter party.10 The consignee may not claim ignorance of said
charter party because the bills of lading expressly referred to the same. Accordingly, the consignees
under the bills of lading must likewise abide by the terms of the charter party. And as stated,
recovery cannot be had thereunder, for loss or damage to the cargo, against the shipowners, unless
the same is due to personal acts or negligence of said owner or its manager, as distinguished from
its other agents or employees. In this case, no such personal act or negligence has been proved.
WHEREFORE, the judgment appealed from is hereby reversed and appellant is absolved from
liability to plaintiff. No costs. So ordered.
G.R. No. 131621 September 28, 1999
LOADSTAR SHIPPING CO., INC., petitioner,
vs.
COURT OF APPEALS and THE MANILA INSURANCE CO., INC., respondents.

DAVIDE, JR., C.J.:
Petitioner Loadstar Shipping Co., Inc. (hereafter LOADSTAR), in this petition for review
on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, seeks to reverse and set aside the
following: (a) the 30 January 1997 decision 1 of the Court of Appeals in CA-G.R. CV No. 36401, which
afVirmed the decision of 4 October 1991 2 of the Regional Trial Court of Manila, Branch 16, in Civil
Case No. 85-29110, ordering LOADSTAR to pay private respondent Manila Insurance Co. (hereafter
MIC) the amount of P6,067,178, with legal interest from the Viling of the compliant until fully paid,
P8,000 as attorney's fees, and the costs of the suit; and (b) its resolution of 19 November
1997, 3 denying LOADSTAR's motion for reconsideration of said decision.
The facts are undisputed.1wphi1.nt
On 19 November 1984, LOADSTAR received on board its M/V "Cherokee" (hereafter, the vessel) the
following goods for shipment:
a) 705 bales of lawanit hardwood;
b) 27 boxes and crates of tilewood assemblies and the others ;and
c) 49 bundles of mouldings R & W (3) Apitong Bolidenized.
The goods, amounting to P6,067,178, were insured for the same amount with MIC against various
risks including "TOTAL LOSS BY TOTAL OF THE LOSS THE VESSEL." The vessel, in turn, was insured
by Prudential Guarantee & Assurance, Inc. (hereafter PGAI) for P4 million. On 20 November 1984,
on its way to Manila from the port of Nasipit, Agusan del Norte, the vessel, along with its cargo, sank
off Limasawa Island. As a result of the total loss of its shipment, the consignee made a claim with
LOADSTAR which, however, ignored the same. As the insurer, MIC paid P6,075,000 to the insured in
full settlement of its claim, and the latter executed a subrogation receipt therefor.
On 4 February 1985, MIC Viled 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. It also prayed that
PGAI be ordered to pay the insurance proceeds from the loss the vessel directly to MIC, said amount
to be deducted from MIC's claim from LOADSTAR.
In its answer, LOADSTAR denied any liability for the loss of the shipper's goods and claimed that
sinking of its vessel was due to force majeure. PGAI, on the other hand, averred that MIC had no
cause of action against it, LOADSTAR being the party insured. In any event, PGAI was later dropped
as a party defendant after it paid the insurance proceeds to LOADSTAR.
As stated at the outset, the court a quo rendered judgment in favor of MIC, prompting LOADSTAR to
elevate the matter to the court of Appeals, which, however, agreed with the trial court and afVirmed
its decision in toto.
In dismissing LOADSTAR's appeal, the appellate court made the following observations:
1) LOADSTAR cannot be considered a private carrier on the sole
ground that there was a single shipper on that fateful voyage. The
court noted that the charter of the vessel was limited to the ship, but
LOADSTAR retained control over its crew. 4
2) As a common carrier, it is the Code of Commerce, not the Civil
Code, which should be applied in determining the rights and
liabilities of the parties.
3) The vessel was not seaworthy because it was undermanned on the
day of the voyage. If it had been seaworthy, it could have withstood
the "natural and inevitable action of the sea" on 20 November 1984,
when the condition of the sea was moderate. The vessel sank, not
because of force majeure, but because it was not seaworthy.
LOADSTAR'S allegation that the sinking was probably due to the
"convergence of the winds," as stated by a PAGASA expert, was not
duly proven at the trial. The "limited liability" rule, therefore, is not
applicable considering that, in this case, there was an actual Vinding
of negligence on the part of the carrier. 5
4) Between MIC and LOADSTAR, the provisions of the Bill of Lading
do not apply because said provisions bind only the shipper/
consignee and the carrier. When MIC paid the shipper for the goods
insured, it was subrogated to the latter's rights as against the carrier,
LOADSTAR. 6
5) There was a clear breach of the contract of carriage when the
shipper's goods never reached their destination. LOADSTAR's
defense of "diligence of a good father of a family" in the training and
selection of its crew is unavailing because this is not a proper or
complete defense in culpa contractual.
6) "Art. 361 (of the Code of Commerce) has been judicially construed
to mean that when goods are delivered on board a ship in good order
and condition, and the shipowner delivers them to the shipper in bad
order and condition, it then devolves upon the shipowner to both
allege and prove that the goods were damaged by reason of some
fact which legally exempts him from liability." Transportation of the
merchandise at the risk and venture of the shipper means that the
latter bears the risk of loss or deterioration of his goods arising from
fortuitous events, force majeure, or the inherent nature and defects of
the goods, but not those caused by the presumed negligence or fault
of the carrier, unless otherwise proved. 7
The errors assigned by LOADSTAR boil down to a determination of the following issues:
(1) Is the M/V "Cherokee" a private or a common carrier?
(2) Did LOADSTAR observe due and/or ordinary diligence in these
premises.
Regarding the Virst issue, LOADSTAR submits that the vessel was a private carrier because it was not
issued certiVicate of public convenience, it did not have a regular trip or schedule nor a Vixed route,
and there was only "one shipper, one consignee for a special cargo."
In refutation, MIC argues that the issue as to the classiVication of the M/V "Cherokee" was not timely
raised below; hence, it is barred by estoppel. While it is true that the vessel had on board only the
cargo of wood products for delivery to one consignee, it was also carrying passengers as part of its
regular business. Moreover, the bills of lading in this case made no mention of any charter party but
only a statement that the vessel was a "general cargo carrier." Neither was there any "special
arrangement" between LOADSTAR and the shipper regarding the shipment of the cargo. The
singular fact that the vessel was carrying a particular type of cargo for one shipper is not sufVicient
to convert the vessel into a private carrier.
As regards the second error, LOADSTAR argues that as a private carrier, it cannot be presumed to
have been negligent, and the burden of proving otherwise devolved upon MIC. 8
LOADSTAR also maintains that the vessel was seaworthy. Before the fateful voyage on 19 November
1984, the vessel was allegedly dry docked at Keppel Philippines Shipyard and was duly inspected by
the maritime safety engineers of the Philippine Coast Guard, who certiVied that the ship was Vit to
undertake a voyage. Its crew at the time was experienced, licensed and unquestionably competent.
With all these precautions, there could be no other conclusion except that LOADSTAR exercised the
diligence of a good father of a family in ensuring the vessel's seaworthiness.
LOADSTAR further claims that it was not responsible for the loss of the cargo, such loss being due
to force majeure. It points out that when the vessel left Nasipit, Agusan del Norte, on 19 November
1984, the weather was Vine until the next day when the vessel sank due to strong waves. MCI's
witness, Gracelia Tapel, fully established the existence of two typhoons, "WELFRING" and "YOLING,"
inside the Philippine area of responsibility. In fact, on 20 November 1984, signal no. 1 was declared
over Eastern Visayas, which includes Limasawa Island. Tapel also testiVied that the convergence of
winds brought about by these two typhoons strengthened wind velocity in the area, naturally
producing strong waves and winds, in turn, causing the vessel to list and eventually sink.
LOADSTAR goes on to argue that, being a private carrier, any agreement limiting its liability, such as
what transpired in this case, is valid. Since the cargo was being shipped at "owner's risk,"
LOADSTAR was not liable for any loss or damage to the same. Therefore, the Court of Appeals erred
in holding that the provisions of the bills of lading apply only to the shipper and the carrier, and not
to the insurer of the goods, which conclusion runs counter to the Supreme Court's ruling in the case
of St. Paul Fire & Marine Co. v. Macondray & Co., Inc., 9 and National Union Fire Insurance Company of
Pittsburgh v. Stolt-Nielsen Phils., Inc. 10
Finally, LOADSTAR avers that MIC's claim had already prescribed, the case having been instituted
beyond the period stated in the bills of lading for instituting the same suits based upon claims
arising from shortage, damage, or non-delivery of shipment shall be instituted within sixty days
from the accrual of the right of action. The vessel sank on 20 November 1984; yet, the case for
recovery was Viled only on 4 February 1985.
MIC, on the other hand, claims that LOADSTAR was liable, notwithstanding that the loss of the cargo
was due to force majeure, because the same concurred with LOADSTAR's fault or negligence.
Secondly, LOADSTAR did not raise the issue of prescription in the court below; hence, the same
must be deemed waived.
Thirdly, the " limited liability " theory is not applicable in the case at bar because LOADSTAR was at
fault or negligent, and because it failed to maintain a seaworthy vessel. Authorizing the voyage
notwithstanding its knowledge of a typhoon is tantamount to negligence.
We Vind no merit in this petition.
Anent the Virst assigned error, we hold that LOADSTAR is a common carrier. It is not necessary that
the carrier be issued a certiVicate 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.
In support of its position, LOADSTAR relied on the 1968 case of Home Insurance Co. v. American
Steamship Agencies, Inc., 11 where this Court held that a common carrier transporting special cargo
or chartering the vessel to a special person becomes a private carrier that is not subject to the
provisions of the Civil Code. Any stipulation in the charter party absolving the owner from liability
for loss due to the negligence of its agent is void only if the strict policy governing common carriers
is upheld. Such policy has no force where the public at is not involved, as in the case of a ship totally
chartered for the use of a single party. LOADSTAR also cited Valenzuela Hardwood and Industrial
Supply, Inc. v. Court of Appeals 12 and National Steel Corp. v. Court of Appeals, 13 both of which upheld
the Home Insurance doctrine.
These cases invoked by LOADSTAR are not applicable in the case at bar for the simple reason that
the factual settings are different. The records do not disclose that the M/V "Cherokee," on the date
in question, undertook to carry a special cargo or was chartered to a special person only. There was
no charter party. The bills of lading failed to show any special arrangement, but only a general
provision to the effect that the M/V"Cherokee" was a "general cargo carrier." 14 Further, the bare fact
that the vessel was carrying a particular type of cargo for one shipper, which appears to be purely
coincidental, is not reason enough to convert the vessel from a common to a private carrier,
especially where, as in this case, it was shown that the vessel was also carrying passengers.
Under the facts and circumstances obtaining in this case, LOADSTAR Vits the deVinition of a common
carrier under Article 1732 of the Civil Code. In the case of De Guzman v. Court of Appeals, 15 the
Court juxtaposed the statutory deVinition of "common carriers" with the peculiar circumstances of
that case, viz.:
The Civil Code deVines "common carriers" in the following terms:
Art. 1732. Common carriers are persons, corporations, Virms or
associations engaged in the business of carrying or transporting
passengers or goods or both, by land, water, or air for compensation,
offering their services to the public.
The above article makes no distinction between one whose principal business
activity is the carrying of persons or goods or both, and one who does such carrying
only as ancillary activity (in local idiom, as "a sideline". Article 1732 also carefully
avoids making any distinction between a person or enterprise offering
transportation service on a regular or scheduled basis and one offering such service
on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish
between a carrier offering its services to the "general public," i.e., the general
community or population, and one who offers services or solicits business only from
a narrow segment of the general population. We think that Article 1733 deliberately
refrained from making such distinctions.
xxx xxx xxx
It appears to the Court that private respondent is properly characterized as a
common carrier even though he merely "back-hauled" goods for other merchants
from Manila to Pangasinan, although such backhauling was done on a periodic or
occasional rather than regular or scheduled manner, and eventhough private
respondent's principal occupation was not the carriage of goods for others. There is
no dispute that private respondent charged his customers a fee for hauling their
goods; that fee frequently fell below commercial freight rates is not relevant here.
The Court of Appeals referred to the fact that private respondent held no certiVicate
of public convenience, and concluded he was not a common carrier. This is palpable
error. A certiVicate of public convenience is not a requisite for the incurring of
liability under the Civil Code provisions governing common carriers. That liability
arises the moment a person or Virm acts as a common carrier, without regard to
whether or not such carrier has also complied with the requirements of the
applicable regulatory statute and implementing regulations and has been granted a
certiVicate of public convenience or other franchise. To exempt private respondent
from the liabilities of a common carrier because he has not secured the necessary
certiVicate of public convenience, would be offensive to sound public policy; that
would be to reward private respondent precisely for failing to comply with
applicable statutory requirements The business of a common carrier impinges
directly and intimately upon the safety and well being and property of those
members of the general community who happen to deal with such carrier. The law
imposes duties and liabilities upon common carriers for the safety and protection of
those who utilize their services and the law cannot allow a common carrier to
render such duties and liabilities merely facultative by simply failing to obtain the
necessary permits and authorizations.
Moving on to the second assigned error, we Vind that the M/V "Cherokee" was not seaworthy when
it embarked on its voyage on 19 November 1984. The vessel was not even sufViciently manned at
the time. "For a vessel to be seaworthy, it must be adequately equipped for the voyage and manned
with a sufVicient number of competent ofVicers and crew. The failure of a common carrier to
maintain in seaworthy condition its vessel involved in a contract of carriage is a clear breach of its
duty prescribed in Article 1755 of the Civil Code." 16
Neither do we agree with LOADSTAR's argument that the "limited liability" theory should be applied
in this case. The doctrine of limited liability does not apply where there was negligence on the part
of the vessel owner or agent. 17 LOADSTAR was at fault or negligent in not maintaining a seaworthy
vessel and in having allowed its vessel to sail despite knowledge of an approaching typhoon. In any
event, it did not sink because of any storm that may be deemed as force majeure, inasmuch as the
wind condition in the performance of its duties, LOADSTAR cannot hide behind the "limited
liability" doctrine to escape responsibility for the loss of the vessel and its cargo.
LOADSTAR also claims that the Court of Appeals erred in holding it liable for the loss of the goods, in
utter disregard of this Court's pronouncements in St. Paul Fire & Marine Ins. Co. v. Macondray & Co.,
Inc., 18 and National Union Fire Insurance v. Stolt-Nielsen Phils., Inc. 19 It was ruled in these two cases
that after paying the claim of the insured for damages under the insurance policy, the insurer is
subrogated merely to the rights of the assured, that is, it can recover only the amount that may, in
turn, be recovered by the latter. Since the right of the assured in case of loss or damage to the goods
is limited or restricted by the provisions in the bills of lading, a suit by the insurer as subrogee is
necessarily subject to the same limitations and restrictions. We do not agree. In the Virst place, the
cases relied on by LOADSTAR involved a limitation on the carrier's liability to an amount Vixed in the
bill of lading which the parties may enter into, provided that the same was freely and fairly agreed
upon (Articles 1749-1750). On the other hand, the stipulation in the case at bar effectively reduces
the common carrier's liability for the loss or destruction of the goods to a degree less than
extraordinary (Articles 1744 and 1745), that is, the carrier is not liable for any loss or damage to
shipments made at "owner's risk." Such stipulation is obviously null and void for being contrary to
public policy." 20 It has been said:
Three kinds of stipulations have often been made in a bill of lading. The `irst one
exempting the carrier from any and all liability for loss or damage occasioned by its
own negligence. The second is one providing for an unqualiVied limitation of such
liability to an agreed valuation. And the third is one limiting the liability of the
carrier to an agreed valuation unless the shipper declares a higher value and pays a
higher rate of. freight. According to an almost uniform weight of authority, the Virst
and second kinds of stipulations are invalid as being contrary to public policy, but
the third is valid and enforceable. 21
Since the stipulation in question is null and void, it follows that when MIC paid the shipper,
it was subrogated to all the rights which the latter has against the common carrier,
LOADSTAR.
Neither is there merit to the contention that the claim in this case was barred by prescription. MIC's
cause of action had not yet prescribed at the time it was concerned. Inasmuch as neither the Civil
Code nor the Code of Commerce states a speciVic prescriptive period on the matter, the Carriage of
Goods by Sea Act (COGSA) which provides for a one-year period of limitation on claims for loss
of, or damage to, cargoes sustained during transit may be applied suppletorily to the case at bar.
This one-year prescriptive period also applies to the insurer of the goods. 22 In this case, the period
for Viling the action for recovery has not yet elapsed. Moreover, a stipulation reducing the one-year
period is null and void; 23 it must, accordingly, be struck down.
WHEREFORE, the instant petition is DENIED and the challenged decision of 30 January 1997 of the
Court of Appeals in CA-G.R. CV No. 36401 is AFFIRMED. Costs against petitioner.1wphi1.nt
SO ORDERED.
G.R. No. 102316 June 30, 1997
VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner,
vs.
COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents.

PANGANIBAN, J.:
Is a stipulation in a charter party that the "(o)wners shall not be responsible for loss, split, short-
landing, breakages and any kind of damages to the cargo" 1 valid? This is the main question raised in
this petition for review assailing the Decision of Respondent Court of Appeals 2 in CA-G.R. No.
CV-20156 promulgated on October 15, 1991. The Court of Appeals modiVied the judgment of the
Regional Trial Court of Valenzuela, Metro Manila, Branch 171, the dispositive portion of which
reads:
WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and
Insurance Co., Inc. to pay plaintiff the sum of TWO MILLION PESOS (P2,000,000.00)
representing the value of the policy of the lost logs with legal interest thereon from
the date of demand on February 2, 1984 until the amount is fully paid or in the
alternative, defendant Seven Brothers Shipping Corporation to pay plaintiff the
amount of TWO MILLION PESOS (2,000,000.00) representing the value of lost logs
plus legal interest from the date of demand on April 24, 1984 until full payment
thereof; the reasonable attorney's fees in the amount equivalent to Vive (5) percent
of the amount of the claim and the costs of the suit.
Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping Corporation
the sum of TWO HUNDRED THIRTY THOUSAND PESOS (P230,000.00) representing
the balance of the stipulated freight charges.
Defendant South Sea Surety and Insurance Company's counterclaim is hereby
dismissed.
In its assailed Decision, Respondent Court of Appeals held:
WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far (sic) as
the liability of the Seven Brothers Shipping Corporation to the plaintiff is concerned
which is hereby REVERSED and SET ASIDE. 3
The Facts
The factual antecedents of this case as narrated in the Court of Appeals Decision are as follows:
It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial
Supply, Inc.) entered into an agreement with the defendant Seven Brothers
(Shipping Corporation) whereby the latter undertook to load on board its vessel M/
V Seven Ambassador the former's lauan round logs numbering 940 at the port of
Maconacon, Isabela for shipment to Manila.
On 20 January 1984, plaintiff insured the logs against loss and/or damage with
defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter
issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said
date.
On 24 January 1984, the plaintiff gave the check in payment of the premium on the
insurance policy to Mr. Victorio Chua.
In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984
resulting in the loss of the plaintiff's insured logs.
On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the
premium and documentary stamps due on the policy was tendered due to the
insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc.
cancelled the insurance policy it issued as of the date of the inception for non-
payment of the premium due in accordance with Section 77 of the Insurance Code.
On 2 February 1984, plaintiff demanded from defendant South Sea Surety and
Insurance Co., Inc. the payment of the proceeds of the policy but the latter denied
liability under the policy. Plaintiff likewise Viled a formal claim with defendant Seven
Brothers Shipping Corporation for the value of the lost logs but the latter denied the
claim.
After due hearing and trial, the court a quo rendered judgment in favor of plaintiff
and against defendants. Both defendants shipping corporation and the surety
company appealed.
Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the
court a quo the following assignment of errors, to wit:
A. The lower court erred in holding that the proximate cause of the sinking of the
vessel Seven Ambassadors, was not due to fortuitous event but to the negligence of
the captain in stowing and securing the logs on board, causing the iron chains to
snap and the logs to roll to the portside.
B. The lower court erred in declaring that the non-liability clause of the Seven
Brothers Shipping Corporation from logs (sic) of the cargo stipulated in the charter
party is void for being contrary to public policy invoking article 1745 of the New
Civil Code.
C. The lower court erred in holding defendant-appellant Seven Brothers Shipping
Corporation liable in the alternative and ordering/directing it to pay plaintiff-
appellee the amount of two million (2,000,000.00) pesos representing the value of
the logs plus legal interest from date of demand until fully paid.
D. The lower court erred in ordering defendant-appellant Seven Brothers Shipping
Corporation to pay appellee reasonable attorney's fees in the amount equivalent to
5% of the amount of the claim and the costs of the suit.
E. The lower court erred in not awarding defendant-appellant Seven Brothers
Corporation its counter-claim for attorney's fees.
F. The lower court erred in not dismissing the complaint against Seven Brothers
Shipping Corporation.
Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the following errors:
A. The trial court erred in holding that Victorio Chua was an agent of defendant-
appellant South Sea Surety and Insurance Company, Inc. and likewise erred in not
holding that he was the representative of the insurance broker Columbia Insurance
Brokers, Ltd.
B. The trial court erred in holding that Victorio Chua received compensation/
commission on the premiums paid on the policies issued by the defendant-appellant
South Sea Surety and Insurance Company, Inc.
C. The trial court erred in not applying Section 77 of the Insurance Code.
D. The trial court erred in disregarding the "receipt of payment clause" attached to
and forming part of the Marine Cargo Insurance Policy No. 84/24229.
E. The trial court in disregarding the statement of account or bill stating the amount
of premium and documentary stamps to be paid on the policy by the plaintiff-
appellee.
F. The trial court erred in disregarding the endorsement of cancellation of the policy
due to non-payment of premium and documentary stamps.
G. The trial court erred in ordering defendant-appellant South Sea Surety and
Insurance Company, Inc. to pay plaintiff-appellee P2,000,000.00 representing value
of the policy with legal interest from 2 February 1984 until the amount is fully paid,
H. The trial court erred in not awarding to the defendant-appellant the attorney's
fees alleged and proven in its counterclaim.
The primary issue to be resolved before us is whether defendants shipping
corporation and the surety company are liable to the plaintiff for the latter's lost
logs. 4
The Court of Appeals afVirmed in part the RTC judgment by sustaining the liability of South Sea
Surety and Insurance Company ("South Sea"), but modiVied it by holding that Seven Brothers
Shipping Corporation ("Seven Brothers") was not liable for the lost cargo. 5 In modifying the RTC
judgment, the respondent appellate court ratiocinated thus:
It appears that there is a stipulation in the charter party that the ship owner would
be exempted from liability in case of loss.
The court a quo erred in applying the provisions of the Civil Code on common
carriers to establish the liability of the shipping corporation. The provisions on
common carriers should not be applied where the carrier is not acting as such but as
a private carrier.
Under American jurisprudence, a common carrier undertaking to carry a special
cargo or chartered to a special person only, becomes a private carrier.
As a private carrier, a stipulation exempting the owner from liability even for the
negligence of its agent is valid (Home Insurance Company, Inc. vs. American
Steamship Agencies, Inc., 23 SCRA 24).
The shipping corporation should not therefore be held liable for the loss of the
logs. 6
South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc. ("Valenzuela")
Viled separate petitions for review before this Court. In a Resolution dated June 2, 1995, this Court
denied the petition of South
Sea. 7 There the Court found no reason to reverse the factual Vindings of the trial court and the Court
of Appeals that Chua was indeed an authorized agent of South Sea when he received Valenzuela's
premium payment for the marine cargo insurance policy which was thus binding on the insurer. 8
The Court is now called upon to resolve the petition for review Viled by Valenzuela assailing the CA
Decision which exempted Seven Brothers from any liability for the lost cargo.
The Issue
Petitioner Valenzuela's arguments resolve around a single issue: "whether or not respondent Court
(of Appeals) committed a reversible error in upholding the validity of the stipulation in the charter
party executed between the petitioner and the private respondent exempting the latter from
liability for the loss of petitioner's logs arising from the negligence of its (Seven Brothers')
captain." 9
The Court's Ruling
The petition is not meritorious.
Validity of Stipulation is Lis Mota
The charter party between the petitioner and private respondent stipulated that the "(o)wners shall
not be responsible for loss, split, short-landing, breakages and any kind of damages to the
cargo." 10 The validity of this stipulation is the lis mota of this case.
It should be noted at the outset that there is no dispute between the parties that the proximate
cause of the sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the "snapping of
the iron chains and the subsequent rolling of the logs to the portside due to the negligence of the
captain in stowing and securing the logs on board the vessel and not due to fortuitous
event." 11 Likewise undisputed is the status of Private Respondent Seven Brothers as a private
carrier when it contracted to transport the cargo of Petitioner Valenzuela. Even the latter admits
this in its petition. 12
The trial court deemed the charter party stipulation void for being contrary to public
policy, 13 citing Article 1745 of the Civil Code which provides:
Art. 1745. Any of the following or similar stipulations shall be considered
unreasonable, unjust and contrary to public policy:
(1) That the goods are transported at the risk of the owner or shipper;
(2) That the common carrier will not be liable for any loss, destruction, or
deterioration of the goods;
(3) That the common carrier need not observe any diligence in the custody of the
goods;
(4) That the common carrier shall exercise a degree of diligence less than that of a
good father of a family, or of a man of ordinary prudence in the vigilance over the
movables transported;
(5) That the common carrier shall not be responsible for the acts or omissions of his
or its employees;
(6) That the common carrier's liability for acts committed by thieves, or of robbers
who do not act with grave or irresistible threat, violence or force, is dispensed with
or diminished;
(7) That the common carrier is not responsible for the loss, destruction, or
deterioration of goods on account of the defective condition of the car, vehicle, ship,
airplane or other equipment used in the contract of carriage.
Petitioner Valenzuela adds that the stipulation is void for being contrary to Articles 586 and 587 of
the Code of Commerce 14 and Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and
paragraph 1, Article 1409 of the Civil Code, 15 petitioner further contends that said stipulation
"gives no duty or obligation to the private respondent to observe the diligence of a good father of a
family in the custody and transportation of the cargo."
The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had
acted as a private carrier in transporting petitioner's lauan logs. Thus, Article 1745 and other Civil
Code provisions on common carriers which were cited by petitioner may not be applied unless
expressly stipulated by the parties in their charter party. 16
In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo
rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the
cargo caused even by the negligence of the ship captain. Pursuant to Article 1306 17 of the Civil
Code, such stipulation is valid because it is freely entered into by the parties and the same is not
contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of
private carriage is not even a contract of adhesion. We stress that 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 justiViably be applied to a ship transporting commercial goods as a private carrier.
Consequently, the public policy embodied therein is not contravened by stipulations in a charter
party that lessen or remove the protection given by law in contracts involving common carriers.
The issue posed in this case and the arguments raised by petitioner are not novel; they were
resolved long ago by this Court in Home Insurance Co. vs. American Steamship Agencies, Inc. 18 In that
case, the trial court similarly nulliVied a stipulation identical to that involved in the present case for
being contrary to public policy based on Article 1744 of the Civil Code and Article 587 of the Code of
Commerce. Consequently, the trial court held the shipowner liable for damages resulting for the
partial loss of the cargo. This Court reversed the trial court and laid down, through Mr. Justice Jose P.
Bengzon, the following well-settled observation and doctrine:
The provisions of our Civil Code on common carriers were taken from Anglo-
American law. Under American jurisprudence, a common carrier undertaking to
carry a special cargo or chartered to a special person only, becomes a private
carrier. As a private carrier, a stipulation exempting the owner from liability for the
negligence of its agent is not against public policy, and is deemed valid.
Such doctrine We `ind reasonable. The Civil Code provisions on common carriers
should not be applied where the carrier is not acting as such but as a private
carrier. The stipulation in the charter party absolving the owner from liability for loss
due to the negligence of its agent would be void if the strict public policy governing
common carriers is applied. Such policy has no force where the public at large is not
involved, as in this case of a ship totally chartered for the used of a single
party. 19(Emphasis supplied.)
Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public enters
into a contract of transportation with common carriers without a hand or a voice in the preparation
thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot
submit its own stipulations for the approval of the common carrier. Thus, the law on common
carriers extends its protective mantle against one-sided stipulations inserted in tickets, invoices or
other documents over which the riding public has no understanding or, worse, no choice. Compared
to the general public, a charterer in a contract of private carriage is not similarly situated. It can
and in fact it usually does enter into a free and voluntary agreement. In practice, the parties in a
contract of private carriage can stipulate the carrier's obligations and liabilities over the shipment
which, in turn, determine the price or consideration of the charter. Thus, a charterer, in exchange for
convenience and economy, may opt to set aside the protection of the law on common carriers. When
the charterer decides to exercise this option, he takes a normal business risk.
Petitioner contends that the rule in Home Insurance is not applicable to the present case because it
"covers only a stipulation exempting a private carrier from liability for the negligence of his agent,
but it does not apply to a stipulation exempting a private carrier like private respondent from the
negligence of his employee or servant which is the situation in this case." 20 This contention of
petitioner is bereft of merit, for it raises a distinction without any substantive difference. The
case Home Insurance speciVically dealt with "the liability of the shipowner for acts or negligence of
its captain and crew" 21 and a charter party stipulation which "exempts the owner of the vessel from
any loss or damage or delay arising from any other source, even from the neglect or fault of the
captain or crew or some other person employed by the owner on
board, for whose acts the owner would ordinarily be liable except for said
paragraph." 22 Undoubtedly, Home Insurance is applicable to the case at bar.
The naked assertion of petitioner that the American rule enunciated in Home Insurance is not the
rule in the Philippines 23 deserves scant consideration. The Court there categorically held that said
rule was "reasonable" and proceeded to apply it in the resolution of that case. Petitioner miserably
failed to show such circumstances or arguments which would necessitate a departure from a well-
settled rule. Consequently, our ruling in said case remains a binding judicial precedent based on the
doctrine of stare decisis and Article 8 of the Civil Code which provides that "(j)udicial decisions
applying or interpreting the laws or the Constitution shall form part of the legal system of the
Philippines."
In Vine, the respondent appellate court aptly stated that "[in the case of] a private carrier, a
stipulation exempting the owner from liability even for the negligence of its agents is valid." 24
Other Arguments
On the basis of the foregoing alone, the present petition may already be denied; the Court, however,
will discuss the other arguments of petitioner for the beneVit and satisfaction of all concerned.
Articles 586 and 587, Code of Commerce
Petitioner Valenzuela insists that the charter party stipulation is contrary to Articles 586 and 587 of
the Code of Commerce which confer on petitioner the right to recover damages from the shipowner
and ship agent for the acts or conduct of the captain. 25 We are not persuaded. Whatever rights
petitioner may have under the aforementioned statutory provisions were waived when it entered
into the charter party.
Article 6 of the Civil Code provides that "(r)ights may be waived, unless the waiver is contrary to
law, public order, public policy, morals, or good customs, or prejudicial to a person with a right
recognized by law." As a general rule, patrimonial rights may be waived as opposed to rights to
personality and family rights which may not be made the subject of waiver. 26 Being patently and
undoubtedly patrimonial, petitioner's right conferred under said articles may be waived. This, the
petitioner did by acceding to the contractual stipulation that it is solely responsible or any damage
to the cargo, thereby exempting the private carrier from any responsibility for loss or damage
thereto. Furthermore, as discussed above, the contract of private carriage binds petitioner and
private respondent alone; it is not imbued with public policy considerations for the general public
or third persons are not affected thereby.
Articles 1170 and 1173, Civil Code
Petitioner likewise argues that the stipulation subject of this controversy is void for being contrary
to Articles 1170 and 1173 of the Civil Code 27 which read:
Art. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages
Art. 1173. The fault or negligence of the obligor consists in the omission of that
diligence which is required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place. When negligence shows
bad faith, the provisions of articles 1171 and 2201, shall apply.
If the law does not state the diligence which is to be observed in the performance,
that which is expected of a good father of a family shall be required.
The Court notes that the foregoing articles are applicable only to the obligor or the one with an
obligation to perform. In the instant case, Private Respondent Seven Brothers is not an obligor in
respect of the cargo, for this obligation to bear the loss was shifted to petitioner by virtue of the
charter party. This shifting of responsibility, as earlier observed, is not void. The provisions cited by
petitioner are, therefore, inapplicable to the present case.
Moreover, the factual milieu of this case does not justify the application of the second paragraph of
Article 1173 of the Civil Code which prescribes the standard of diligence to be observed in the event
the law or the contract is silent. In the instant case, Article 362 of the Code of Commerce 28 provides
the standard of ordinary diligence for the carriage of goods by a carrier. The standard of diligence
under this statutory provision may, however, be modiVied in a contract of private carriage as the
petitioner and private respondent had done in their charter party.
Cases Cited by Petitioner Inapplicable
Petitioner cites Shewaram vs. Philippine Airlines, Inc. 29 which, in turn, quoted Juan Ysmael &
Co. vs. Gabino Barreto & Co. 30 and argues that the public policy considerations stated there vis-a-
vis contractual stipulations limiting the carrier's liability be applied "with equal force" to this
case. 31 It also cites Manila Railroad Co. vs. Compaia Transatlantica 32 and contends that
stipulations exempting a party from liability for damages due to negligence "should not be
countenanced" and should be "strictly construed" against the party claiming its beneVit. 33 We
disagree.
The cases of Shewaram and Ysmael both involve a common carrier; thus, they necessarily justify the
application of such policy considerations and concomitantly stricter rules. As already discussed
above, the public policy considerations behind the rigorous treatment of common carriers are
absent in the case of private carriers. Hence, the stringent laws applicable to common carriers are
not applied to private carries. The case of Manila Railroad is also inapplicable because the action for
damages there does not involve a contract for transportation. Furthermore, the defendant therein
made a "promise to use due care in the lifting operations" and, consequently, it was "bound by its
undertaking"'; besides, the exemption was intended to cover accidents due to hidden defects in the
apparatus or other unforseeable occurrences" not caused by its "personal negligence." This promise
was thus constructed to make sense together with the stipulation against liability for damages. 34 In
the present case, we stress that the private respondent made no such promise. The agreement of
the parties to exempt the shipowner from responsibility for any damage to the cargo and place
responsibility over the same to petitioner is the lone stipulation considered now by this Court.
Finally, petitioner points to Standard Oil Co. of New York vs. Lopez Costelo, 35 Walter A. Smith &
Co. vs. Cadwallader Gibson Lumber Co., 36 N. T . Hashim and Co. vs. Rocha and Co., 37 Ohta Development
Co. vs. Steamship "Pompey" 38 and Limpangco Sons vs. Yangco Steamship Co. 39 in support of its
contention that the shipowner be held liable for damages. 40 These however are not on all fours
with the present case because they do not involve a similar factual milieu or an identical stipulation
in the charter party expressly exempting the shipowner form responsibility for any damage to the
cargo.
Effect of the South Sea Resolution
In its memorandum, Seven Brothers argues that petitioner has no cause of action against it because
this Court has earlier afVirmed the liability of South Sea for the loss suffered by petitioner. Private
respondent submits that petitioner is not legally entitled to collect twice for a single loss. 41 In view
of the above disquisition upholding the validity of the questioned charter party stipulation and
holding that petitioner may not recover from private respondent, the present issue is moot and
academic. It sufVices to state that the Resolution of this Court dated June 2, 1995 42 afVirming the
liability of South Sea does not, by itself, necessarily preclude the petitioner from proceeding against
private respondent. An aggrieved party may still recover the deViciency for the person causing the
loss in the event the amount paid by the insurance company does not fully cover the loss. Article
2207 of the Civil Code provides:
Art. 2207. If the plaintiff's property has been insured, and he has received indemnity
for the insurance company for the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person who has violated the contract. If
the amount paid by the insurance company does not fully cover the injury or loss,
the aggrieved party shall be entitled to recover the deViciency form the person
causing the loss or injury.
WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any
reversible error on the part of Respondent Court. The assailed Decision is AFFIRMED.
SO ORDERED.
G.R. No. 70462 August 11, 1988
PAN AMERICAN WORLD AIRWAYS, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT, RENE V. PANGAN, SOTANG BASTOS PRODUCTIONS and
ARCHER PRODUCTIONS, respondents.
Guerrero & Torres for petitioner.
Jose B. Layug for private respondents.

CORTES, J.:
Before the Court is a petition Viled by an international air carrier seeking to limit its liability for lost
baggage, containing promotional and advertising materials for Vilms to be exhibited in Guam and the
U.S.A., clutch bags, barong tagalogs and personal belongings, to the amount speciVied in the airline
ticket absent a declaration of a higher valuation and the payment of additional charges.
The undisputed facts of the case, as found by the trial court and adopted by the appellate court, are
as follows:
On April 25, 1978, plaintiff Rene V. Pangan, president and general manager of the
plaintiffs Sotang Bastos and Archer Production while in San Francisco, Califonia and
Primo Quesada of Prime Films, San Francisco, California, entered into an agreement
(Exh. A) whereby the former, for and in consideration of the amount of US $2,500.00
per picture, bound himself to supply the latter with three Vilms. 'Ang Mabait,
Masungit at ang Pangit,' 'Big Happening with Chikiting and Iking,' and 'Kambal
Dragon' for exhibition in the United States. It was also their agreement that plaintiffs
would provide the necessary promotional and advertising materials for said Vilms on
or before May 30, 1978.
On his way home to the Philippines, plaintiff Pangan visited Guam where he
contacted Leo Slutchnick of the Hafa Adai Organization. Plaintiff Pangan likewise
entered into a verbal agreement with Slutchnick for the exhibition of two of the Vilms
above-mentioned at the Hafa Adai Theater in Guam on May 30, 1978 for the
consideration of P7,000.00 per picture (p. 11, tsn, June 20, 1979). Plaintiff Pangan
undertook to provide the necessary promotional and advertising materials for said
Vilms on or before the exhibition date on May 30,1978.
By virtue of the above agreements, plaintiff Pangan caused the preparation of the
requisite promotional handbills and still pictures for which he paid the total sum of
P12,900.00 (Exhs. B, B-1, C and C1). Likewise in preparation for his trip abroad to
comply with his contracts, plaintiff Pangan purchased fourteen clutch bags, four
capiz lamps and four barong tagalog, with a total value of P4,400.00 (Exhs. D, D-1, E,
and F).
On May 18, 1978, plaintiff Pangan obtained from defendant Pan Am's Manila OfVice,
through the Your Travel Guide, an economy class airplane ticket with No.
0269207406324 (Exh. G) for passage from Manila to Guam on defendant's Flight No.
842 of May 27,1978, upon payment by said plaintiff of the regular fare. The Your
Travel Guide is a tour and travel ofVice owned and managed by plaintiffs witness
Mila de la Rama.
On May 27, 1978, two hours before departure time plaintiff Pangan was at the
defendant's ticket counter at the Manila International Airport and presented his
ticket and checked in his two luggages, for which he was given baggage claim tickets
Nos. 963633 and 963649 (Exhs. H and H-1). The two luggages contained the
promotional and advertising materials, the clutch bags, barong tagalog and his
personal belongings. Subsequently, Pangan was informed that his name was not in
the manifest and so he could not take Flight No. 842 in the economy class. Since
there was no space in the economy class, plaintiff Pangan took the Virst class because
he wanted to be on time in Guam to comply with his commitment, paying an
additional sum of $112.00.
When plaintiff Pangan arrived in Guam on the date of May 27, 1978, his two
luggages did not arrive with his Vlight, as a consequence of which his agreements
with Slutchnick and Quesada for the exhibition of the Vilms in Guam and in the
United States were cancelled (Exh. L). Thereafter, he Viled a written claim (Exh. J) for
his missing luggages.
Upon arrival in the Philippines, Pangan contacted his lawyer, who made the
necessary representations to protest as to the treatment which he received from the
employees of the defendant and the loss of his two luggages (Exh. M, O, Q, S, and T).
Defendant Pan Am assured plaintiff Pangan that his grievances would be
investigated and given its immediate consideration (Exhs. N, P and R). Due to the
defendant's failure to communicate with Pangan about the action taken on his
protests, the present complaint was Viled by the plaintiff. (Pages 4-7, Record On
Appeal). [Rollo, pp. 27-29.]
On the basis of these facts, the Court of First Instance found petitioner liable and rendered
judgment as follows:
(1) Ordering defendant Pan American World Airways, Inc. to pay all the plaintiffs the
sum of P83,000.00, for actual damages, with interest thereon at the rate of 14% per
annum from December 6, 1978, when the complaint was Viled, until the same is fully
paid, plus the further sum of P10,000.00 as attorney's fees;
(2) Ordering defendant Pan American World Airways, Inc. to pay plaintiff Rene V.
Pangan the sum of P8,123.34, for additional actual damages, with interest thereon at
the rate of 14% per annum from December 6, 1978, until the same is fully paid;
(3) Dismissing the counterclaim interposed by defendant Pan American World
Airways, Inc.; and
(4) Ordering defendant Pan American World Airways, Inc. to pay the costs of suit.
[Rollo, pp. 106-107.]
On appeal, the then Intermediate Appellate Court afVirmed the trial court decision.
Hence, the instant recourse to this Court by petitioner.
The petition was given due course and the parties, as required, submitted their respective
memoranda. In due time the case was submitted for decision.
In assailing the decision of the Intermediate Appellate Court petitioner assigned the following
errors:
1. The respondent court erred as a matter of law in afVirming the trial court's award of actual
damages beyond the limitation of liability set forth in the Warsaw Convention and the contract of
carriage.
2. The respondent court erred as a matter of law in afVirming the trial court's award of actual
damages consisting of alleged lost proVits in the face of this Court's ruling concerning special or
consequential damages as set forth in Mendoza v. Philippine Airlines [90 Phil. 836 (1952).]
The assigned errors shall be discussed seriatim
1. The airline ticket (Exh. "G') contains the following conditions:
NOTICE
If the passenger's journey involves an ultimate destination or stop in a country other
than the country of departure the Warsaw Convention may be applicable and the
Convention governs and in most cases limits the liability of carriers for death or
personal injury and in respect of loss of or damage to baggage. See also notice
headed "Advice to International Passengers on Limitation of Liability.
CONDITIONS OF CONTRACT
1. As used in this contract "ticket" means this passenger ticket and baggage check of
which these conditions and the notices form part, "carriage" is equivalent to
"transportation," "carrier" means all air carriers that carry or undertake to carry the
passenger or his baggage hereunder or perform any other service incidental to such
air carriage. "WARSAW CONVENTION" means the convention for the UniVication of
Certain Rules Relating to International Carriage by Air signed at Warsaw, 12th
October 1929, or that Convention as amended at The Hague, 28th September 1955,
whichever may be applicable.
2. Carriage hereunder is subject to the rules and limitations relating to liability
established by the Warsaw Convention unless such carriage is not "international
carriage" as de`ined by that Convention.
3. To the extent not in conVlict with the foregoing carriage and other services
performed by each carrier are subject to: (i) provisions contained in this ticket, (ii)
applicable tariffs, (iii) carrier's conditions of carriage and related regulations which
are made part hereof (and are available on application at the ofVices of carrier),
except in transportation between a place in the United States or Canada and any
place outside thereof to which tariffs in force in those countries apply.
xxx xxx xxx
NOTICE OF BAGGAGE LIABILITY LIMITATIONS
Liability for loss, delay, or damage to baggage is limited as follows unless a higher
value is declared in advance and additional charges are paid: (1)for most international
travel (including domestic portions of international journeys) to approximately $9.07
per pound ($20.00 per kilo) for checked baggage and $400 per passenger for
unchecked baggage: (2) for travel wholly between U.S. points, to $750 per passenger
on most carriers (a few have lower limits). Excess valuation may not be declared on
certain types of valuable articles. Carriers assume no liability for fragile or
perishable articles. Further information may be obtained from the carrier.
[Emphasis supplied.].
On the basis of the foregoing stipulations printed at the back of the ticket, petitioner contends that
its liability for the lost baggage of private respondent Pangan is limited to $600.00 ($20.00 x 30
kilos) as the latter did not declare a higher value for his baggage and pay the corresponding
additional charges.
To support this contention, petitioner cites the case of Ong Yiu v. Court of Appeals [G.R. No. L-40597,
June 29, 1979, 91 SCRA 223], where the Court sustained the validity of a printed stipulation at the
back of an airline ticket limiting the liability of the carrier for lost baggage to a speciVied amount and
ruled that the carrier's liability was limited to said amount since the passenger did not declare a
higher value, much less pay additional charges.
We Vind the ruling in Ong Yiu squarely applicable to the instant case. In said case, the Court, through
Justice Melencio Herrera, stated:
Petitioner further contends that respondent Court committed grave error when it
limited PAL's carriage liability to the amount of P100.00 as stipulated at the back of
the ticket....
We agree with the foregoing Vinding. The pertinent Condition of Carriage printed at
the back of the plane ticket reads:
8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or
damage baggage of the passenger is LIMITED TO P100.00 for each
ticket unless a passenger declares a higher valuation in excess of
P100.00, but not in excess, however, of a total valuation of Pl,000.00
and additional charges are paid pursuant to Carrier's tariffs.
There is no dispute that petitioner did not declare any higher value for his luggage,
much less (lid he pay any additional transportation charge.
But petitioner argues that there is nothing in the evidence to show that he had
actually entered into a contract with PAL limiting the latter's liability for loss or
delay of the baggage of its passengers, and that Article 1750 * of the Civil Code has
not been complied with.
While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is
nevertheless bound by the provisions thereof. "Such provisions have been held to be
a part of the contract of carriage, and valid and binding upon the passenger
regardless of the latter's lack of knowledge or assent to the regulation." [Tannebaum
v. National Airline, Inc., 13 Misc. 2d 450,176 N.Y.S. 2d 400; Lichten v. Eastern
Airlines, 87 Fed. Supp. 691; Migoski v. Eastern Air Lines, Inc., Fla., 63 So. 2d 634.] It is
what is known as a contract of "adhesion," in regards which it has been said that
contracts of adhesion wherein one party imposes a ready made form of contract on
the other, as the plane ticket in the case at bar, are contracts not entirely prohibited.
The one who adheres to the contract is in reality free to reject it entirely; if he
adheres, he gives his consent,[Tolentino, Civil Code, Vol. IV, 1962 ed., p. 462, citing
Mr. Justice J.B.L. Reyes, Lawyer's Journal, Jan. 31, 1951, p. 49]. And as held in
Randolph v. American Airlines, 103 Ohio App. 172,144 N.E. 2d 878; Rosenchein v.
Trans World Airlines, Inc., 349 S.W. 2d 483.] "a contract limiting liability upon an
agreed valuation does not offend against the policy of the law forbidding one from
contracting against his own negligence."
Considering, therefore, that petitioner had failed to declare a higher value for his
baggage, he cannot be permitted a recovery in excess of P100.00....
On the other hand, the ruling in Shewaram v. Philippine Air Lines, Inc. [G.R. No. L-20099, July 2, 1966,
17 SCRA 606], where the Court held that the stipulation limiting the carrier's liability to a speciVied
amount was invalid, Vinds no application in the instant case, as the ruling in said case was premised
on the Vinding that the conditions printed at the back of the ticket were so small and hard to read
that they would not warrant the presumption that the passenger was aware of the conditions and
that he had freely and fairly agreed thereto. In the instant case, similar facts that would make the
case fall under the exception have not been alleged, much less shown to exist.
In view thereof petitioner's liability for the lost baggage is limited to $20.00 per kilo or $600.00, as
stipulated at the back of the ticket.
At this juncture, in order to rectify certain misconceptions the Court Vinds it necessary to state that
the Court of Appeal's reliance on a quotation from Northwest Airlines, Inc. v. Cuenca [G.R. No.
L-22425, August 31, 1965, 14 SCRA 1063] to sustain the view that "to apply the Warsaw Convention
which limits a carrier's liability to US$9.07 per pound or US$20.00 per kilo in cases of contractual
breach of carriage ** is against public policy" is utterly misplaced, to say the least. In said case,
while the Court, as quoted in the Intermediate Appellate Court's decision, said:
Petitioner argues that pursuant to those provisions, an air "carrier is liable only" in
the event of death of a passenger or injury suffered by him, or of destruction or loss
of, or damages to any checked baggage or any goods, or of delay in the
transportation by air of passengers, baggage or goods. This pretense is not borne out
by the language of said Articles. The same merely declare the carrier liable for
damages in enumerated cases, if the conditions therein speciVied are present.
Neither said provisions nor others in the aforementioned Convention regulate or
exclude liability for other breaches of contract by the carrier. Under petitioner's
theory, an air carrier would be exempt from any liability for damages in the event of
its absolute refusal, in bad faith, to comply with a contract of carriage, which is
absurd.
it prefaced this statement by explaining that:
...The case is now before us on petition for review by certiorari, upon the ground that
the lower court has erred: (1) in holding that the Warsaw Convention of October 12,
1929, relative to transportation by air is not in force in the Philippines: (2) in not
holding that respondent has no cause of action; and (3) in awarding P20,000 as
nominal damages.
We deem it unnecessary to pass upon the First assignment of error because the same is
the basis of the second assignment of error, and the latter is devoid of merit, even if we
assumed the former to be well taken. (Emphasis supplied.)
Thus, it is quite clear that the Court never intended to, and in fact never did, rule against the validity
of provisions of the Warsaw Convention. Consequently, by no stretch of the imagination may said
quotation from Northwest be considered as supportive of the appellate court's statement that the
provisions of the Warsaw Convention limited a carrier's liability are against public policy.
2. The Court Vinds itself unable to agree with the decision of the trial court, and afVirmed by the
Court of Appeals, awarding private respondents damages as and for lost proVits when their
contracts to show the Vilms in Guam and San Francisco, California were cancelled.
The rule laid down in Mendoza v. Philippine Air Lines, Inc. [90 Phil. 836 (1952)] cannot be any
clearer:
...Under Art.1107 of the Civil Code, a debtor in good faith like the defendant herein, may
be held liable only for damages that were foreseen or might have been foreseen at the
time the contract of transportation was entered into. The trial court correctly found
that the defendant company could not have foreseen the damages that would be
suffered by Mendoza upon failure to deliver the can of `ilm on the 17th of September,
1948 for the reason that the plans of Mendoza to exhibit that Vilm during the town
Viesta and his preparations, specially the announcement of said exhibition by posters
and advertisement in the newspaper, were not called to the defendant's attention.
In our research for authorities we have found a case very similar to the one under consideration. In
the case of Chapman vs. Fargo, L.R.A. (1918 F) p. 1049, the plaintiff in Troy, New York, delivered
motion picture Vilms to the defendant Fargo, an express company, consigned and to be delivered to
him in Utica. At the time of shipment the attention of the express company was called to the fact
that the shipment involved motion picture Vilms to be exhibited in Utica, and that they should be
sent to their destination, rush. There was delay in their delivery and it was found that the plaintiff
because of his failure to exhibit the Vilm in Utica due to the delay suffered damages or loss of proVits.
But the highest court in the State of New York refused to award him special damages. Said appellate
court observed:
But before defendant could be held to special damages, such as the present alleged loss
of pro`its on account of delay or failure of delivery, it must have appeared that he had
notice at the time of delivery to him of the particular circumstances attending the
shipment, and which probably would lead to such special loss if he defaulted. Or, as the
rule has been stated in another form, in order to purpose on the defaulting party
further liability than for damages naturally and directly, i.e., in the ordinary course of
things, arising from a breach of contract, such unusual or extraordinary damages must
have been brought within the contemplation of the parties as the probable result of
breach at the time of or prior to contracting. Generally, notice then of any special
circumstances which will show that the damages to be anticipated from a breach
would be enhanced has been held suf`icient for this effect.
As may be seen, that New York case is a stronger one than the present case for the reason that the
attention of the common carrier in said case was called to the nature of the articles shipped, the
purpose of shipment, and the desire to rush the shipment, circumstances and facts absent in the
present case. [Emphasis supplied.]
Thus, applying the foregoing ruling to the facts of the instant case, in the absence of a showing that
petitioner's attention was called to the special circumstances requiring prompt delivery of private
respondent Pangan's luggages, petitioner cannot be held liable for the cancellation of private
respondents' contracts as it could not have foreseen such an eventuality when it accepted the
luggages for transit.
The Court is unable to uphold the Intermediate Appellate Court's disregard of the rule laid down
in Mendoza and afVirmance of the trial court's conclusion that petitioner is liable for damages based
on the Vinding that "[tlhe undisputed fact is that the contracts of the plaintiffs for the exhibition of
the Vilms in Guam and California were cancelled because of the loss of the two luggages in question."
[Rollo, p. 36] The evidence reveals that the proximate cause of the cancellation of the contracts was
private respondent Pangan's failure to deliver the promotional and advertising materials on the
dates agreed upon. For this petitioner cannot be held liable. Private respondent Pangan had not
declared the value of the two luggages he had checked in and paid additional charges. Neither was
petitioner privy to respondents' contracts nor was its attention called to the condition therein
requiring delivery of the promotional and advertising materials on or before a certain date.
3. With the Court's holding that petitioner's liability is limited to the amount stated in the ticket, the
award of attorney's fees, which is grounded on the alleged unjustiVied refusal of petitioner to satisfy
private respondent's just and valid claim, loses support and must be set aside.
WHEREFORE, the Petition is hereby GRANTED and the Decision of the Intermediate Appellate Court
is SET ASIDE and a new judgment is rendered ordering petitioner to pay private respondents
damages in the amount of US $600.00 or its equivalent in Philippine currency at the time of actual
payment.
SO ORDERED.
G.R. No. 92501 March 6, 1992
PHILIPPINE AIR LINES, petitioner,
vs.
HON. COURT OF APPEALS and ISIDRO CO, respondents.

GRIO-AQUINO, J.:
This is a petition for review of the decision dated July 19, 1989 of the Court of Appeals afVirming the
decision of the Regional Trial Court of Pasay City which awarded P72,766.02 as damages and
attorney's fees to private respondent Isidro Co for the loss of his checked-in baggage as a passenger
of petitioner airline.
The Vindings of the trial court, which were adopted by the appellate court, are:
"At about 5:30 a.m. on April 17, 1985, plaintiff [Co], accompanied by his wife and
son, arrived at the Manila International Airport aboard defendant airline's PAL Flight
No. 107 from San Francisco, California, U.S.A. Soon after his embarking (sic), plaintiff
proceeded to the baggage retrieval area to claim his checks in his possession.
Plaintiff found eight of his luggage, but despite diligent search, he failed to locate
ninth luggage, with claim check number 729113 which is the one in question in this
case.
"Plaintiff then immediately notiVied defendant company through its employee, Willy
Guevarra, who was then in charge of the PAL claim counter at the airport. Willy
Guevarra, who testiVied during the trial court on April 11, 1986, Villed up the printed
form known as a Property Irregularity Report (Exh. "A"), acknowledging one of the
plaintiff's luggages to be missing (Exh. "A-1"), and signed after asking plaintiff
himself to sign the same document (Exh. "A-2"). In accordance with this procedure in
cases of this nature, Willy Guevarra asked plaintiff to surrender to him the nine
claim checks corresponding to the nine luggages, i.e., including the one that was
missing.
The incontestable evidence further shows that plaintiff lost luggage was a Samsonite
suitcase measuring about 62 inches in length, worth about US$200.00 and
containing various personal effects purchased by plaintiff and his wife during their
stay in the United States and similar other items sent by their friends abroad to be
given as presents to relatives in the Philippines. Plaintiff's invoices evidencing their
purchases show their missing personal effects to be worth US$1,243.01, in addition
to the presents entrusted to them by their friends which plaintiffs testiVied to be
worth about US$500.00 to US$600.00 (Exhs. "D", "D-1", to "D-17"; tsn, p. 4, July 11,
1985; pp. 5-14, March 7, 1986).
Plaintiff on several occasions unrelentingly called at defendant's ofVice in order to
pursue his complaint about his missing luggage but no avail. Thus, on April 15, 1985,
plaintiff through his lawyer wrote a demand letter to defendant company though
Rebecca V. Santos, its manager, Central Baggage Services (Exhs. "B" & "B-1"). On
April 17, 1985, Rebecca Santos replied to the demand letter (Exh. "B")
acknowledging "that to date we have been unable to locate your client's (plaintiff's)
baggage despite our careful search" and requesting plaintiff's counsel to "please
extend to him our sincere apologies for the inconvenience he was caused by this
unfortunate incident" (Exh. "C"). Despite the letter (Exh. "C"), however, defendants
never found plaintiff's missing luggage or paid its corresponding value.
Consequently, on May 3, 1985, plaintiff Viled his present complaint against said
defendants. (pp. 38-40, Rollo.)
Co sued the airline for damages. The Regional Trial Court of Pasay City found the defendant airline
(now petitioner) liable, and rendered judgment on June 3, 1986, the dispositive portion of which
reads:
WHEREFORE, judgment is hereby rendered sentencing defendant Philippine
Airlines, Inc. to pay plaintiff Isidro Co:
1) P42,766.02 by way of actual damages;
2) P20,000.00 by way of exemplary damages;
3) P10,000.00 as attorney's fees;
all in addition to the costs of the suit.
"Defendants' counterclaim is hereby dismissed for lack of merit."
(p. 40, Rollo.)
On appeal, the Court of Appeals afVirmed in toto the trial court's award.
In his petition for review of the Court of Appeal's decision, petitioner alleges that the appellate court
erred:
1. in afVirming the conclusion of the trial court that the petitioner's retrieval baggage
report was a fabrication;
2. in not applying the limit of liability under the Warsaw Convention which limits the
liability of an air carrier of loss, delay or damage to checked-in baggage to US$20.00
based on weight; and
3. in awarding private respondent Isidro Co actual and exemplary damages,
attorney's fees, and costs.
The Virst and third assignments of error raise purely factual issues which are not reviewable by this
Court (Sec. 2, Rule 45, Rules of Court). The Court reviews only questions of law which must be
distinctly set forth in the petition. (Hodges vs. People, 68 Phil. 178.) The probative value of
petitioner's retrieval report was passed upon by the Regional Trial Court of Pasay City, whose
Vinding was afVirmed by the Court of Appeals as follows:
In this respect, it is further argued that appellee should produce his claim tag if he
had not surrendered it because there was no baggage received. It appeared,
however, that appellee surrendered all the nine claim checks corresponding to the
nine luggages, including the one that was missing, to the PAL ofVicer after
accomplishing the Property, Irregularity Report. Therefore, it could not be possible
for appellee to produce the same in court. It is now for appellant airlines to produce
the veracity of their Baggage Retrieval Report by corroborating evidence other than
testimonies of their employees. Such document is within the control of appellant
and necessarily requires other corroborative evidence. Since there is no compelling
reason to reverse the factual Vindings of the lower court, this Court resolves not to
disturb the same. (p. 41, Rollo.)
Whether or not the lost luggage was ever retrieved by the passenger, and whether or not the actual
and exemplary damages awarded by the court to him are reasonable, are factual issues which we
may not pass upon in the absence of special circumstances requiring a review of the evidence.
In Alitalia vs. IAC (192 SCRA 9, 18, citing Pan American World Airways, Inc. vs. IAC 164 SCRA 268),
the Warsaw Convention limiting the carrier's liability was applied because of a simple loss of
baggage without any improper conduct on the part of the ofVicials or employees of the airline, or
other special injury sustained by the passengers. The petitioner therein did not declare a higher
value for his luggage, much less did he pay an additional transportation charge.
Petitioner contends that under the Warsaw Convention, its liability, if any, cannot exceed US $20.00
based on weight as private respondent Co did not declare the contents of his baggage nor pay
traditional charges before the Vlight (p. 3, tsn, July 18, 1985).
We Vind no merit in that contention. In Samar Mining Company, Inc. vs. Nordeutscher Lloyd (132
SCRA 529), this Court ruled:
The liability of the common carrier for the loss, destruction or deterioration of
goods transported from a foreign country to the Philippines is governed primarily
by the New Civil Code. In all matters not regulated by said Code, the rights and
obligations of common carriers shall be governed by the Code of Commerce and by
Special Laws.
The provisions of the New Civil Code on common carriers are Articles 1733, 1735 and 1753 which
provide:
Art. 1733. 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 the passengers transported by them, according to all the
circumstances of each case.
Art. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the
preceding article if the goods are lost, destroyed or deteriorated, common carriers
are presumed to have been at fault or to have acted negligently, unless they prove
that they observed extraordinary diligence as required in article 1733.
Art. 1753. The law of the country to which the goods are to be transported shall
govern the liability of the common carrier for their loss, destruction or
deterioration.
Since the passenger's destination in this case was the Philippines, Philippine law governs the
liability of the carrier for the loss of the passenger's luggage.
In this case, the petitioner failed to overcome, not only the presumption, but more importantly, the
private respondent's evidence, proving that the carrier's negligence was the proximate cause of the
loss of his baggage. Furthermore, petitioner acted in bad faith in faking a retrieval receipt to bail
itself out of having to pay Co's claim.
The Court of Appeals therefore did not err in disregarding the limits of liability under the Warsaw
Convention.
The award of exemplary damages and attorney's fees to the private respondent was justiVied. In the
cases of Imperial Insurance, Inc. vs. Simon, 122 Phil. 189 and Bert Osmea and Associates vs. CA, 120
SCRA 396, the appellant was awarded attorney's fees because of appellee's failure to satisfy the
former's just and valid demandable claim which forced the appellant to litigate. Likewise, in the case
of Phil. Surety Ins. Co., Inc. vs. Royal Oil Products, 102 Phil. 326, this Court justiVied the grant of
exemplary damages and attorney's fees to the petitioner's failure, even refusal, to pay the private
respondent's valid claim.
WHEREFORE, the petition for review is DENIED for lack of merit. Costs against the petitioner.
SO ORDERED.

G.R. No. 60501. March 5, 1993.


CATHAY PACIFIC AIRWAYS, LTD, petitioner, vs. COURT OF APPEALS and TOMAS L. ALCANTARA,
respondents.
Siguion-Reyna, Montecillo & Ongsiako and Tomacruz, Manguiat & Associates for petitioner.
Tanjuatco, Oreta, Tanjuatco, Berenger & Corpus for private respondent.

SYLLABUS
1. CIVIL LAW; CONTRACT OF CARRIAGE; BREACH THEREOF; PETITIONER BREACHED ITS
CONTRACT OF CARRIAGE WITH PRIVATE RESPONDENT WHEN IT FAILED TO DELIVER HIS
LUGGAGE AT THE DESIGNATED PLACE AND TIME. Petitioner breached its contract of carriage
with private respondent when it failed to deliver his luggage at the designated place and time, it
being the obligation of a common carrier to carry its passengers and their luggage safely to their
destination, which includes the duty not to delay their transportation, and the evidence shows that
petitioner acted fraudulently or in bad faith.
2. DAMAGES; MORAL AND EXEMPLARY DAMAGES PREDICATED UPON A BREACH OF CONTRACT
OF CARRIAGE; RECOVERABLE ONLY IN INSTANCES WHERE THE MISHAP RESULTS IN DEATH OF A
PASSENGER, OR WHERE THE CARRIER IS GUILTY OF FRAUD OR BAD FAITH; THE CONDUCT OF
PETITIONER'S REPRESENTATIVE TOWARDS RESPONDENT JUSTIFIES THE GRANT OF MORAL AND
EXEMPLARY DAMAGES IN CASE AT BAR. Moral damages predicated upon a breach of contract of
carriage may only be recoverable in instances where the mishap results in death of a passenger, or
where the carrier is guilty of fraud or bad faith. The language and conduct of petitioner's
representative towards respondent Alcantara was discourteous or arbitrary to justify the grant of
moral damages. The CATHAY representative was not only indifferent and impatient; he was also
rude and insulting. He simply advised Alcantara to buy anything he wanted. But even that was not
sincere because the representative knew that the passenger was limited only to $20.00 which,
certainly, was not enough to purchase comfortable clothings appropriate for an executive
conference. Considering that Alcantara was not only a revenue passenger but even paid for a Virst
class airline accommodation and accompanied at the time by the Commercial Attache of the
Philippine Embassy who was assisting him in his problem, petitioner or its agents should have been
more courteous and accommodating to private respondent, instead of giving him a curt reply, "What
can we do, the baggage is missing. I cannot do anything . . . Anyhow, you can buy anything you need,
charged to Cathay PaciVic." 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.
3. TEMPERATE DAMAGES; RECOVERABLE ONLY UPON PROOF THAT THE CLAIMANT SUSTAINED
SOME PECUNIARY LOSS. 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. It cannot be gainsaid that respondent's luggage was ultimately delivered to him
without serious or appreciable damage.
4. WARSAW 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; DOES NOT PRECLUDE THE OPERATION
OF THE CIVIL CODE AND OTHER PERTINENT LAWS. As We have repeatedly held, 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 wilfull misconduct on the part of the carrier's employees is found
or established, which is clearly the case before Us.

D E C I S I O N
BELLOSILLO, J p:

This is a petition for review on certiorari of the decision of the Court of Appeals which afVirmed with
modiVication that of the trial court by increasing the award of damages in favor of private
respondent Tomas L. Alcantara.
The facts are undisputed: On 19 October 1975, respondent Tomas L. Alcantara was a Virst class
passenger of petitioner Cathay PaciVic Airways, Ltd. (CATHAY for brevity) on its Flight No. CX-900
from Manila to Hongkong and onward from Hongkong to Jakarta on Flight No. CX-711. The purpose
of his trip was to attend the following day, 20 October 1975, 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. He
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, private respondent 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 Vinally 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 ofVicial of
the Philippine Embassy.
On 1 March 1976, respondent Viled his complaint against petitioner with the Court of First Instance
(now Regional Trial Court) of Lanao del Norte praying for temperate, moral and exemplary
damages, plus attorney's fees.
On 18 April 1976, the trial court rendered its decision ordering CATHAY to pay Plaintiff P20,000.00
for moral damages, P5,000.00 for temperate damages, P10,000.00 for exemplary damages, and
P25,000.00 for attorney's fees, and the costs. 1
Both parties appealed to the Court of Appeals. 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 Vinding 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.
On 11 November 1981, respondent Court of Appeals rendered its decision afVirming the Vindings of
fact of the trial court but modifying its award by increasing the moral damages to P80,000.00,
exemplary damages to P20,000.00 and temperate or moderate damages to P10,000.00. The award
of P25,000.00 for attorney's fees was maintained.
The same grounds raised by petitioner in the Court of Appeals are reiterated before Us. CATHAY
contends that: (1) the Court of Appeals erred in holding petitioner liable to respondent Alcantara
for moral, exemplary and temperate damages as well as attorney's fees; and, (2) the Court of
Appeals erred in failing to apply the Warsaw Convention on the liability of a carrier to its
passengers.
On its Virst assigned error, CATHAY argues that although it failed to transport respondent
Alcantara's luggage on time, the one-day delay was not made in bad faith so as to justify moral,
exemplary and temperate damages. It submits that the conclusion of respondent appellate court
that private respondent was treated rudely and arrogantly when he sought assistance from
CATHAY's employees has no factual basis, hence, the award of moral damages has no leg to stand on.
Petitioner's Virst assigned error involves Vindings of fact which are not reviewable by this Court. 2 At
any rate, it is not impressed with merit. Petitioner breached its contract of carriage with private
respondent when it failed to deliver his luggage at the designated place and time, it being the
obligation of a common carrier to carry its passengers and their luggage safely to their destination,
which includes the duty not to delay their transportation, 3 and the evidence shows that petitioner
acted fraudulently or in bad faith.
Moral damages predicated upon a breach of contract of carriage may only be recoverable in
instances where the mishap results in death of a passenger, 4 or where the carrier is guilty of fraud
or bad faith. 5
In the case at bar, 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. We agree. CATHAY alleges that as a result of mechanical trouble, all pieces of luggage on board
the Virst aircraft bound for Jakarta were unloaded and transferred to the second aircraft which
departed an hour and a half later. Yet, as the Court of Appeals 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, 6 We are persuaded that the employees
of CATHAY acted in bad faith. We refer to the deposition of Romulo Palma, Commercial Attache of
the Philippine Embassy at Jakarta, who was with respondent Alcantara when the latter sought
assistance from the employees of CATHAY. This deposition was the basis of the Vindings of the lower
courts when both awarded moral damages to private respondent. Hereunder is part of Palma's
testimony
"Q: What did Mr. Alcantara say, if any?
A. Mr. Alcantara was of course . . . . I could understand his position. He was furious for the
experience because probably he was thinking he was going to meet the Director-General the
following day and, well, he was with no change of proper clothes and so, I would say, he was not
happy about the situation.
Q: What did Mr. Alcantara say?
A: He was trying to press the fellow to make the report and if possible make the delivery of his
baggage as soon as possible.
Q: And what did the agent or duty ofVicer say, if any?
A: The duty ofVicer, of course, answered back saying 'What can we do, the baggage is missing. I
cannot do anything.' something like it. 'Anyhow you can buy anything you need, charged to Cathay
PaciVic.'
Q: What was the demeanor or comportment of the duty ofVicer of Cathay PaciVic when he said to Mr.
Alcantara 'You can buy anything chargeable to Cathay PaciVic'?
A: If I had to look at it objectively, the duty ofVicer would like to dismiss the affair as soon as possible
by saying indifferently 'Don't worry. It can be found.'" 7
Indeed, the aforequoted testimony shows that the language and conduct of petitioner's
representative towards respondent Alcantara was discourteous or arbitrary to justify the grant of
moral damages. The CATHAY representative was not only indifferent and impatient; he was also
rude and insulting. He simply advised Alcantara to buy anything he wanted. But even that was not
sincere because the representative knew that the passenger was limited only to $20.00 which,
certainly, was not enough to purchase comfortable clothings appropriate for an executive
conference. Considering that Alcantara was not only a revenue passenger but even paid for a Virst
class airline accommodation and accompanied at the time by the Commercial Attache of the
Philippine Embassy who was assisting him in his problem, petitioner or its agents should have been
more courteous and accommodating to private respondent, instead of giving him a curt reply, "What
can we do, the baggage is missing. I cannot do anything . . . Anyhow, you can buy anything you need,
charged to Cathay PaciVic." CATHAY's employees should have been more solicitous to a passenger in
distress and assuaged his anxieties and apprehensions. To compound matters, CATHAY refused to
have the luggage of Alcantara delivered to him at his hotel; instead, he was required to pick it up
himself and an ofVicial of the Philippine Embassy. Under the circumstances, it is evident that
petitioner was remiss in its duty to provide proper and adequate assistance to a paying passenger,
more so one with Virst class accommodation.
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. 8 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. 9 It cannot be
gainsaid that respondent's luggage was ultimately delivered to him without serious or appreciable
damage.
As regards its second assigned error, petitioner airline contends that the extent of its liability for
breach of contract should be limited absolutely to that set forth in the Warsaw Convention. We do
not agree. As We have repeatedly held, 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. 10 The
Warsaw Convention declares the carrier liable for damages in the enumerated cases and under
certain limitations. 11 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, 12 especially if
wilfull misconduct on the part of the carrier's employees is found or established, which is clearly
the case before Us. 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 wilfull 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 wilfull 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
fulVill 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, 13 this Court observed that a traveller would naturally suffer mental anguish, anxiety
and shock when he Vinds that his luggage did not travel with him and he Vinds 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. We however Vind the award by the
Court of Appeals of P80,000.00 for moral damages excessive, hence, We reduce the amount to
P30,000.00. The exemplary damages of P20,000.00 being reasonable is maintained, as well as the
attorney's fees of P25,000.00 considering that petitioner's act or omission has compelled Alcantara
to litigate with third persons or to incur expenses to protect his interest. 14
WHEREFORE, the assailed decision of respondent Court of Appeals is AFFIRMED with the exception
of the award of temperate damages of P10,000.00 which is deleted, while the award of moral
damages of P80,000.00 is reduced to P30,000.00. The award of P20,000.00 for exemplary damages
is maintained as reasonable together with the attorney's fees of P25,000.00. The moral and
exemplary damages shall earn interest at the legal rate from 1 March 1976 when the complaint was
Viled until full payment.
SO ORDERED.

ROBLES V SANTOS
7NOV
44 OG 2268 | September 6, 1947 | Pres. J. Montemayor
Doctrine:
1. If the damage or loss was not due to fortuitous events, force majeure or inherent nature and
defect of goods, but was traceable to the own negligence of the common carrier, then he is liable.
2. Provided that there is meeting of the minds and from such meeting arise rights and obligations,
there should be no limitations as to the form of the contract of carriage. Bill of lading is not essential
to the contract, although it may be obligatory by reason of the regulations of railroad companies or
as a condition imposed in the contract by agreement of that parties themselves.
Facts:
Plaintiff RuVina Robles brought the present action against defendant operator and driver Jose Santos
to recover the value of her lost goods. Sitting in the front seat of Santos old Roadster with her large
buri bag containing two bolts of cloth called gris and 10 undershirts, Robles was told by Santos to
transfer her baggage to the trunk compartment possibly because of its bulk. Robles objected
because it might get lost but later on agreed upon the reassurance of Santos that the compartment
will be locked. On the way to Manila, the compartment was opened from time to time as other
passengers got their baggages. Upon arrival in Bambang, Manila, Robles found that her bag with its
contents is missing.
Issue:
W/N defendant operator is liable
Held:
Yes. Judgment was modiVied as to amount of damages.
The defendant, being habitually engaged in transportation for the public, is bound and governed by
the Code of Commerce in his relations and responsibility to his passengers and their baggage or
goods. The last paragraph of Article 361 of the Code of Commerce, placing upon the carrier the
burden of proof to show that the loss or damage was caused by fortuitous events, force majeure or
inherent nature and defect of goods, implies that if the damage or loss was traceable to the own
negligence of the common carrier, then he is liable.
Had defendant allowed plaintiff to keep her bag near her and guard it, the loss would never have
occurred. There was misdelivery resulting in complete loss. The defendant as a carrier failed to
exercise the necessary supervision and care to prevent the loss.
On defendants contention that no bill of lading was issued and that he is thus not liable for loss, it
must be noted that the bill of lading is not indispensable. Provided that there is meeting of the
minds and from such meeting arise rights and obligations, there should be no limitations as to the
form of the contract of carriage. Bill of lading is not essential to the contract, although it may be
obligatory by reason of the regulations of railroad companies or as a condition imposed in the
contract by agreement of that parties themselves.
Advertisements

G.R. No. 71238 March 19, 1992


LUFTHANSA GERMAN AIRLINES, petitioner,
vs.
INTERMEDIATE APPELLATE COURT and SPOUSES HENRY H. ALCANTARA and TERESITA
ALCANTARA, respondents.

BIDIN, J.:
This is a petition for review on certiorari decision of the then Intermediate Appellate Court * dated
May 31, 1984, afVirming with modiVication the decision of the then Court of First Instance of Manila,
Sixth Judicial District, Branch XXIV, and the resolution dated June 18, 1985 denying the motion for
reconsideration of the said decision.
The antecedent facts of this case are as follows:
On January 21, 1979, respondent Henry H. Alcantara shipped thirteen (13) pieces of luggage
through petitioner Lufthansa from Teheran to Manila as evidenced by Lufthansa Air Waybill No.
220-9776-2733 (Exhibit "A", also Exhibit "1"). The Air Waybill discloses that the actual gross weight
of the thirteen (13) pieces of luggage is 180 kilograms. Respondent Henry H. Alcantara did not
declare an inventory of the contents or the value of the luggages when he delivered them to
Lufthansa.
On March 3, 1979, the thirteen (13) pieces of luggage were boarded in one of Lufthansa's Vlights
which arrived in Manila on the same date. After the luggages arrived in Manila, the consignee,
respondent Teresita Alcantara, was able to claim from the cargo broker Philippine Skylanders, Inc.
on March 6, 1979 only twelve (12) out of the thirteen (13) pieces of luggage with a total weight of
174 kilograms (Exhibits "20" and "20-A").
The private respondents advised Lufthansa of the loss of one of the luggages and of the contents
thereof (Exhibits "B", "C" and "D"). Petitioner Lufthansa sent telex tracing messages to different
stations and to the Philippine Airlines which actually carried the cargo (Exhibits "3", "5", "7", "9",
"11", "12", "13" and "14"). But all efforts in tracing the missing luggage were fruitless (Exhibits "4",
"6", "8", "10", "12" and "17").
Since efforts to trace the missing luggage yielded negative results, Lufthansa informed Henry
Alcantara accordingly and advised him to Vile a claim invoice (Exhibits "18" and "19").
On September 24, 1979, the private respondents wrote the petitioner demanding the production of
the missing luggage within then (10) days from receipt (Exhibit "E"). Since the petitioner did not
comply with said demand, the private respondents Viled a complaint dated May 7, 1980, for breach
of contract with damages against the petitioner before the Court of First Instance of Manila, Sixth
Judicial District, Branch XXIV.
The petitioner Viled its answer to the complaint alleging that the Warsaw Convention limits the
liability of the carrier, if any, with respect to cargo to a sum of 250 francs per kilo ($20.00 per kilo or
$9.07 per pound), unless a higher value is declared in advance and additional charges are paid by
the passenger and the conditions of the contract as set forth in the air waybill expressly subject the
contract of carriage of cargo to the Warsaw Convention. The petitioner also alleged that it never
acted fraudulently or in bad faith so as to entitle respondent spouses to moral damages and
attorney's fees, nor did it act in a wanton, fraudulent, reckless, oppressive or malevolent manner as
to entitle spouses to exemplary damages.
After trial, on November 18, 1981, the trial court ** rendered its decision, the dispositive portion of
which reads as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs, spouses Henry H.
Alcantara and Teresita Alcantara, and against Lufthansa German Airlines.
(1) Ordering defendant to pay plaintiffs the sum of P200,000.00 for actual damages,
with interest thereon at the legal rate from the date of the Viling of the complaint
until the principal sum is fully paid;
(2) Ordering defendant to pay plaintiffs the sum of P20,000.00 as attorney's fees;
and
(3) Ordering defendant to pay the costs of suit.
SO ORDERED. (Rollo, pp. 62-63)
The petitioner appealed to the then Intermediate Appellate Court. On May 31, 1984, the appellate
promulgated its decision, the dispositive portion of which reads:
WHEREFORE, PREMISES CONSIDERED, the decision appealed from is hereby
AFFIRMED with the modiVication that the amount of P20,000.00 awarded as
attorney's fees shall be deleted, the costs to be borne by the respective parties.
SO ORDERED. (Rollo, p. 39).
Its motion for reconsideration having been denied, the petition Viled the instant petition.
The main issue in this case is whether or not the private respondents are entitled to an award of
damages beyond the liability set forth in the Warsaw Convention and in the Airwaybill of Lading.
The petitioner contends that the Republic of the Philippines is a party to the "Convention for the
UniVication of Certain Rules Relating to International Transportation by Air," otherwise known as
the Warsaw Convention. After the Senate of the Republic of the Philippines, by its Resolution No. 19
of May 16, 1950, concurred in the adherence by the government of the Philippines to the said
Convention, and after the government of the Republic of the Philippines formally notiVied the
government of the Republic of Poland of such adherence on November 9, 1950, Presidential
Proclamation No. 201 signed by the late President Ramon Magsaysay on September 23, 1965 made
public the adherence of the Republic of the Philippines to the said Warsaw Convention which
applies to all international transportation of persons, baggage or goods performed by aircraft for
hire. Since the contract between the petitioner and respondent Henry H. Alcantara embodied in
Airwaybill No. 220-9776-2733 is one of international carriage by air, it is subject to the Warsaw
Convention, which in Article 22 limits the liability of the carrier with respect to checked baggage to
a sum of 250 French francs per kilo (equivalent to US $20.00/kilo) unless a higher value has been
declared in advance and additional charges are paid by the passenger. Respondent Henry H.
Alcantara having admitted that he did not declare the value or contents of the missing luggage, the
liability of the petitioner is therefore limited by the Warsaw Convention and the Airwaybill to US
$20.00 per kilo.
The petitioner further argues that the award of P200,000.00 as actual damages is not borne by
evidence. It insists that the testimonial and documentary evidence of respondent spouses failed to
indicate the actual value of the alleged contents of the missing luggage and have not presented
actual proof as to the contents, total weight and value of the missing luggage as well as the actual
damage they suffered (Rollo, pp. 88-89, 95).
On the other hand, the private respondents maintain that the petitioner, as found by the trial and
appellate courts, waived the beneVits of the Warsaw Convention when it offered a settlement in the
amount of $200.00 which is much higher than what the Convention prescribes and never raised
timely objections during the trial to the introduction of evidence regarding the actual claims and
damages sustained by respondent Alcantara.
The private respondents also claim that in the trial of the case, they proved a loss of P200,000.00
and an expense of $15,000.00 in vainly trying to locate the missing luggage all over Europe and the
trial court awarded less than what was proven (Rollo, p. 118).
The petition is without merit.
The loss of one luggage belonging to the private respondents while the same was in the custody of
the petitioner is not disputed. The contract of air carriage generates a relation attended with a
public duty. Neglect or malfeasance of the carrier's employees could given ground for an action for
damages (Zulueta v. Pan American World Airways, Inc., 43 SCRA 37 [1972]). Common carriers are
liable for the missing goods for failure to comply with its duty (American Insurance Co., Inc. v.
Macondray & Co., Inc., 39 SCRA 494 [171]).
In Alitalia vs. Intermediate Appellate Court (192 SCRA 9 [1990]) where petitioner Alitalia as carrier
failed to deliver a passenger's (Dr. Felipa Pablo's) baggage containing the papers she was scheduled
to read and the materials which would have enabled her to make scientiVic presentation (consisting
of slides, autoradiograms or Vilms, tables and tabulations ) in a prestigious international conference
in Rome where she was invited to participate in the conference, extended by the Joint FAO/IAEA
Division of Atomic Energy in Food and Agriculture of the Untied Nations, as a consequence of which
she failed to participate in the conference, this Court held that the Warsaw Convention does not
exclude liability for other breaches of contract by the carrier. Thus:
The Convention does not thus operate as an exclusive enumeration of the instances
of an airline's liability, or as an absolute limit of the extent of that liability. Such a
proposition is not borne out by the language of the Convention, as this Court has
now, and at an earlier time, pointed out. Moreover, slight reVlection readily leads to
the conclusion that it should be deemed a limit of liability only in those cases where
the cause of the death or injury to person, or destruction, loss or damage to property
or delay in its transport is not attributable to or attended by any wilfull misconduct,
bad faith, recklessness, or otherwise improper conduct on the part of any ofVicial or
employee for which the carrier is responsible, and there is otherwise no special or
extraordinary form of resulting injury. The Convention's provisions, in short, do not
"regulate or exclude liability for other breaches of contract by the carrier" or
misconduct of its ofVicers and employees, or for some particular or exceptional type
of damage. Otherwise, "an air carrier would be exempt from any liability for
damages in the event of its absolute refusal, in bad faith, to comply with a contract of
carriage, which is absurd." Nor may it for a moment be supposed that if a member of
the aircraft complement should inVlict some physical injury on a passenger, or
maliciously destroy or damage the latter's property, the Convention might
successfully be pleaded as the sole gauge to determine the carrier's liability to the
passenger. Neither may the Convention invoked to justify the disregard of some
extraordinary sort of damage resulting to a passenger and preclude recovery
therefor beyond the limits set by said Convention. It is in this sense that the
Convention has been applied, or ignored, depending on the peculiar facts presented
by each case.
xxx xxx xxx
In the case at bar, no bad faith or otherwise improper conduct may be ascribed to
the employees of petitioner airline; and Dr. Pablo's luggage was eventually returned
to her, belatedly, it is true, but without appreciable damage. The fact is, nevertheless,
that some species of injury was caused to Dr. Pablo because petitioner ALITALIA
misplaced her baggage and failed to deliver it to her at the time appointed a
breach of its contract of carriage, to be sure with the result that she was unable to
read the paper and make the scientiVic presentation (consisting of slides,
autoradiograms or Vilms, tables and tabulations) that she had painstakingly labored
over, at the prestigious international conference, to attend which she had traveled
hundreds of miles, to her chagrin and embarrassment and the disappointment and
annoyance of the organizers. She felt, no unreasonably, that the invitation for her to
participate at the conference, extended by the Joint FAO/IAEA Division of Atomic
Energy in Food and Agriculture of the United Nations, was a singular honor not only
to herself, but to the University of the Philippines and the country as well, an
opportunity to make some sort of impression among her colleagues in that Vield of
scientiVic activity. The opportunity to claim this honor or distinction was
irretrievably lost to her because of Alitalia's breach of its contract.
Apart from this, there can be no doubt that Dr. Pablo underwent profound distress
and anxiety, which gradually turned to panic and Vinally despair, from the time she
learned that her suitcases were missing up to the time when, having gone to Rome,
she Vinally realized that she would no longer be able to take part in the conference.
As she herself put it, she "was really shocked and distraught and confused."
Certainly, the compensation for the injury suffered by Dr. Pablo cannot under the
circumstances be restricted to that prescribed by the Warsaw Convention for delay
in the transport of baggage.
She is not, of course, entitled to be compensated for loss or damage to her luggage.
As already mentioned, her baggage was ultimately delivered to her in Manila, tardily,
but safely. She is however entitled to nominal damages which, as the law says, is
adjudicated in order that a right of the plaintiff, which has been violated or invaded
by the defendant, may be vindicated and recognized, and not for the purpose of
indemnifying the plaintiff that for any loss suffered and this Court agrees that the
respondent Court of Appeals correctly set the amount thereof at P40,000.00.
In the case at bar, the trial court found that: (a) petitioners airline has not successfully refuted the
presumption established by Article 1735 of the Civil Code that the loss of the luggage in question
was due to the negligence or fault of its employees; (b) the contents of the missing luggage of
private respondents could not be replaced and were assessed at P200,000.00 by the latter;
(c) respondent Henry Alcantara spent about $15,000.00 in trying to locate said luggage in
Frankfurt, Germany, London, United Kingdom and Hongkong;
(d) there being no evidence to the contrary, the foregoing assessments made by private respondents
were fair and reasonable; and (e) private respondents were unable to present ample evidence to
prove fraud and bad faith and are therefore not entitled to moral damages under Article 2220 of the
Civil Code (Rollo, p. 61).
On the other hand, the Court of Appeals found that the lower court's award of P200,000.00 as actual
compensatory damages is well based factually and legally (Rollo, p. 37) except as to the deletion of
attorney's fees due to the absence of Vindings of gross and evident bad faith (Rollo, p. 39).
Under the circumstances, there appears to be no cogent reason to disturb the factual Vindings of
both the trial court and the Court of Appeals.
Furthermore, the respondent court found that petitioner waived the applicability of the Warsaw
Convention to the case at bar when it offered private respondent a higher amount than that which
is provided in the said law and failed to raise timely objections during the trial when questions and
answers were brought out regarding the actual claims and damages sustained by Alcantara which
were even subjected to lengthy cross examination by Lufthansa's counsel. In Abrenica v. Gonda (34
Phil. 739), this Court held:
. . . (I)t has been repeatedly laid down as a rule of evidence that a protest or
objection against the admission of any evidence must be made at the proper time,
and that if not so made it will be understood to have been waived. The proper time
to make a protest or objection is when, from the question addressed to the witness,
or from the answer thereto, or from the presentation of proof, the inadmissibility of
evidence is, or may be inferred.
It is also settled that the court cannot disregard evidence which would ordinarily be incompetent
under the rules but has been rendered admissible by the failure of a party to object thereto. Thus:
. . . The acceptance of an incompetent witness to testify in a civil suit, as well as the
allowance of improper questions that may be put to him while on the stand is a
matter resting in the discretion of the litigant. He may asset his right by timely
objection or he may waive it, expressly or by silence. In any case, the option rests
with him. Once admitted, the testimony is in the case for what it is worth and the judge
has no power to disregard it for the sole reason that it could have been excluded, if it
had been objected to, nor to strike it out on its own motion. (Cruz v. CA, et al., 192
SCRA 209 [1990] citing Marella vs. Reyes, 12 Phil. 1). (Emphasis supplied).
WHEREFORE, the petition is Dismissed and the questioned decision and resolution of the appellate
court are AfVirmed. No costs.
SO ORDERED.